SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 1998
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SOURCE CAPITAL CORPORATION
--------------------------
Exact name of registrant as specified in its charter)
Washington 0-12199 91-0853890
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(State or other (Commission (IRS Employer
jurisdiction of File Number Identification No.)
of incorporation)
1825 N. Hutchinson Road, Spokane, Washington 99212
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (509) 928-0908
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Not Applicable
---------------------------------
(Former name or former address,
if changed since last report)
<PAGE>
ITEM 5. Other Events.
On February 11, 1998, Source Capital Corporation (the "Company")
completed a private placement of $6,000,000 in principal amount of its
7-1/2% Convertible Subordinated Debentures due March 1, 2008 (the
"Debentures"). The offering of the Debentures was not registered
under the Securities Act of 1933 (the "Act") and the Debentures were
sold in reliance upon exemptions available under the Act.
Subsequent to the earlier of September 30, 1998 or the effective
date of a registration statement to be filed with the Securities and
Exchange Commission for the registration of the no par value common
stock (the "Common Stock") to be issued upon the conversion of the
Debentures, the Debentures are convertible into shares of Common
Stock, unless previously redeemed, at a conversion price of $8.01 per
share, subject to adjustment in certain events. The Debentures are
redeemable, in whole or in part, at any time on or after March 1,
2001, at the redemption prices set forth in the Indenture, dated as of
February 11, 1998 (the "Indenture"), between the Company and Bankers
Trust Company, as Trustee (the "Trustee"), plus accrued interest. The
Debentures are required to be repurchased at the option of the holder
upon the occurrence of a "Designated Event" (as defined in the
Indenture) at 100% of their principal amount plus accrued interest.
The Debentures are unsecured and subordinate in right of payment
to all Senior Debt (as defined in the Indenture).
Pursuant to a Registration Rights Agreement, dated as of
February 11, 1998, between the Company and Pacific Crest Securities,
Inc., the placement agent for the Debenture private placement, the
Company is obligated to use its best efforts to file with the
Securities and Exchange Commission before July 31, 1998, and to use
its best efforts to cause to become effective on or prior to September
30, 1998, a shelf registration statement covering resales of the
shares of common stock issuable upon conversion of the Debentures and
to maintain the effectiveness of such registration statement until
February 11, 2000, subject to adjustment in certain circumstances.
The Company plans to use a portion of the estimated $5,470,000
net proceeds from the Debentures (after deduction of placement fees
and estimated expenses) to fund additional equity investments in its
leasing and accounts receivable factoring subsidiaries, which is
expected to allow those subsidiaries to increase their leasing and
lending portfolios. A portion of the net proceeds will also be used
by the Company to fund additional commercial loans made by it and for
general corporate purposes.
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) The following exhibits are filed as Exhibits hereto:
Exhibit
Number Description
------- ----------------------------------------------------------
4.1 Indenture, dated as of February 11, 1998, between the
Registrant and Bankers Trust Company, as Trustee, relating
to the Registrant's 7-1/2% Convertible Subordinated
Debentures due 2008.
10.3 Registration Rights Agreement, dated as of February 11,
1998, between the Registrant and Pacific Crest Securities,
Inc.
99.1 Press Release of the Registrant, dated February 12, 1998.
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.
SOURCE CAPITAL CORPORATION
(Registrant)
Dated: February 18, 1998 By: /s/ LESTER L. CLARK
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Lester L. Clark, Vice
President, Treasurer and
Secretary
<PAGE>
EXHIBIT 4.1
INDENTURE
DATED AS OF FEBRUARY 11, 1998
BETWEEN
SOURCE CAPITAL CORPORATION
AND
BANKERS TRUST COMPANY
TRUSTEE
-------------------
7 1/2% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 2008
---------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions
SECTION 1.02. Incorporation by Reference of Trust Indenture Act
SECTION 1.03. Rules of Construction
ARTICLE II
THE SECURITIES
SECTION 2.01. Form of Securities and Dating
SECTION 2.02. Execution and Authentication
SECTION 2.03. Registrar, Paying Agent and Conversion Agent
SECTION 2.04. Paying Agent To Hold Money in Trust
SECTION 2.05. Securityholder Lists.
SECTION 2.06. Transfer and Exchange
SECTION 2.07. Replacement Securities
SECTION 2.08. Outstanding Securities
SECTION 2.09. Treasury Securities
SECTION 2.10. Temporary Securities
SECTION 2.11. Cancellation
SECTION 2.12. Defaulted Interest
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee
SECTION 3.02. Selection of Securities To Be Redeemed
SECTION 3.03. Notice of Redemption
SECTION 3.04. Effect of Notice of Redemption
SECTION 3.05. Deposit of Redemption Price
SECTION 3.06. Securities Redeemed in Part
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities
SECTION 4.02. SEC Reports
SECTION 4.03. Compliance Certificate
SECTION 4.04. Stay, Extension and Usury Laws
SECTION 4.05. Liquidation
SECTION 4.06. Reservation of Shares of Common Stock for
Issuance Upon Conversion
SECTION 4.07. Rule 144A Information Requirement
<PAGE>
ARTICLE V
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.
SECTION 5.02. Successor Corporation Substituted
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default
SECTION 6.02. Acceleration
SECTION 6.03. Other Remedies
SECTION 6.04. Waiver of Past Defaults
SECTION 6.05. Control by Majority
SECTION 6.06. Limitation on Suits
SECTION 6.07. Rights of Holders To Receive Payment
SECTION 6.08. Collection Suit by Trustee
SECTION 6.09. Trustee May File Proofs of Claim
SECTION 6.10. Priorities
SECTION 6.11. Undertaking for Costs
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee
SECTION 7.02. Rights of Trustee
SECTION 7.03. Individual Rights of Trustee
SECTION 7.04. Trustee's Disclaimer
SECTION 7.05. Notice of Defaults
SECTION 7.06. Reports by Trustee to Holders
SECTION 7.07. Compensation and Indemnity
SECTION 7.08. Replacement of Trustee
SECTION 7.09. Successor Trustee by Merger, etc.
SECTION 7.10. Eligibility; Disqualification
SECTION 7.11. Preferential Collection of Claims Against Company
ARTICLE VIII
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations
SECTION 8.02. Application of Trust Money
SECTION 8.03. Repayment to Company
SECTION 8.04. Reinstatement
<PAGE>
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders
SECTION 9.02. With Consent of Holders
SECTION 9.03. Compliance with Trust Indenture Act
SECTION 9.04. Revocation and Effect of Consents
SECTION 9.05. Notation on or Exchange of Securities
SECTION 9.06. Trustee Protected
ARTICLE X
CONVERSION
SECTION 10.01. Conversion Privilege
SECTION 10.02. Conversion Procedure
SECTION 10.03. Fractional Shares
SECTION 10.04. Taxes on Conversion
SECTION 10.05. Company To Provide Stock
SECTION 10.06. Adjustment for Dividends and Distributions of
Common Stock
SECTION 10.07. Adjustment for Rights Issue
SECTION 10.08. Adjustment for Other Distributions
SECTION 10.09. Adjustment for Subdivision of Common Stock
SECTION 10.10. Adjustment for Reclassification of Common Stock
SECTION 10.11. [Intentionally Omitted]
SECTION 10.12. When Adjustment May Be Deferred
SECTION 10.13. When No Adjustment Required
SECTION 10.14. Notice of Adjustment
SECTION 10.15. Voluntary Reduction
SECTION 10.16. Notice of Certain Transactions
SECTION 10.17. Reorganization of Company
SECTION 10.18. Company Determination Final
SECTION 10.19. Trustee's Disclaimer
ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.01. Securities Subordinate to Senior Debt
SECTION 11.02. No Payments When Senior Debt in Default;
Payment Over of Proceeds upon Dissolution, Etc.
SECTION 11.03. Trustee to Effectuate Subordination
SECTION 11.04. Trustee Not Charged With Knowledge of Prohibition
SECTION 11.05. Rights of Trustee as Holder of Senior Debt
SECTION 11.06. Article Applicable to Paying Agent
<PAGE>
ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
SECTION 12.01. Right To Require Repurchase
SECTION 12.02. Notice; Method of Exercising Repurchase Right
SECTION 12.03. Certain Definitions
SECTION 12.04. Compliance with Rule 13e-4
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls
SECTION 13.02. Notices and Common Stockholder Information
SECTION 13.03. Communication by Holders with Other Holders
SECTION 13.04. Certificate and Opinion as to Conditions Precedent
SECTION 13.05. Statements Required in Certificate or Opinion
SECTION 13.06. Rules by Trustee and Agents
SECTION 13.07. Legal Holidays
SECTION 13.08. No Recourse Against Others
SECTION 13.09. Counterparts
SECTION 13.10. Governing Law
SECTION 13.11. No Adverse Interpretation of Other Agreements
SECTION 13.12. Successors
SECTION 13.13. Severability
SECTION 13.14. Table of Contents, Headings, Etc.
SIGNATURE 42,43
Exhibit A A-1
Exhibit B-I B-I-1
Exhibit B-II B-II-1
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act section Indenture Section
--------------- ---------------------------------------------
310(a)(1) 7.10
(a)(2)
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) .7.08; 7.10; 13.02
(c) N.A.
311(a) 7.11
x (b) 7.11
(c) N.A.
312(a) 2.05
(b) 13.03
(c) 13.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c)(3) 7.06; 13.02
(d) 7.06
314(a) 4.02; 13.02
(b) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) N.A.
315(a) 7.01(b)
(b) 7.05; 13.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 13.01
N.A. means not applicable.
-------------------
* This Cross-Reference Table is not part of the Indenture.
<PAGE>
INDENTURE dated as of February 11, 1997, between SOURCE CAPITAL
CORPORATION, a corporation duly organized and existing under the laws
of the State of Washington (the "Company"), having its principal
office at 1825 North Hutchinson Road, Spokane, Washington 99212, and
BANKERS TRUST COMPANY, a banking corporation duly organized and
validly existing under the laws of the State of New York, as Trustee
(the "Trustee"), having its principal office at 4 Albany Street, New
York, New York 10006.
Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's
7 1/2% Convertible Subordinated Debentures due 2008 (the "Securities"):
ARTICLE DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise
requires:
"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" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), when used
with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership
of voting securities by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent, Conversion Agent or
co-Registrar.
"BOARD OF DIRECTORS" means the Board of Directors of the Company
or any authorized committee of the Board.
"CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of corporate
stock.
"CHANGE IN CONTROL" means as provided in Section 12.03.
"COMMON STOCK" means Common Stock of the Company as it exists on
the date of this Indenture or as it may be constituted from time to
time.
"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article V and thereafter means the
successor.
"CONVERSION AGENT" means the party named in Section 2.03.
"CONVERSION DATE" means the date on which the Holder satisfies
all the requirements of paragraph 9 of the Securities.
<PAGE>
"CORPORATE TRUST OFFICE" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business
shall be administered which office at the date of the execution of
this Indenture is located at Four Albany Street, New York, New York
10006, Attention: Corporate Trust and Agency Group or at any other
time at such other address as the Trustee may designate from time to
time by notice to the Company and Securityholders.
"CURRENT MARKET PRICE" means (a) for purposes of Section 10.03
the last reported sales price of the Common Stock (as reported by
NASDAQ Stock Market s SmallCap Market System) on the last trading day
prior to the Conversion Date and (b) for purposes of Sections 10.07,
10.08 and 12.03, the average of the last reported sales prices of the
Common Stock (as reported by NASDAQ) for 15 consecutive trading days
commencing 25 trading days before the date in question.
"DEBT" means
"DEFAULT" means any event which is, or after notice or passage of
time would be, an Event of Default.
"DEFINITIVE SECURITY" means as provided in Section 2.01.
"DESIGNATED EVENT" means as provided in Section 12.03.
"DESIGNATED SENIOR DEBT" means the principal of (and premium, if
any), and interest on and other amounts now or hereafter due on any
and all indebtedness now or hereafter incurred under (a) the Loan and
Security Agreement between the Company and Seafirst Bank dated May 1,
1997 and/or (b) the Loan Agreement between the Company and Washington
Mutual Bank d/b/a Western Bank dated January 15, 1998, as the same may
be amended from time to time, including all renewals, extensions and
refundings thereof.
"EVENT OF DEFAULT" means as provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" or "SECURITYHOLDER" means a person in whose name a
Security is registered on the securities Register.
"INDENTURE" means this Indenture as amended from time to time.
"LEGAL HOLIDAY" means as provided in Section 13.07.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"OFFICER" means Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or
any Assistant Secretary of the Company.
<PAGE>
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers, one of whom must be the Chairman of the Board, the
President, the Treasurer or a Vice- President of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel
which may be an employee of or counsel to the Company or the Trustee.
"PAYING AGENT" means the party named in Section 2.03.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"PRINCIPAL" of a debt security means the principal of the
security plus the premium, if any, on the security.
"REDEMPTION DATE" means the date on which Securities are redeemed
by the Company pursuant to Article III.
"REDEMPTION PRICE" means the amount paid by the Company to redeem
a Security, as determined in paragraph 6 of the Securities.
"REGISTRAR" means the party named in Section 2.03.
"REPURCHASE DATE" means as provided in Section 12.01.
"RESTRICTED SECURITY" means any Security that bears or is
required to bear the legend set forth in Section 2.06(b).
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the securities described above issued under
this Indenture in the form of Exhibit A hereto.
"SECURITIES REGISTER" means as provided in Section 2.03.
"SENIOR DEBT" means the principal of (and premium, if any) and
interest on and other amounts due on any indebtedness, whether
outstanding on the date of execution of this Indenture or thereafter
created, incurred, assumed or guaranteed by the Company for money
borrowed from others (including, for this purpose, all obligations
incurred under capitalized leases or purchase money mortgages) or in
connection with the acquisition by it or a Subsidiary of any other
business or entity, and, in each case, all renewals, extensions and
refundings thereof, other than (a) any such indebtedness as to which,
in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the
Securities, (b) indebtedness of the Company to any Affiliate and (c)
the Securities. Senior Debt shall include, but shall not be limited
to, Designated Senior Debt.
<PAGE>
"SIGNIFICANT SUBSIDIARY" means a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X under the Securities Act of
1933, as amended, and the Exchange Act (as such Regulation is in
effect on the date hereof) except that any subsidiary the common stock
of which is listed on a national securities exchange or authorized for
quotation on NASDAQ (at present or at any future relevant time) (a
"Public Subsidiary"), and any subsidiary of a Public Subsidiary, shall
be deemed not to be a Significant Subsidiary.
"SUBSIDIARY" of any specified person means a corporation more
than 50% of the outstanding voting stock of which is owned, directly
or indirectly, by the Company or by one or more other subsidiaries, or
by the Company and one or more other subsidiaries. For the purposes
of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or
only so long as no senior class of stock has such voting power by
reason of any contingency.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code SS
77aaa-77bbbb) as amended and in effect on the date of this Indenture
or, if this Indenture is qualified under the TIA, from and after the
date of such qualification, the TIA as in effect at the date of such
qualification.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor.
"TRUST OFFICER" means, with respect to the Trustee, any officer
assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Indenture.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the
United States of America for the payment of which the full faith and
credit of the United States of America is pledged. U.S. Government
obligations shall not be callable at the issuer's option.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
<PAGE>
(b) all other terms used herein which are defined in the TIA
either directly or by reference therein, have the meanings assigned to
them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles; and
(d) 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.
ARTICLE II
THE SECURITIES
SECTION 2.01. FORM OF SECURITIES AND DATING. The Securities
will be issued in definitive form, substantially in the form of
Exhibit A (each, a "Definitive Security"). The Securities may have
notations, legends or endorsements required by law, stock exchange
rule or usage. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture
and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Payment of principal of and any interest on any Definitive
Security shall be made to the holder thereof as of the record date for
such payment as specified in the form of Definitive Security.
SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities
shall be executed on behalf of the Company by an officer, under its
corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries. The signature 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
executed by the Company to the Trustee for authentication, together
with a written order of the Company signed by two Officers for the
authentication and delivery of such Securities; and the Trustee in
accordance with such written order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
<PAGE>
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 manual signature, and
such certificate upon any Security shall be conclusive evidence, and
the only evidence, that such Security has been duly authenticated and
delivered hereunder.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same
right as an Agent to deal with the Company or an Affiliate.
SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The
Company shall maintain in such locations as it shall determine (a) an
office or agency where securities may be presented for registration of
transfer or for exchange ("Registrar"), (b) an office or agency where
Securities may be presented for payment ("Paying Agent"), and (c) an
office or agency where securities may be presented for
conversion("Conversion Agent"). The Registrar shall keep a register
of the Securities and of their transfer and exchange (the "Securities
Register"). The Company may appoint one or more co-Registrars, one or
more additional paying agent sand one or more additional conversion
agents. The term "Paying Agent" includes any additional paying agent;
the term "Conversion Agent" includes any additional conversion agent.
The Company may change any Paying Agent, Registrar, Conversion Agent
or co-Registrar without prior notice. The Company shall notify the
Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity
as Registrar, Paying Agent or Conversion Agent, the Trustee shall act
as such. The Company or any of its subsidiaries may act as Conversion
Agent, Paying Agent, Registrar or co-Registrar.
The Company initially appoints the Trustee as Conversion Agent,
Paying Agent, Registrar and authenticating agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company
shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal or interest on the Securities, and will
notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or a subsidiary) shall have no further
liability for the money. If the Company or a subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Securityholders all money held by it as Paying
Agent.
<PAGE>
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of Securityholders. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee
on or before each interest payment date and at such other times as the
Trustee may request in writing alist in such form and as of such date
as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE. (a) When Definitive
Securities are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Definitive Securities or to
exchange such Definitive Securities for an equal principal amount of
Definitive Securities of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; PROVIDED,
HOWEVER, that the Definitive Securities surrendered for transfer or
exchange (i) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the
Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney, duly authorized in writing, (ii) shall be accompanied by an
opinion of counsel acceptable to the Company and to the Registrar or
co- Registrar to the effect that such transfer is in compliance with
the Securities Act (in substantially the form of Exhibit B-II hereto),
and (iii) in the case of Definitive Securities which are Restricted
Securities only, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Security is being acquired for the
account of such Holder, without transfer, a certification from such
Holder to that effect (in substantially the form of Exhibit B-I
hereto); or
(B) if such Definitive Security is being transferred to a
qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rules
144 or 145 or Regulation S under the Securities Act or pursuant to an
effective registration statement under the Securities Act, a
certification to that effect (in substantially the form of Exhibit B-I
hereto); or
(C) if such Definitive Security is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the
form of Exhibit B-I hereto).
To permit the registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but
<PAGE>
the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Sections 2.10,
3.06, 9.05 or 10.02). The Registrar or co-Registrar shall not be
required to register the transfer of or exchange any Definitive
Security selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
All Securities issued upon any registration of 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 registration of
transfer or exchange.
(b) Except as permitted by the following paragraph, each
certificate evidencing the Definitive Securities (and all securities
issued in exchange therefor or substitution thereof (shares of Common
Stock issued upon conversion of any Restricted Security shall bear a
comparable legend)) shall bear a legend in substantially the following
form:
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON ITS
CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (4) PURSUANT TO ANY OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501 (a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION. THE HOLDER OF THIS
SECURITY AGREES TO DELIVER SUCH CERTIFICATES, OPINIONS AND
OTHER INFORMATION AS THE COMPANY OR THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER BY IT OF
THIS SECURITY AND ANY COMMON STOCK ISSUED UPON ITS
CONVERSION COMPLIES WITH THE FOREGOING.
<PAGE>
Upon any sale or other transfer of a Restricted Security
satisfying the conditions set forth in clause (3) or (4)above, or with
respect to any Restricted Security that may be sold pursuant to Rule
144(k) promulgated under the Securities Act, the Registrar or co-
Registrar shall permit the Holder thereof to exchange such Restricted
Security for Definitive Securities that do not bear the legend set
forth above and rescind any restriction on the transfer of such
Security; PROVIDED, HOWEVER, with respect to any request for an
exchange of a Restricted Security for a Definitive Security which does
not bear a legend, which request is made in reliance upon Rule 144(k),
the Holder thereof shall certify in writing to the Registrar or co-
Registrar that such request is so being made in reliance on Rule
144(k).
(c) The Company shall not be required (i) to issue, register the
transfer of Securities during a period beginning at the opening of
business 15 days before the day of any selection of Securities for
redemption under Section 3.02 and ending at the close of business on
the day of selection, or (ii) to register the transfer of any Security
so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 2.07. REPLACEMENT SECURITIES. If any mutilated Security
is surrendered to the Trustee, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a new
Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of
any Security and (b) such security or indemnity as may be required by
them to save each of them and any agent of either 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
deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount 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.
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 duly
issued hereunder.
<PAGE>
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 2.08. OUTSTANDING SECURITIES. The Securities
outstanding at any time are all the Securities authenticated by the
Trustee except for those canceled by it, those delivered to it for
cancellation hereunder, and those described in this Section as not
outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser.
If Securities are considered paid under Section 4.01, they cease
to be outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Security.
SECTION 2.09. TREASURY SECURITIES. In determining whether the
Holders of the required principal amount of Securities have concurred
in any direction, waiver or consent, Securities owned by the Company
or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction,
waiver or consent, only Securities which any Corporate Trust Officer
knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SECURITIES. Until the Definitive
Securities are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of the Definitive Securities but
may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate the Definitive Securities
in exchange for temporary Securities.
SECTION 2.11. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar, Paying
Agent and Conversion Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange, payment or
conversion. The Trustee shall cancel all Securities surrendered for
registration of transfer, exchange, payment, replacement, conversion
or cancellation and shall dispose of cancelled Securities. The
Company may not issue new Securities to replace Securities that it has
paid or that have been delivered to the Trustee for cancellation or
that any Securityholder has converted pursuant to Article X.
<PAGE>
SECTION 2.12. DEFAULTED INTEREST. If the Company fails to make
a payment of interest on the Securities, it shall pay such defaulted
interest plus any interest payable on the defaulted interest in any
lawful manner. It may pay such defaulted interest, plus any such
interest payable on it, to the persons who are Securityholders on a
subsequent special record date. The Company shall fix any such record
date and payment date. At least 15 days before any such record date,
the Company shall mail to Securityholders a notice that states the
record date, payment date, and amount of such interest to be paid.
ARTICLE III
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to
redeem Securities pursuant to the optional redemption provisions of
paragraph 6 of the Securities, it shall notify the Trustee of the
Redemption Date and the principal amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section to the
Trustee at least 40 days but not more than 60 days before the
Redemption Date(unless a shorter notice period shall be satisfactory
to the Trustee).
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less
than all the Securities are to be redeemed, the Trustee shall select
the Securities to be redeemed by lot or by a method that complies with
the requirements of any exchange on which the Securities are listed
and that the Trustee considers fair and appropriate. The Trustee may
select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of
them it selects shall be in amounts of $1,000 or integral multiples of
$1,000. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not
more than 60 days before a Redemption Date, the Company shall mail a
notice of redemption to each Holder whose Securities are to be
redeemed at the address of such Holder shown in the Security Register.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, upon surrender of such Security, a new Security
or securities in principal amount equal to the unredeemed portion will
be issued;
<PAGE>
(d) the conversion price;
(e) the name and address of the Paying Agent and Conversion
Agent;
(f) that Securities called for redemption may be converted at
any time before the close of business on the business day before the
Redemption Date;
(g) that Holders who want to convert Securities must satisfy the
requirements in paragraph 9 of the Securities;
(h) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(i) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date; and
(j) that Holders who convert after the date of the redemption
notice but before the Redemption Date will be entitled to receive
accrued interest on their converted Securities through the Redemption
Date.
At the Company's request, the Trustee shall give notice of
redemption in the Company's name and at its expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once a notice of
redemption mailed, Securities called for redemption become due and
payable on the Redemption Date at the price set forth in the Security.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before the
Redemption Date, the Company shall deposit with the Trustee or with
the Paying Agent money sufficient to pay the Redemption Price of and
accrued interest on all Securities to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money not
required for that purpose.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Definitive Security that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the Holder at the expense of
the Company a new Definitive Security equal in principal amount to the
unredeemed portion of the Definitive Security surrendered.
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall pay the
principal of and interest on the Securities on the dates and in the
manner provided in the Securities. Principal and interest shall be
considered paid on the date due if the Paying Agent (other than the
Company or a subsidiary) holds on that date money designated for and
sufficient to pay all principal and interest then due; PROVIDED,
HOWEVER, that money held by the Paying Agent for the benefit of
holders of Senior Debt pursuant to the provisions of Article XI hereof
shall not be considered paid within the meaning of this Section 4.01.
To the extent lawful, the Company shall pay interest
semiannually(including post-petition interest in any proceeding under
any bankruptcy, insolvency or other similar law) on (a) overdue
principal, at the rate borne by the Securities and (b) overdue
installments of interest (including interest contemplated by clause
(a) and without regard to any applicable grace period)at the same
rate.
SECTION 4.02. SEC REPORTS. The Company shall deliver to the
Trustee within 15 days after it files them with the SEC copies of the
annual reports and of the information, documents, and other reports
(or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The
Company also shall comply with the other provisions of TIA S 314(a).
The Company shall timely comply with its reporting and filing
obligations under applicable federal securities laws.
SECTION 4.03. COMPLIANCE CERTIFICATE. The Company shall deliver
to the Trustee, within 120 days after the end of each fiscal year of
the Company, an Officers' Certificate stating that a review of the
activities of the Company and its subsidiaries during the preceding
fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such officer signing such
certificate, that to the best of his knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance
of any of the terms, provisions and conditions hereof (or, if a
Default or Events of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge) and that
to the best of his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of
or interest, if any, on the Securities are prohibited.
The first certificate pursuant to this Section shall be for the
fiscal year ending on December 31, 1998.
<PAGE>
The Company will, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon becoming aware of
any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default.
SECTION 4.04. STAY, EXTENSION AND USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury 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 it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will
not, by resort to any such law, 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 has been
enacted.
SECTION 4.05. LIQUIDATION. The Company shall not adopt any plan
of liquidation which provides for, contemplates, or the effectuation
of which is preceded by, (a) the sale, lease, conveyance or other
disposition of all or substantially all the assets of the Company
otherwise than substantially as an entirety in accordance with Article
V and (b) the distribution of all or substantially all the proceeds of
such sale, lease, conveyance or other disposition and of the remaining
assets of the Company to holders of Common Stock of the Company,
unless the Company shall in connection with the adoption of such plan
make provision for, or agree that prior to making any liquidating
distributions it will make provision for, the satisfaction of the
Company's obligations hereunder and under the Securities as to the
payment of principal and interest.
SECTION 4.06. RESERVATION OF SHARES OF COMMON STOCK FOR ISSUANCE
UPON CONVERSION. The Company will at all times cause there to be
authorized and reserved for issuance upon conversion of the Securities
such number of shares of Common Stock as would be issuable upon
conversion of all the Securities then outstanding.
SECTION 4.07. RULE 144A INFORMATION REQUIREMENT. For so long as
any of the Securities remain outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities
Act, the Company covenants and agrees that it shall, during any period
in which it is not subject to Section 13 or 15(d) under the Exchange
Act, make available to any Holder of Securities which continue to be
restricted securities in connection with any sale thereof and any
prospective purchaser of Securities from such Holder, the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Securities Act.
<PAGE>
ARTICLE V
SUCCESSORS
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall
not consolidate with or merge into any other corporation or convey,
transfer or lease its properties and assets substantially as an
entirety to any person, unless:
(a) the corporation 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 organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of and 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 and shall have provided for
conversion rights in accordance with Section 10.17;
(b) 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 occurred and be
continuing; and
(c) 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 such
supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any
consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company
in accordance with Section 5.01, the successor corporation formed by
such consolidation or into or with which the Company is merged or to
which such sale, lease, conveyance or other disposition 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 has been named as the Company herein; PROVIDED,
HOWEVER, that the predecessor Company in the case of a sale, lease,
conveyance or other disposition shall not be released from the
obligation to pay the principal of and interest on the Securities.
<PAGE>
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs
if:
(a) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and the Default
continues for a period of 30 days;
(b) the Company defaults in the payment of the principal or
premium, if any, of any Security when the same becomes due and payable
at maturity, upon redemption or otherwise;
(c) the Company defaults in the payment of the repurchase price
in respect of any Security on the Repurchase Date therefor in
accordance with the provisions of Article XII, whether or not such
payment is prohibited by the provisions of Article XI;
(d) the Company defaults in the performance of, or breaches, any
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and such default
or breach continues for a period of 60 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 then outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(e) the Company defaults under any bond, debenture, note or
other evidence of indebtedness for money borrowed by the Company or
under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness
for money borrowed by the Company, whether such indebtedness now
exists or shall hereafter be created, which default shall have
resulted in $1,000,000 or more of such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness having been
discharged, or acceleration having been rescinded or annulled, within
a period of 10 days after there shall have 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
then outstanding Securities a written notice specifying such default
and requiring the Company to cause such indebtedness to be discharged
or cause such acceleration to be rescinded or annulled and stating
that such notice is a "Notice of Default" hereunder; or
<PAGE>
(f) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver,
conservator, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking of possession by any such
official in an involuntary case or other proceeding commenced against
it or shall file an answer admitting the material allegations against
it in any such proceeding, or shall make a general assignment for the
benefit of creditors, or shall take any corporate action to authorize
any of the foregoing, or becomes unable or fails generally to pay its
debts as they become due; or an involuntary case or other proceeding
shall be commenced against the Company or any Significant Subsidiary
seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now
or thereafter in effect or seeking the appointment of a trustee,
receiver, conservator, liquidator, custodian or other similar official
of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a
period of 90 consecutive days.
In the case of any Event of Default pursuant to the provisions of
this Section 6.01 occurring by reason of any wilful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium which the Company would
have had to pay if the Company then had elected to redeem the
Securities pursuant to paragraph 6 of the Securities, an equivalent
premium shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the
Securities contained to the contrary notwithstanding.
SECTION 6.02. ACCELERATION. If an Event of Default (other than
an Event of Default specified in clause (f) of Section 6.01) occurs
and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the then outstanding
Securities by notice to the Company and the Trustee, may declare the
unpaid principal of and accrued interest on all the Securities to be
due and payable. Upon such declaration the principal and interest
shall be due and payable immediately. If an Event of Default
specified in clause (f) of Section 6.01 occurs, such an amount shall
ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may rescind an acceleration and
its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
<PAGE>
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect
the payment of principal or interest on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder
in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to
the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Section 9.02,
the Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or
Event of Default and its consequences except a continuing Default or
Event of Default in the payment of the principal (other than principal
due by reason of acceleration)of or interest on any Security or a
Default which materially and adversely affects the rights of any
Holders under Article X.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the then outstanding Securities may direct the
time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, is unduly prejudicial to the
rights of other Securityholders, or would involve the Trustee in
personal liability.
SECTION 6.06. LIMITATION ON SUITS. A SECURITYHOLDER may pursue
a remedy with respect to this Indenture or the Securities only if:
(a) the Holder gives to the Trustee notice of a continuing Event
of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Securities do not give the
Trustee a direction inconsistent with the request. A Securityholder
may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
<PAGE>
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal and interest
on the Security, on or after the respective due dates expressed in the
Security, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected
without the consent of the Holder.Notwithstanding any other provision
of this Indenture, the right of any Holder of a Security (a) to bring
suit for the enforcement of the right to convert the Security and (b)
to require the Company to repurchase the Security pursuant to Article
XII, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of
Default specified in Section 6.01(a), (b) or (c) occurs and is
continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount
of principal and interest remaining unpaid on the Securities and
interest on overdue principal and interest and such further amount as
shall be sufficient to cover the costs and, to the extent lawful,
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may
file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee and
the Securityholders allowed in any judicial proceedings relative to
the Company, its creditors or its property. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any
such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money
pursuant to this Article, it shall pay out the money in the following
order:
FIRST, to the Trustee for amounts due under Section 7.07;
SECOND, to holders of Senior Debt to the extent required by
Article XI;
THIRD, to Securityholders for amounts due and unpaid on the
Securities for principal, and interest, ratably, without
preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, and interest,
respectively; and
<PAGE>
FOURTH, to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders other than as provided for in Section 2.12.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any
litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a
suit by Holders of more than 10% in principal amount of the then
outstanding Securities.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture; PROVIDED
HOWEVER, that the Trustee is not required to confirm the
correctness of any mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
<PAGE>
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through agents, attorneys, custodians or
nominees and shall not be responsible for the misconduct or negligence
of any agent, attorney, custodian or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or an Affiliate
with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities or any private placement memorandum, it shall not be
accountable for the Company's use of the proceeds from the Securities,
<PAGE>
and it shall not be responsible for any statement of the Company in
the Indenture, any statement in any private placement memorandum or
any statement in the Securities other than its authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of
Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to Securityholders, at the name and address
which appears in the Securities Register a notice of the Default or
Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Security (including
any failure to make any mandatory redemption payment required
hereunder), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. This Section 7.06
shall not be operative as part of this Indenture unless and until this
Indenture is qualified under the TIA, if ever, and, until such
qualification, this Indenture shall be construed as if this Section
7.06 were not contained herein.
Within 60 days after the reporting date (which shall be March 1
of each year), the Trustee shall mail to each Securityholder, at the
name and address which appears in the Securities Register a brief
report dated as of such reporting date that complies with TIA S
313(a). The Trustee also shall comply with TIA S 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA S
313(c).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange on
which the Securities are listed. The Company shall notify the Trustee
when the Securities are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay
to the Trustee from time to time reasonable compensation for its
services hereunder. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred by it. Such expenses may include the
reasonable compensation and out-of-pocket expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee and its officers,
directors, agents and employees against any loss or liability incurred
by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and
the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
<PAGE>
The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or
bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee.
When the Trustee incurs expenses or renders services after an
Event of default specified in Section 6.01(f) occurs, the expenses and
the compensation for the services are intended to constitute expenses
of administration under any bankruptcy, insolvency or other similar
law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal
of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment
as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders
of a majority in principal amount of the then outstanding Securities
may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
bankruptcy, insolvency or other similar law;
(c) a receiver, trustee, liquidator or similar official takes
charge of the Trustee or its property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly
appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in principal amount of
the then outstanding Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the then
outstanding Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
<PAGE>
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties
of the Trustee under this Indenture. The successor Trustee shall mail
a notice of its succession to Securityholders. The retiring Trustee
shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 7.07.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof
shall continue for the benefit of the retiring Trustee with respect to
expenses and liabilities incurred by it prior to such replacement.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. This Indenture
shall always have a Trustee who satisfies the requirements of TIA S
310(a)(1). The Trustee shall always have a combined capital and
surplus of $50,000,000 as set forth in its most recent published
annual report of condition. The Trustee will at all times comply
with, and when this Indenture is qualified under the TIA will be
subject to, TIA S 310(b), including the optional provision permitted
by the second sentence of TIA S 310(b)(9).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA S 311(a), excluding any creditor
relationship listed in TIA S 311(b). A Trustee who has resigned or
been removed shall be subject to TIA S 311(a) to the extent indicated
therein. In the event that the Trustee is also serving as the
Conversion Agent, Paying Agent or Registrar, the rights, protections,
immunities and indemnities granted to the Trustee hereunder shall be
afforded to the Conversion Agent, Paying Agent and Registrar.
ARTICLE VIII
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. This
Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 and 8.03 shall survive) when
all outstanding Securities theretofore authenticated and issued have
been delivered to the Trustee for cancellation and the Company has
paid all sums payable hereunder. In addition, the Company may
terminate all of its obligations under this Indenture (except the
Company's obligations under Sections 7.07 and 8.03) if:
<PAGE>
(a) the Securities mature within one year or all of them are to
be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption; and
(b) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations sufficient to pay principal and
interest on the Securities to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder. The Company
may make the deposit only during the one- year period and only if
Article XI permits it. However, the Company's obligations in Sections
2.03, 2.04, 2.05, 2.06, 2.07,4.01, 7.07, 8.03, 8.04 and in Article X,
shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 7.07 and 8.03
shall survive.
In order to have money available on a payment date to pay
principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or before
such payment date in such amounts as will provide the necessary money.
After a deposit made pursuant to this Section 8.01, the Trustee
upon request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified above.
SECTION 8.02. APPLICATION OF TRUST MONEY. The Trustee shall
hold in trust money or U.S. Government obligations deposited with it
pursuant to Section 8.01. It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and
in accordance with this Indenture to the payment of principal and
interest on the Securities. Money and securities so held in trust are
not subject to Article XI.
SECTION 8.03. REPAYMENT TO COMPANY. The Trustee and the Paying
Agent shall promptly pay to the Company upon request any excess money
or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or
interest that remains unclaimed for two years after the date upon
which such payment shall have become due; PROVIDED, HOWEVER, that the
Company shall have first caused notice of such payment to the Company
to be mailed to each Securityholder entitled thereto no less than 30
days prior to such payment. After payment to the Company,
Securityholders entitled to the money must look to the Company for
payment as general creditors unless an applicable abandoned property
law designates another person.
<PAGE>
SECTION 8.04. REINSTATEMENT. If (a) the Trustee or Paying Agent
is unable to apply any money in accordance with Section 8.02 by reason
of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application and
(b) the Holders of at least majority in principal amount of the then
outstanding Securities so request by written notice to the Trustee,
the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section
8.02; PROVIDED, HOWEVER, that if the Company makes any payment of
principal or interest of any Security following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the
Holders of such Securities to receive such payment from the money held
by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without the consent
of any Securityholder:
(a) to cure any ambiguity, defect or inconsistency; or
(b) to comply with Sections 5.01 and 10.17; or
(c) to provide for uncertificated Securities in addition to
certificated Securities; or
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Section 6.07,
the Company and the Trustee may amend this Indenture or the Securities
with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Securities. Subject to
Sections 6.04 and 6.07, the Holders of a majority in principal amount
of the then outstanding Securities may also waive compliance in a
particular instance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each
Securityholder affected, an amendment or waiver under this Section may
not:
(a) reduce the amount of Securities whose Holders must consent
to an amendment or waiver;
(b) reduce the rate of or change the time for payment of
interest on any Security;
(c) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(d) make any Security payable in money other than that stated in
the Security;
<PAGE>
(e) make any change in Section 6.04, 6.07 or 9.02 which
adversely affects the rights of the Securityholders;
(f) make any change that adversely affects the right to convert
any Security;
(g) make any change in Article XI that adversely affects the
rights of any Securityholder; or
(h) waive a default in the payment of the principal (except
principal due by reason of acceleration) of, or interest on, any
Security or any Default which materially and adversely affects the
rights of any Securityholders under Article X.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing the
amendment or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every
amendment to this Indenture or the Securities shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an
amendment or waiver becomes effective, a consent to it by a Holder of
a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the
consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion
of a Security if the Trustee receives the notice of revocation before
the date on which the Trustee receives an Officer's Certificate
certifying that the Holders of the requisite principal amount of
securities have consented to the amendment or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment or waiver. If a record date is fixed, then notwithstanding
the provisions of the immediately preceding paragraph, those persons
who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment or waiver or to revoke any consent previously given, whether
or not such persons continue to be Holders after such record date. No
consent shall be valid or effective for more than 90 days after such
record date unless consents from Holders of the principal amount of
securities required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-
day period.
After an amendment or waiver becomes effective it shall bind
every Securityholder, unless it is of the type described in any of
clauses (a)through (h) of Section 9.02. In such case, the amendment
or waiver shall bind each Holder of a Security who has consented to it
and every subsequent Holder of a Security that evidences the same debt
as the consenting Holder's Security.
<PAGE>
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. The
Trustee may place an appropriate notation about an amendment or waiver
on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new
Securities that reflect the amendment or waiver.
SECTION 9.06. TRUSTEE PROTECTED. The Trustee shall sign all
supplemental indentures, except that the Trustee need not sign any
supplemental indenture that adversely affects its rights.
ARTICLE X
CONVERSION
SECTION 10.01. CONVERSION PRIVILEGE. A Holder of a Security may
convert it into Common Stock at any time during the period stated in
paragraph 9 of the Securities. The number of shares issuable upon
conversion of a Security is determined as follows: divide the
principal amount to be converted by the conversion price in effect on
the Conversion Date. Round the result to the nearest 1/100th of a
share.
The initial conversion price is stated in paragraph 9 of the
Securities. The conversion price is subject to adjustment.
A Holder may convert a portion of a Security if the portion is
$1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to conversion of all of a Security also apply to
conversion of a portion of it.
SECTION 10.02. CONVERSION PROCEDURE. To convert a Security, a
Holder must satisfy the requirements in paragraph 9 of the Securities.
As soon as practical, the Company shall deliver through the Conversion
Agent a certificate for the number of full shares of Common Stock
issuable upon the conversion together with payment in lieu of any
fractional share. The person in whose name the certificate is
registered shall be treated as a stockholder of record on and after
the Conversion Date.
No payment or adjustment will be made on conversion of any
Security for interest accrued thereon or dividends on any Common Stock
issued and the Holder will lose any right to payment of interest on
the Securities surrendered for conversion; PROVIDED, HOWEVER, that
upon a call for redemption by the Company, accrued and unpaid interest
to the Redemption Date shall be payable with respect to Securities
that are converted after a redemption notice has been mailed pursuant
to Section 3.03 and on or prior to the Redemption Date. Securities
surrendered for conversion during the period from the regular record
date for an interest payment to the corresponding interest payment
date (except Securities called for redemption as described in the
preceding sentence) must be accompanied by payment of an amount equal
to the interest thereon which the Holder is to receive on such
interest payment date.
<PAGE>
If a Holder converts more than one Security at the same time, the
number of full shares issuable upon the conversion shall be based on
the total principal amount of the Securities surrendered.
Upon a surrender of a Definitive Security that is converted in
part, the Company shall issue and the Trustee shall authenticate for
the Holder a new Definitive Security equal in principal amount to the
unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is a Legal
Holiday in a place where a Conversion Agent is located, the Security
may be surrendered to that Conversion Agent on the next succeeding day
that is not a Legal Holiday.
SECTION 10.03. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon conversion of a Security.
Instead the Company will deliver payment in lieu thereof for the
current market value of the fractional share. The current market
value of a fraction of a share is determined as follows: multiply the
Current Market Price of a full share by the fraction. Round the
result to the nearest cent.
SECTION 10.04. TAXES ON CONVERSION. The Company will pay any
and all taxes that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of Securities pursuant hereto.
The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the
Holder of the Security or Securities to be converted, and no such
issue or delivery shall be made unless and until the person requesting
such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been
paid.
SECTION 10.05. COMPANY TO PROVIDE STOCK. The Company has
reserved and shall continue to reserve out of its authorized but
unissued Common Stock or its Common Stock held in treasury enough
shares of Common Stock to permit the conversion of the Securities in
full.
All shares of Common Stock which may be issued upon conversion of
the Securities shall be fully paid and non assessable.
The Company will comply with all securities laws regulating the
offer and delivery of shares of Common Stock upon conversion of
Securities and will use its best efforts to list such shares on each
national securities exchange on which the Common Stock is listed.
SECTION 10.06. ADJUSTMENT FOR DIVIDENDS AND DISTRIBUTIONS OF
COMMON STOCK. In case the Company shall pay or make a dividend or
other distribution on any class of Capital Stock of the Company in
<PAGE>
Common Stock, the conversion price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such conversion price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares of Common Stock and the total number of shares of Common Stock
constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this Section 10.06, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
SECTION 10.07. ADJUSTMENT FOR RIGHTS ISSUE. In case the Company
shall issue rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than the Current Market Price per share of the
Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion price in
effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such conversion
price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such Current Market Price and the denominator shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such reduction
to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes
of this Section 10.07, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock.
The Company will not issue any rights or warrants in respect of shares
of Common Stock held in the treasury of the Company.
SECTION 10.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS. In case the
Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in
Section 10.07, any dividend or distribution paid in cash out of the
earned surplus of the Company and any dividend or distribution
referred to in Section 10.06), the conversion price shall be adjusted
<PAGE>
so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the close of business
on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall
be the Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and contained in a Board Resolution filed with the Trustee)
of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price per share of the Common
Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
SECTION 10.09. ADJUSTMENT FOR SUBDIVISION OF COMMON Stock. In
case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case outstanding shares of Common Stock
shall each be combined into a smaller number of shares of Common
Stock, the conversion price in effect at the opening of business on
the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
SECTION 10.10. ADJUSTMENT FOR RECLASSIFICATION OF COMMON STOCK.
The reclassification of Common Stock into securities including other
than Common Stock shall be deemed to involve (a) a distribution of
such Securities other than Common Stock to all holders of Common Stock
(and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to
receive such distribution" and "the date fixed for such determination"
within the meaning of Section 10.08) and (b) a subdivision or
combination, as the case may be, of the number of shares of Common
Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be
"the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective," as the case may be,
and "the day upon which such subdivision or combination becomes
effective" within the meaning of Section 10.09.
SECTION 10.11. [Intentionally Omitted]
<PAGE>
SECTION 10.12. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment
in the conversion price need be made for a transaction referred to in
Sections 10.06,10.07, 10.08, 10.09 or 10.10 unless the adjustment
would require an increase or decrease of at least 1% in the conversion
price. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 10.13. WHEN NO ADJUSTMENT REQUIRED. No adjustment need
be made for a transaction referred to in Sections 10.06, 10.07, 10.08,
10.09 or 10.10 if all Securityholders are entitled to participate in
the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock or
issuance of Common Stock pursuant to a Company plan for reinvestment
of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
To the extent the Securities become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not
accrue on the cash.
SECTION 10.14. NOTICE OF ADJUSTMENT. Whenever the conversion
price is adjusted, the Company shall promptly mail to Securityholders
and the Trustee notice of the adjustment. The Company shall file with
the Trustee a certificate from the Company's independent public
accountants briefly stating the facts requiring the adjustment and the
manner of computing it. The certificate shall be conclusive evidence
that the adjustment is correct.
SECTION 10.15. VOLUNTARY REDUCTION. The Company from time to
time may reduce the conversion price by any amount for any period of
time if the period is at least 20 days or such longer period as may be
required by law and if the reduction is irrevocable during the period,
provided, that in no event may the conversion price be less than the
par value of a share of Common Stock.
Whenever the conversion price is reduced, the Company shall mail
to Securityholders and the Trustee a notice of the reduction and
comply with Rule 13e-4 promulgated by the SEC under the Exchange Act,
if such rule is applicable, and any other applicable rules and
regulations of the SEC. The notice shall state the reduced conversion
price and the period it will be in effect.
A reduction of the conversion price does not change or adjust the
conversion price otherwise in effect for purposes of Sections 10.06,
10.07,10.08, 10.09 and 10.10.
<PAGE>
SECTION 10.16. NOTICE OF CERTAIN TRANSACTIONS. If:
(a) the Company takes any action that would require an adjustment
in the conversion price pursuant to Sections 10.06, 10.07, 10.08,
10.09 or 10.10 and if the Company does not let Securityholders
participate pursuant to Section 10.13;
(b) the Company takes any action that would require a
supplemental indenture pursuant to Section 10.17; or
(c) there is a liquidation or dissolution of the Company, the
Company shall mail to Securityholders and the Trustee a notice stating
the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Company shall mail such notice at least 15 days
before such date. Failure to mail such notice or any defect in it
shall not affect the validity of the transaction.
SECTION 10.17. REORGANIZATION OF COMPANY. If the Company is a
party to a transaction subject to Section 5.01, or a merger which
reclassifies or changes its outstanding Common Stock, upon
consummation of such transaction the Securities shall automatically
become convertible into the kind and amount of securities, cash or
other assets which the Holder of a Security would have owned
immediately after the consolidation, merger, transfer or lease if the
Holder had converted the Security at the conversion price in effect
immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the person
obligated to issue securities or deliver cash or other assets upon
conversion of the Securities shall enter into a supplemental indenture
so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Article. The successor Company shall mail to Securityholders
a notice describing the supplemental indenture.
If securities deliverable upon conversion of the securities, as
provided above, are themselves convertible into the securities of an
Affiliate of the formed, surviving, transferee or lessee corporation,
that issuer shall join in the supplemental indenture which shall so
provide.
If this Section applies, Section 10.06 does not apply.
SECTION 10.18. COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to
Section 10.03, 10.08,or 10.13 is conclusive.
<PAGE>
SECTION 10.19. TRUSTEE'S DISCLAIMER. The Trustee has no duty to
determine when an adjustment under this Article should be made, how it
should be made or what it should be. The Trustee has no duty to
determine whether any provisions of a supplemental indenture under
Section 10.17 are correct. The Trustee makes no representation as to
the validity or value of any securities or assets issued upon
conversion of the Securities. The Trustee shall not be responsible
for the Company's failure to comply with this Article. Each
Conversion Agent other than the Company shall have the same protection
under this Section as the Trustee
ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.01. SECURITIES SUBORDINATE TO SENIOR DEBT. The
Company, for itself, its successors and assigns, covenants and agrees,
and each Holder of the Securities, by his acceptance thereof likewise
covenants and agrees that all Securities issued hereunder shall be
subordinated and subject, to the extent and in the manner herein set
forth, in right of payment to the prior payment in full of all Senior
Debt.
SECTION 11.02. NO PAYMENTS WHEN SENIOR DEBT IN DEFAULT; PAYMENT
OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event the Company
shall default in the payment on any Senior Debt when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by setoff
or otherwise) shall be made or agreed to be made on account of the
principal of or interest on the Securities, or in respect of any
redemption, retirement, purchase or other acquisition (except through
the conversion thereof) of any of the Securities.
Upon the happening of an event of default with respect to any
Senior Debt, as defined therein or in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the
maturity thereof(under circumstances when the terms of the preceding
paragraph are not applicable), unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by setoff
or otherwise) shall be made or agreed to be made on account of the
principal of or interest on the Securities, or in respect of any
redemption, retirement, purchase or other acquisition (except through
the conversion thereof) of any of the Securities.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company or its property, or any of the Company's
subsidiaries that are guarantors under Designated Senior Debt,
<PAGE>
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company or its property,
(c) any assignment by the Company for the benefit of creditors,
or
(d) any other marshalling of the assets of the Company, all
Senior Debt (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full
before any payment or distribution (direct or indirect), whether in
cash, property or securities, by setoff or otherwise, shall be made to
any Holder on account of any Securities, and to that end any payment
or distribution, whether in cash, property or securities (other than
securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with
respect to the Securities, to the payment of all Senior Debt at the
time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment) which would otherwise
(but for the subordination provisions contained in this Article) be
payable or deliverable in respect of the Securities shall be paid or
delivered directly to the holders of Senior Debt, as their respective
interests may appear, until all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings)shall
have been paid in full.
If the Securities are declared due and payable before their
stated maturity because of the occurrence of an Event of Default
(under circumstances where the preceding paragraph is not applicable),
no payment (direct or indirect) shall be made in respect of any
Securities unless and until all Senior Debt has been paid in full or
such declaration and its consequence shall have been rescinded and all
such defaults shall have been remedied or waived.
If any payment or distribution (other than securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in this Article with respect to the
Securities, to the payment of all Senior Debt at the time outstanding
and to any securities issued in respect thereof under any such plan of
reorganization or readjustment) shall be received by the Trustee or
the Holders in contravention of any of the terms of this Article and
before all the Senior Debt has been paid in full, such payment or
distribution shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the holders of such Senior
Debt at the time outstanding as their respective interests may appear
for application to the payment of Senior Debt until all Senior Debt
(including any interest thereon accruing after the commencement of any
such proceeding referred to in paragraph (a), (b), (c) or(d) above)
shall have been paid in full. If the Trustee or any such Holder fails
to endorse or assign any such payment or distribution as required by
<PAGE>
this Section, the Trustee and the Holder of each Security by his
acceptance thereof authorizes each holder of Senior Debt, any
representative or representatives of holders of Senior Debt and the
trustee or trustees under any indenture pursuant to which any
instrument evidencing such Senior Debt may have been issued to so
endorse or assign the same.
No holder of Senior Debt shall be prejudiced in the right to
enforce subordination of the Securities by any act or failure to act
on the part of the Company.
Subject to the payment in full of all Senior Debt, the Holders
shall be subrogated (equally and ratably with the holders of all
indebtedness of the Company which ranks on a parity with the
Securities and is entitled to like rights of subrogation) to the
rights of the holders of Senior Debt to receive payments or
distributions applicable to the Senior Debt until the Securities shall
be paid in full, and no such payments or distributions shall, as
between the Company, its creditors other than the holders of Senior
Debt, and the Holders of the Securities, be deemed to be a payment by
the Company to or on account of the Securities. The provisions of
this Article are and are intended solely for the purposes of defining
the relative rights of the Holders of the Securities, on the one hand,
and the holders of Senior Debt, on the other hand, and nothing
contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt and the Holders of the
Securities, the obligation of the Company to pay the Holders the
principal of and interest on the Securities as and when the same shall
become due and payable in accordance with the terms thereof, or
prevent the Trustee or the Holders from exercising all rights, powers
and remedies otherwise permitted by applicable law or under this
Indenture, upon a default or Event of Default hereunder, all subject
to the rights of the holders of the Senior Debt to receive cash,
property or securities otherwise payable or deliverable to the Trustee
or the Holders.
Upon any payment or distribution pursuant to this Section, the Trustee
shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred
to in this Section, are pending, and the Trustee, subject as between
the Trustee and the Holders to the provisions of Section 7.01, shall
be entitled to rely upon a certificate of the liquidating trustee or
agent or other person making such payment or distribution to the
Trustee or to the Holders for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders
of the Senior Debt and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section. In
the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any person as a holder of Senior
<PAGE>
Debt to participate in any payment or distribution pursuant to this
Section, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Debt held by such person, as to the extent to which such person is
entitled to participate in such payment or distribution, and as to
other facts pertinent to the rights of such person under this Section,
and if such evidence is not furnished, the Trustee may defer any
payment to such person pending judicial determination as to the right
of such person to receive such payment.
SECTION 11.03. TRUSTEE TO EFFECTUATE SUBORDINATION. The Holder
of each security by his acceptance thereof authorizes and directs the
Trustee in his behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination as provided
in this Article and appoints the Trustee as attorney-in-fact for any
and all such purposes.
SECTION 11.04. TRUSTEE NOT CHARGED WITH KNOWLEDGE OF
PROHIBITION. Notwithstanding the provisions of this Article or any
other provision of this Indenture, but subject as between the Trustee
and the Holders to the provisions of Section 7.01, the Trustee shall
not be charged with knowledge of the existence of any Senior Debt, or
of any default in the payment of any Senior Debt, or of any facts
which would prohibit the making of any payment of moneys to or by the
Trustee, unless and until three business days after the Trustee shall
have received written notice thereof from the Company or any holder
of Senior Debt or the representative or representatives of such
holder; nor shall the Trustee be charged with knowledge of the curing
of any such default or of the elimination of the act or condition
preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect. The provisions of
this Section shall not limit any rights of holders of Senior Debt
under this Article XI to recover from the Holders of Securities any
payment made to any such Holder.
SECTION 11.05. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT. The
Trustee shall be entitled to all the rights set forth in this Article
with respect to any Senior Debt which may at any time be held by it,
to the same extent as any other holder of Senior Debt, and nothing in
Section 7.11, or elsewhere in this Indenture, shall deprive the
Trustee of any of its rights as such holder.
SECTION 11.06. ARTICLE APPLICABLE TO PAYING AGENT. In case at
any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the
context shall otherwise require) be construed as extending to and
including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; PROVIDED, however,
that Sections 11.04 and 11.05 shall not apply to the Company or any
Affiliate of the Company if the Company or such Affiliate acts as
Paying Agent.
<PAGE>
ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
SECTION 12.01. RIGHT TO REQUIRE REPURCHASE. In the event that
there shall occur a Designated Event with respect to the Company, then
each Securityholder shall have the right, at such Securityholder's
option, but subject to the provisions of Article XI and this Article
XII to require the Company to purchase, and upon exercise of such
right the Company shall purchase, all or any part of such
Securityholder's Securities in principal amount of $1,000 or an
integral multiple thereof on the date (the "Repurchase Date") that is
45 days after the date of the Company Notice, at 100% of the principal
amount, together with accrued interest to the Repurchase Date.
SECTION 12.02. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.
(a) On or before the 30th day after the occurrence of a Designated
Event, the Company, or at the request of the Company, the Trustee,
shall give notice of the occurrence of the Designated Event and of the
repurchase right set forth herein arising as a result thereof (the
"Company Notice") by first-class mail, postage pre-paid, to each
Holder at such Holder's address appearing in the Securities Register.
The Company shall also deliver a copy of such Company Notice to the
Trustee and cause a copy of such Company Notice to be published in a
newspaper of general circulation in the Borough of Manhattan, The City
of New York.
Each Company Notice shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must be
exercised,
(iii) the price at which the repurchase is to be made, if
the repurchase right is exercised, and
(iv) a description of the procedure which a Securityholder
must follow to exercise a repurchase right.
No failure of the Company to give the foregoing notice shall
limit any Securityholder's right to exercise a repurchase right.
(b) To exercise a repurchase right, a Securityholder shall
deliver to the Company (or an agent designated by the Company for such
purpose in the Company Notice), on or before the 30th day after the
date of the Company Notice, (i) written notice of the Securityholder's
exercise of such right, which notice shall set forth the name of the
Securityholder, the principal amount of the Security or Securities (or
portion of a Security) to be repurchased, and a statement that an
election to exercise the repurchase right is being made thereby, and
(ii) the Security or Securities with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company.
<PAGE>
Such written notice shall be irrevocable. If the Repurchase Date
falls between any record date for the payment of interest on the
Securities and the next succeeding interest payment date, Securities
to be repurchased must be accompanied by payment of an amount equal to
the interest thereon which the registered Holder thereof is to receive
on such interest payment date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be
paid the price payable with respect to the Security or Securities as
to which the repurchase right has been exercised in cash to the
Securityholder on the Repurchase Date. In the event that a repurchase
right is exercised with respect to less than the entire principal
amount of a surrendered Security, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance
in the name of the Securityholder a replacement Security or Securities
in the aggregate principal amount of the unrepurchased portion of such
surrendered Security.
SECTION 12.03. CERTAIN DEFINITIONS. For purposes of Sections
12.01 and 12.02:
(a) A "Designated Event" shall be deemed to have occurred on the
date of consummation of the purchase, merger or other acquisition
transaction as referred to in the definition of a Change in Control.
(b) As used herein, a "Change in Control" of the Company shall
be deemed to have occurred when (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related
group of persons; (ii) there shall be consummated any consolidation or
merger of the Company (A) in which the Company is not the continuing
or surviving corporation (other than a consolidation or merger with a
wholly owned subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant
to which the Common Stock would be converted into cash, securities or
other property, in each case, other than a consolidation or merger of
the Company in which the holders of the Common Stock immediately prior
to the consolidation or merger have, directly or indirectly, at least
a majority of the common stock of the continuing or surviving
corporation immediately after such consolidation or merger, or (iii)
any person, or any persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than
the Company, any subsidiary, any employee stock purchase plan, stock
option plan or other stock incentive plan or program, retirement plan
or automatic dividend reinvestment plan or any substantially similar
plan of the Company or any subsidiary or any person holding securities
of the Company for or pursuant to the terms of any such employee
benefit plan), together with any Affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at
least 50% of the total voting power of all classes of Capital Stock of
the Company entitled to vote generally in the election of directors of
the Company.
<PAGE>
(c) Notwithstanding paragraph (b) above, a Change in Control
shall not be deemed to have occurred if (i) the Current Market Price
of the Common Stock is at least equal to 105% of the conversion price
of the Securities in effect immediately preceding the time of such
Change in Control, or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction giving rise to such
Change in Control to the holders of Common Stock consists of shares of
common stock that are, or immediately upon issuance will be, listed on
a national securities exchange or quoted on NASDAQ, and as a result of
such transaction the Securities become convertible solely into such
common stock, or (iii) the consideration in the transaction giving
rise to such Change in Control to the holders of Common Stock consists
of cash, securities that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted on NASDAQ, or a
combination of cash and such securities, and the aggregate fair market
value of such consideration (which, in the case of such securities,
shall be equal to the average of the daily closing prices of such
securities during the ten consecutive trading days commencing with the
sixth trading day following consummation of such transaction) is at
least 105% of the conversion price of the Securities in effect on the
date immediately preceding the closing date of such transaction.
SECTION 12.04. COMPLIANCE WITH RULE 13e-4. In connection with
any repurchase of Securities pursuant to this Article XII, the Company
will comply with Rule 13e-4 promulgated by the SEC under the Exchange
Act, if such Rule is applicable, and any other applicable rules and
regulations of the SEC.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision
of this Indenture limits, qualifies, or conflicts with the duties
imposed by operation of Section 318(c) of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
SECTION 13.02. NOTICES AND COMMON STOCKHOLDER INFORMATION. Any
notice or communication from the Company or the Trustee to the other
is duly given if in writing and delivered in person or mailed by
first-class mail to the following addresses:
If to the Company, at:
Source Capital Corporation
1825 North Hutchinson Road
Spokane, Washington 99212
Attention: President
<PAGE>
If to the Trustee, at:
Bankers Trust Company
Four Albany Street
(4th Floor)
New York, New York 10006
Attention: Corporate Trust and Agency Group
The Company or the Trustee by notice to the other may designate an
additional or different address for subsequent notices or
communications.
Any notice or communication to a Securityholder shall be mailed
by first-class mail to his address shown on the Securities Register.
Failure to mail a notice or communication to a Securityholder or any
defect in such notice or communication shall not affect its
sufficiency with respect to other Securityholders.
The Company shall mail to each Securityholder a copy of its
annual and periodic reports to shareholders, proxy statements and such
other information as it is required to furnish to holders of its
Common Stock under the provisions of the Exchange Act. Such reports,
proxy statements or other written information shall be mailed to the
Securityholders at the time it is mailed to the holders of its Common
Stock.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it. If the Company mails a notice or communication
to Securityholders, it shall mail a copy to the Trustee and each Agent
at the same time.
SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA S 312(b) with other
Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and anyone
else shall have the protection of TIA S 312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the
Trustee to take any action under any provision of this Indenture, the
Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied
with.
<PAGE>
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Every Officer's Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture
shall include:
(a) a statement that each person signing such Certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such Officer's Certificate or Opinion of Counsel are
based;
(c) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 13.06. RULES BY TRUSTEE AND AGENTS. The Trustee may
make reasonable rules for action by or a meeting of Securityholders.
The Registrar, Paying Agent or Conversion Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 13.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday,
a Sunday or a day on which banking institutions are not required to be
open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 13.08. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or
the Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
SECTION 13.09. COUNTERPARTS. This Indenture may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
SECTION 13.10. GOVERNING LAW. The internal laws of the State of
New York shall govern this Indenture and the Securities, without
regard to the conflicts of laws provisions thereof.
<PAGE>
SECTION 13.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a subsidiary. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.12. SUCCESSORS. All agreements of the Company in
this Indenture and the Securities shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 13.13. SEVERABILITY. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 13.14. TABLE OF CONTENTS, HEADINGS, ETC. The Table of
Contents, Cross-Reference Table, and headings of the Articles and
Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in
no way modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed by their respective officers or attorneys-in-fact,
as the case may be, thereunto duly authorized, as of the day and year
first above written.
SOURCE CAPITAL CORPORATION,
By: /s/ D. M. JONES
----------------------------
Name: D. Michael Jones
Title: President
[Seal]
Attest
/s/ LESTER L. CLARK
--------------------------------
Title: Secretary
BANKERS TRUST COMPANY,
as Trustee,
By: /s/ KEVIN WEEKS
------------------------
Name: Kevin Weeks
Title: Assistant Vice President
<PAGE>
EXHIBIT A
(FORM OF DEFINITIVE SECURITY)
(Face of Security)
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES
ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), (4) PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR (AS DEFINED IN RULE 501 (a) (1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION. THE
HOLDER OF THIS SECURITY AGREES TO DELIVER SUCH CERTIFICATES AND OTHER
INFORMATION AS THE COMPANY AND THE TRUSTEE MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER BY IT OF THIS SECURITY AND ANY COMMON STOCK
ISSUED UPON ITS CONVERSION COMPLIES WITH THE FOREGOING.
No. $
---------------- ------------------
SOURCE CAPITAL CORPORATION
7 1/2% CONVERTIBLE SUBORDINATED DEBENTURE
DUE 2008
promises to pay to
---------------------------------------------------------------------
---------------------------------------------------------------------
or registered assigns, the principal sum of
--------------------------
Dollars ($_________) on March 1, 2008.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is hereby made to the further provisions of this 7-1/2%
Convertible Subordinated Debenture set forth on the back of this
security which further provisions shall for all purposes have the same
effect as if set forth at this place.
<PAGE>
Authenticated: Dated:
BANKERS TRUST COMPANY SOURCE CAPITAL CORPORATION
as Trustee
By By
----------------------------- -----------------------------
Authorized Signature President
OR Attest
as Authenticating Agent
--------------------------------
(Assistant) Secretary
By (SEAL)
-----------------------------
Authorized Signature
<PAGE>
Source Capital Corporation
7 1/2% Convertible Subordinated Debenture
due 2008
1. INTEREST. Source Capital Corporation, a Washington
corporation (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on March 1, and September 1 of
each year commencing September 1, 1998. Interest on the Securities
will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from February 11, 1998. Interest
will be computed on the basis of a 360-day year of 12 30-day months.
2. REGISTRATION RIGHTS. As provided in the Registration Rights
Agreement dated as of February 11, 1998 (the Closing Date") (the
"Registration Rights Agreement"), between the Company and Pacific
Crest Securities, Inc. (the "Placement Agent"), the Company is
obligated to use its best efforts to file on or before July 1, 1998,
and to use its best efforts to cause to be declared effective as soon
as practicable after filing, but in no event later than September 30,
1998, a shelf registration statement to be available for resales of
the Common Stock of the Company issuable upon conversion of the
Securities and to use its best efforts to keep such shelf registration
statement continuously effective for a period of two years from the
Closing Date, subject to adjustment as set forth in the Registration
Rights Agreement. This description of the Registration Rights
Agreement is only a summary and is qualified in its entirety by
reference to the detailed provisions in the Registration Rights
Agreement.
3. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except defaulted interest and any interest payable on the
defaulted interest) to the persons who are registered Holders of
Securities at the close of business on the record date for the next
interest payment date even though Securities are canceled after the
record date on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments.
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
4. PAVING AGENT REGISTRAR AND CONVERSION AGENT The Trustee will
act as Conversion Agent, Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar, Conversion Agent or co-registrar
without prior notice. The Company or any of its subsidiaries may act
in any such capacity.
<PAGE>
5. INDENTURE. The Company issued the Securities under an
Indenture dated as of February 11, 1998 (the "Indenture") between the
Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-
77bbbb) as in effect on the date of the Indenture. The Securities are
subject to, and qualified by, all such terms, certain of which are
summarized hereon, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. The Securities are
unsecured general obligations of the Company limited to $6,000,000 in
aggregate principal amount. Capitalized terms used herein and not
elsewhere defined shall have the meaning set forth in the Indenture.
6. OPTIONAL REDEMPTION. The Securities may be redeemed in
whole or from time to time in part, at the option of the Company, at
any time on or after March 1, 2001, at redemption prices equal to the
percentages of the principal amount thereof set forth below in each
case together with accrued interest to the redemption date.
If the redemption date occurs during the 12-month period
beginning March 1 of the years indicated below:
Year Percentage
------------------- ----------
2001 105.0%
2002 102.5%
2003 and thereafter 100.0%
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date
to each Holder of Securities to be redeemed at his registered address.
Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. In the event of a redemption
of less than all of the Securities, the Securities will be chosen for
redemption by the Trustee by lot or by a method that complies with the
requirements of any exchange on which the Securities are traded and
that the Trustee finds to be fair and appropriate. On and after the
Redemption Date interest ceases to accrue on Securities or portions of
them called for redemption.
If this Security is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest will be paid
to the person in whose name this Security is registered at the close
of business on such record date.
8. RIGHT TO REQUIRE REPURCHASE. In the event that there shall
occur a Designated Event with respect to the Company, then each
Securityholder shall have the right, at such Securityholder's option,
but subject to the provisions of Article XI of the Indenture, to
require the Company to purchase, and upon the exercise of such right
the Company shall purchase, all or any part of such Securityholder's
<PAGE>
Securities in a principal amount of $1,000 or an integral multiple
thereof on the date (the "Repurchase Date") that is 45 days after the
date of the Company Notice, at 100% of the principal amount, together
with accrued interest to the Repurchase Date.
To exercise a repurchase right, a Securityholder shall deliver to
the Company (or an agent designated by the, Company for such purpose
in the Company Notice), on or before the 30th day after the date of
the Company Notice, (i) written notice of the Securityholder's
exercise of such right, which notice shall set forth the name of the
Securityholder, the principal amount of the Security or Securities (or
portion of a security) to be repurchased, and a statement that an
election to exercise the repurchase right is being made thereby, and
(ii) the Security or Securities with respect to which the repurchase
right is exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable. If the Repurchase Date falls
between any record date for the payment of interest on the Securities
and the next succeeding interest payment date, Securities to be
repurchased must be accompanied by payment of an amount equal to the
interest thereon which the registered Holder thereof is to receive on
such interest payment date.
9. CONVERSION. A Holder of a Security may convert it into
Common Stock of the Company at any time after the earlier of the close
of business on September 30, 1998, or the effective date of the
registration statements to be filed with the Securities and Exchange
Commission pursuant to the Registration Rights Agreement. If the
Security is called for redemption, the Holder may convert it at any
time prior to the close of business on the business day prior to the
Redemption Date (unless the Company shall default in payment due upon
redemption thereof). The initial conversion price of $8.01 per share
of Common Stock is subject to adjustment in certain events. To
determine the number of shares issuable upon conversion of a Security,
divide the principal amount to be converted by the conversion price in
effect on the Conversion Date. No payment or adjustment will be made
on conversion of any Security for interest accrued thereon or
dividends on any Common Stock issued and the Holder will lose any
right to payment of interest on the Securities surrendered for
conversion; PROVIDED, HOWEVER, that upon a call for redemption by the
Company, accrued and unpaid interest to the Redemption Date shall be
payable with respect to Securities that are converted after a
Redemption Notice has been mailed and on or prior to the Redemption
Date. Securities surrendered for conversion during the period from the
regular record date for an interest payment to the corresponding
interest payment date (except Securities called for redemption as
described in the preceding sentence) must be accompanied by payment of
an amount equal to the interest thereon which the Holder is to receive
on such interest payment date. The Company will deliver payment in
lieu of any fractional share.
<PAGE>
To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements
and transfer documents if required by the Registrar or Conversion
Agent, and (4) pay any transfer or similar tax if required. A Holder
may convert a portion of a Security if the portion is $1,000 or an
integral multiple Of $1,000.
The conversion price is subject to adjustment as set forth in the
Indenture in certain events. No adjustment in the conversion price
will be required unless such adjustment would require a change of at
least 1% in the price then in effect; but any adjustment that would
otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment.
The Company from time to time may voluntarily reduce the
conversion price for a period of time, provided that the conversion
price is not less than the par value of a share of Common Stock.
If the Company is a party to a consolidation or merger or a
transfer or lease of all or substantially all of its assets, the
Securities automatically become convertible into the kind and amount
of securities, cash or other assets which the Holder of a Security
would have owned immediately after such transaction if the Holder had
converted the Security immediately before the effective date of the
transaction.
10. SUBORDINATION. The indebtedness evidenced by the Securities
is, to the extent and in the manner set forth in the Indenture,
expressly subordinated and subject in right of payment to the prior
payment in full of all Senior Debt, as defined in the Indenture, and
this Security is issued subject to such provisions of the Indenture,
and each Holder of this Security, by accepting the same, agrees to and
shall be bound by such provisions and authorizes and directs the
Trustee in his behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination as provided
in the Indenture and appoints the Trustee his attorney-in-fact for any
and all such purposes.
11. DENOMINATIONS. TRANSFER. EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and
integral multiples of $1,000. The transfer of Securities may be
registered and Securities may be exchanged as provided in the
Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Security
or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities for a period of 15
days before a selection of Securities to be redeemed.
12. PERSONS DEEMED OWNERS. The registered Holder of a Security
may be treated as its owner for all purposes.
<PAGE>
13. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the
Holders of at least a majority in principal amount of the then
outstanding Securities, and any existing default may be waived with
the consent of the Holders of a majority in principal amount of the
then outstanding Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to cure
any ambiguity, defect or inconsistency, to provide for assumption of
the Company's obligations to Securityholders or to make any change
that does not adversely affect the rights of any Securityholder.
14. DEFAULTS AND REMEDIES. If an Event of Default shall occur
and be continuing, the principal of all the Securities may be declared
due and payable in the manner and with the effect provided in the
Indenture.
15. TRUSTEE-DEALINGS WITH THE COMPANY. Bankers Trust Company,
the Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal
with the Company or its Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS. A director officer, employee or
stockholder, as such, of the Company shall not have any liability for
any obligations of the Company under the Securities or the Indenture
or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
17. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Securityholder or an assignee, such as: TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and UIGIMIA Uniform Gifts to Minors Act).
<PAGE>
ASSIGNMENT FORM CONVERSION NOTICE
To Assign this Security, fill To convert this Security into
in the form below: Common Stock of the Company,
check the box:
I or we assign and transfer
this Security to: [ ]
----------------------------- To convert only part of this
Security, state the amount:
-----------------------------
$
----------------------------- ----------------------------
----------------------------- If you want the stock
certificate made out in
(Print or type assignee's another person's name, fill in
name, address and zip code): the form below:
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
(Insert assignee's Soc. Sec. (Print or type other person's
or Tax I.D. No.) name, address and zip code)
----------------------------- -----------------------------
(Insert other person's Soc.
and irrevocably appoint Sec. or Tax I.D. no.)
----------------------------- -----------------------------
agent to transfer this
Security on the books of the
Company. The agent may
substitute another to act for
him.
Date:
------------------------
Your Signature: -----------------------------
(Sign exactly as your name
appears on the other side of
this Security. Signature(s)
must be guaranteed by an
Eligible Guarantor Institution
with membership in an approved
signature guarantee program
pursuant to Rule 17Ad-15 under
the Securities Exchange Act of
1934.)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Article XII of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Article XII of the Indenture, state the
amount: $
-------------------
Date: Your Signature:
----------------- -----------------------------
(Sign exactly as your name
appears on the other side of
this Security. Signature(s)
must be guaranteed by an
Eligible Guarantor
Institution with membership
in an approved signature
guarantee program pursuant
to Rule 17Ad-15 under the
Securities Exchange Act of
1934.)
<PAGE>
EXHIBIT B-I
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES
Re: 7 1/2% Convertible Subordinated Debentures due 2008 of Source
Capital Corporation
This Certificate relates to $
-------------------------------
principal amount of Securities held in definitive form by
-------
(the "Transferor").
--------------------------------------
The Transferor has requested the Trustee by written order to
exchange or register the transfer of a Definitive Security or
Securities to a Definitive Security or Securities.
In connection with such request, the Transferor does hereby
acknowledge that the Securities and the shares of Common Stock
issuable upon conversion thereof have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or any other
applicable securities law and, accordingly, none of the Securities or
shares of Common Stock issuable upon conversion thereof may be
offered, sold, transferred, pledged, hypothecated or otherwise
disposed of except (A)(i) to a person that the Transferor reasonably
believes is a qualified institutional buyer ("Qualified Institutional
Buyer") purchasing for its own account or the account of a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule
144A ("Rule 144A") under the Securities Act, (ii) in an offshore
transaction complying with Rule 903 or 904 of Regulation S under the
Securities Act, (iii) pursuant to the exemption from registration
under the Securities Act provided by Rule 144 thereunder (if
available), (iv) pursuant to any other exemption from the registration
requirements of the Securities Act, or (v) pursuant to an effective
registration statement under the Securities Act and (B) in accordance
with any other applicable securities law.
In addition, in respect of each such Security, the Transferor
does hereby certify as follows:*
-- Such Security is being acquired for its own account, without
transfer.
<PAGE>
-- Such Security is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act)
in reliance on Rule 144A or in accordance with Rule 145 or Regulation
S under the Securities Act.
-- Such Security is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective registration
statement under the Securities Act.
-- Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities act, other than Rule 144A, 144 or 145 or Regulation S under
the Securities Act.
An opinion of counsel to the effect that such transfer does not
require registration under the Securities Act accompanies this
certificate.
---------------------------------
(INSERT NAME OF TRANSFEROR)
By:
-----------------------------
Date:
--------------------------
* Check applicable box.
<PAGE>
EXHIBIT B-II
[FORM OF OPINION OF COUNSEL]
[Letterhead of Counsel]
[Date]
SOURCE CAPITAL CORPORATION
1825 North Hutchinson Road
Spokane, Washington 99212
Attention: President
BANKERS TRUST COMPANY
4 Albany Street (4th Floor)
New York, New York 10006
[ ]
-------------------------------------
as Trustee and Registrar
[ ]
-------------------------------------
[ ]
-------------------------------------
Re: $ Principal Amount of 7 1/2%
--------------
Convertible Subordinated Debentures due
2008 of Source Capital Corporation
Gentlemen:
[Name of transferor] has requested that we deliver this opinion
to you in connection with the transfer (the "Transfer") to [name of
transferee] (the "Transferee") of the above-referenced debentures (the
"Debentures") of Source Capital Corporation.
In connection with this opinion, we have relied upon a
certificate of an officer of the Transferee, a copy of which is
annexed hereto, and have made such other investigation as we deem
necessary or appropriate to enable us to render the opinion set fort
below.
On the basis of the foregoing and in reliance thereon, and
assuming that the certificates issued to the Transferee in connection
with the Transfer each contain a legend stating that the Debentures
have not been registered under the Securities Act of 1933, as amended
<PAGE>
(the "Act"), and may not be sold or transferred in the absence of
registration or an exemption therefrom under said Act, we are of the
opinion that the Transfer does not require registration under the Act.
Our opinion herein is limited to United States federal law and we
assume no responsibility as to the applicability thereto, or the
effect thereon, of the laws of any other jurisdiction. This opinion
is furnished by us solely for your benefit, and is not to be otherwise
used, circulated or relied upon without our express written consent.
Very truly yours,
<PAGE>
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
Dated as of
February 11, 1998
Pacific Crest Securities, Inc.
111 S.W. 5th Avenue, 42nd Floor
Portland, Oregon 97204
Ladies and Gentlemen:
Source Capital Corporation, a Washington corporation (the
"Company"), proposes to issue and sell to the Purchasers (as defined
herein) upon the terms set forth in a Subscription Agreement and
Investor Questionnaire between the Purchasers and the Company, its 7-
1/2% Convertible Subordinated Debentures due 2008 (the "Debentures").
As an inducement to Pacific Crest Securities, Inc. (the Placement
Agent to act as the placement agent for the Debentures), the Company
agrees with the Placement Agent (i) for the benefit of the Purchasers
and (ii) for the benefit of the holders from time to time of the
Common Stock, no par value per share (the "Common Stock"), of the
Company issuable upon conversion of the Debentures (collectively, the
"Conversion Shares"), including the Purchasers (each of the foregoing
a "Holder" and, together, the "Holders"), as follows:
SECTION 1. DEFINITIONS. (a) Capitalized terms used herein
without definition shall have their respective meanings set forth in
or pursuant to the Indenture or the Private Placement Memorandum,
dated February 11, 1998, in respect of the Debentures. As used in
this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" or "Securities Act" means the United States Securities Act
of 1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with such specified person. For purposes of this
definition, control of a person means the power, direct or indirect,
to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the United States Securities and Exchange
Commission.
"Conversion Shares " means the shares of Common Stock issuable
upon conversion of the Debentures;
<PAGE>
"Debentures" means the Company's 7-1/2% Convertible Subordinated
Debentures due 2008.
"Effectiveness Period" has the meaning set forth in Section 2
hereof.
"Electing Holder" has the meaning assigned thereto in Section
3(a)(3) hereof.
"Exchange Act" means the United States Securities and Exchange
Act of 1934, as amended.
"Indenture" means the Indenture, dated as of February 11, 1998,
between the Company and Bankers Trust Company, as amended and
supplemented from time to time in accordance with is terms.
"Issue Date" means the date of original issuance of the
Debentures.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering, if any, as set forth in Section 6 hereof.
"Notice and Questionnaire" means a Notice of Registration
Statement and Selling Securityholder Questionnaire in the form to be
provided by the Company.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus
that discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule
430A under the Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion
of the Conversion Shares.
"Purchasers" means the initial purchasers of the Company's 7-1/2%
Convertible Subordinated Debentures due 2008.
"Restricted Security" means any Debenture or Conversion Share
except any such Debenture or Conversion Share which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or
any successor provision thereto), (iii) has been sold in compliance
with Regulation S under the Securities Act (or any successor thereto)
and does not constitute the unsold allotment of a distributor within
the meaning of Regulation S under the Securities Act, or (iv) has
otherwise been transferred and a new Debenture or Conversion Share not
subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company in accordance with Section
2.06 of the Indenture. "Shelf Registration" means a registration
effected pursuant to Section 2 hereof.
<PAGE>
"Shelf Registration Statement" means a shelf registration
statement of the Company pursuant to the provisions of Section 2
hereof filed with the Commission which covers some or all of the
Conversion Shares, as applicable, on an appropriate form under Rule
415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Underwriter" means any underwriter of Conversion Shares in
connection with an offering thereof under a Shelf Registration
Statement.
SECTION 2. SHELF REGISTRATION. (a) The Company shall, before
July 31, 1998, use its best efforts to file with the Commission a
Shelf Registration Statement relating to the offer and sale of the
Conversion Shares by the Holders from time to time in accordance with
the methods of distribution elected by such Holders and set forth in
such Shelf Registration Statement and, thereafter, shall use its best
efforts to cause such Shelf Registration Statement to be declared
effective under the Act on or prior to September 30, 1998; PROVIDED,
however, that no Holder shall be entitled to have the Conversion
Shares held by it covered by such Shelf Registration unless such
Holder is an Electing Holder.
(b) The Company shall use its best efforts:
(i) to keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof
to be usable by Holders until the second anniversary of the Issue
Date or such shorter period that will terminate when all the
Conversion Shares covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement (the
"Effectiveness Period");
(ii) after the date the Shelf Registration Statement becomes
effective, within 35 days after the request of any holder of
Conversion Shares that is not then an Electing Holder, to take
any action necessary and required by law to enable such holder to
use the Prospectus forming a part thereof for resales of
Conversion Shares, including, without limitation, any action
necessary to identify such holder as a selling Securityholder in
the Shelf Registration Statement; PROVIDED, HOWEVER, that nothing
in this subparagraph shall relieve such holder of the obligation
to return a completed and signed Notice and Questionnaire to the
Company in accordance with Section 3(a)(2) hereof; and
(iii) if at any time, the Debentures, pursuant to Article V
of the Indenture, are convertible into securities other than
Common Stock, the Company shall, or shall cause any successor
under the Indenture to, cause such securities to be included in
the Shelf Registration Statement no later than the date on which
the Debentures may then be convertible into such securities.
<PAGE>
The Company shall be deemed not to have used its best efforts to
keep the Shelf Registration Statement effective during the requisite
period if the Company voluntarily takes any action that would result
in Holders of Conversion Shares covered thereby not being able to
offer and sell any such Conversion Shares during that period, unless
(i) such action in required by applicable law, or (ii) the continued
effectiveness of the Shelf Registration Statement would require the
Company to disclose a material financing, acquisition or other
corporate trans action, and the Board of Directors shall have
determined in good faith that such disclosure is not in the best
interests of the Company and its stockholders; provided that in the
case of clause (i) above, the Company thereafter must promptly comply
with the requirements of paragraph 3(j) below, if applicable and in
the case of clauses (i) and (ii) above, the Company shall be entitled
to suspend the use of any prospectus forming a part of an effective
Registration Statement under this Section 2 for a reasonable period of
time (a "DELAY PERIOD"), except that the aggregate number of days
included in all Delay Periods during any consecutive 12 months shall
not exceed the aggregate of 90 days (whether or not consecutive).
SECTION 3. REGISTRATION PROCEDURES. In connection with any
Shelf Registration Statement, the following provisions shall apply:
(a) (1) Not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, the Company shall mail the
Notice and Questionnaire to the holders of Conversion Shares. No
holder shall be entitled to be named as a selling Securityholder in
the Shelf Registration Statement as of the Effective Time, and no
holder shall be entitled to use the Prospectus forming a part thereof
for resales of Conversion Shares at any time, unless such holder has
returned a completed and signed Notice and Questionnaire to the
Company by the deadline for response set forth therein; PROVIDED,
HOWEVER, holders of Conversion Shares shall have at least 28 calendar
days from the date on which the Notice and Questionnaire is first
mailed to such holders to return a completed and signed Notice and
Questionnaire to the Company.
(2) After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any holder of
Conversion Shares that is not then an Electing Holder, promptly send a
Notice and Questionnaire to such holder. The Company shall not be
required to take any action to name such holder as a selling
Securityholder in the Shelf Registration Statement or to enable such
holder to use the Prospectus forming a part thereof for resales of
Conversion Shares until such holder has returned a completed and
signed Notice and Questionnaire to the Company.
(3) The term "Electing Holder" shall mean any holder of
Conversion Shares that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a)(1) or
3(a)(2) hereof.
<PAGE>
(b) The Company shall furnish to the Placement Agent, prior to
the filing thereof with the Commission, a copy of any Shelf
Registration Statement, and each amendment thereof and each amendment
or supplement, if any, to the Prospectus included therein.
(c) The Company shall promptly take such action as may be
necessary so that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all
material respects with the Securities Act and the Exchange Act and the
respective rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(d) (1) The Company shall advise the Placement Agent and, in
the case of clause (i), the Electing Holders, and, if requested by the
Placement Agent or any such Electing Holder, confirm such advice in
writing:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective
amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
(2) The Company shall advise the Placement Agent and the
Electing Holders and, if requested by the Placement Agent or any such
Electing Holder, confirm such advice in writing of:
(f) The Company shall furnish to each Electing Holder included
within the coverage of any Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Electing Holder so requests in writing, all
reports, other documents and exhibits that are filed with or
incorporated by reference in the Shelf Registration Statement.
(g) The Company shall, during the Effectiveness Period, deliver
to each Electing Holder of Conversion Shares included within the
coverage of any Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary Prospectus, if
<PAGE>
any) included in such Shelf Registration Statement and any amendment
or supplement thereto as such Electing Holder may reasonably request;
and the Company consents (except during the continuance of any event
described in Section 3(d)(2)(iii)) to the use of the Prospectus or any
amendment or supplement thereto by each of the Electing Holders of
Conversion Shares in connection with the offering and sale of the
Conversion Shares covered by the Prospectus or any amendment or
supplement thereto during the Shelf Registration Period.
(h) Prior to any offering of Conversion Shares pursuant to any
Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Electing Holders of Conversion Shares included
therein and their respective counsel in connection with the
registration or qualification of such Conversion Shares for offer and
sale under the securities or, if required, blue sky laws of such
jurisdictions in the United States as any such Electing Holders
reasonably request in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such
jurisdictions of the Conversion Shares covered by such Shelf
Registration Statement; PROVIDED, HOWEVER, that in no event shall the
Company be obligated to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to so qualify but for this Section 3(h), (ii) file any
general consent to service of process in any jurisdiction where it is
not as of the date hereof then so subject or (iii) subject itself to
taxation in any such jurisdiction if it is not so subject.
(i) Unless any Conversion Shares shall be in book-entry only
form, the Company shall cooperate with the Electing Holders of
Conversion Shares to facilitate the timely preparation and delivery of
certificates representing Conversion Shares to be sold pursuant to any
Shelf Registration Statement free of any restrictive legends and in
such permitted denominations and registered in such names as Electing
Holders may request in connection with the sale of Conversion Shares
pursuant to such Shelf Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraph
3(d)(2)(iii) above, the Company shall promptly prepare a
post-effective amendment to any Shelf Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to purchasers of
the Conversion Shares included therein, the Prospectus will not
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If
the Company notifies the Electing Holders of the occurrence of any
event contemplated by paragraph 3(c)(2)(iii) above, the Electing
Holders shall suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made.
(k) Not later than the effective date of any Shelf Registration
Statement hereunder, the Company shall provide a CUSIP number for the
securities registered under such Shelf Registration Statement.
<PAGE>
(l) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission, and to make
generally available to its securityholders as soon as practicable, but
in any event not later than eighteen months after (i) the effective
date (as defined in Rule 158(c) under the Securities Act) of the Shelf
Registration Statement, (ii) the effective date of each post-effective
amendment to the Shelf Registration Statement, and (iii) the date of
each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration
Statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder (including, at the option of
the Company, Rule 158).
(m) [Intentionally Omitted.]
(n) The Company may require each Electing Holder of Conversion
Shares to be sold pursuant to any Shelf Registration Statement to
furnish to the Company such information regarding the Electing Holder
and the distribution of such Conversion Shares as may be required by
applicable law or regulation for inclusion in such Shelf Registration
Statement and the Company may exclude from such registration the
Conversion Shares of any Electing Holder that fails to furnish such
information within a reasonable time after receiving such request.
(o) The Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to
a Shelf Registration Statement, such information as the Managing
Underwriters reasonably agree should be included therein and to which
the Company does not reasonably object and shall make all required
filings of such Prospectus supplement or post-effective amendment as
soon as practicable after they are notified of the matters to be
included or incorporated in such Prospectus supplement or
post-effective amendment.
(p) The Company shall enter into such customary agreements
(including underwriting agreements in customary form) to take all
other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Conversion Shares, and in
connection therewith, if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in Section 5 (or such other
provisions and procedures acceptable to the Managing Underwriters, if
any) with respect to all parties to be indemnified pursuant to
Section 5.
<PAGE>
(q) The Company shall:
(i) make reasonably available for inspection by the
Electing Holders of Conversion Shares to be registered
thereunder, any underwriter participating in any disposition
pursuant to such Shelf Registration Statement, and any attorney,
accountant or other agent retained by such Electing Holders or
any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and
its subsidiaries;
(ii) cause the Company's officers, directors and employees
to make reasonably available for inspection all relevant
information reasonably requested by such Electing Holders or any
such underwriter, attorney, accountant or agent in connection
with any such Shelf Registration Statement, in each case, as is
customary for similar due diligence examinations; PROVIDED,
HOWEVER, that any information that is designated in writing by
the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by such
Electing Holders or any such underwriter, attorney, accountant or
agent, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes
available to the public generally or through a third party
without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the
Electing Holders of Conversion Shares registered thereunder and
the underwriters, if any, in form, substance and scope as are
customarily made by the Company to underwriters in primary
underwritten offerings and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing
Underwriters, if any) in customary form addressed to each
Electing Holder and the underwriters, if any, covering such
matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be
reasonably requested by such Electing Holders and underwriters
(it being agreed that the matters to be covered by such opinion
or written statement by such counsel delivered in connection with
such opinions shall include in customary form, without
limitation, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence
from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, including the
documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading);
<PAGE>
(v) obtain "cold comfort" letters and updates thereof from
the independent public accountants of the Company (and, if
necessary, any other independent public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or
are required to be, included in the Shelf Registration
Statement), addressed to each such Electing Holder of Conversion
Shares registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with primary
underwritten offerings;
(vi) deliver such documents and certificates as may be
reasonably requested by any such Electing Holders and the
Managing Underwriters, if any, including those to evidence
compliance with Section 3(i) and with any customary conditions
contained in the underwriting agreement or other agreement
entered into by the Company. The foregoing actions set forth in
clauses (iii), (iv), (v) and (vi) of this Section 3(q) shall be
performed at each closing under any underwritten offering to the
extent required thereunder.
(r) The Company shall use its best reasonable efforts to cause
the Conversion Shares to be listed for quotation on the NASDAQ stock
market or other stock exchange or trading system on which the Common
Stock primarily trades on or prior to the effective date of any Shelf
Registration Statement hereunder.
(s) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Conversion Shares or participate as
a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the Conduct Rules and the
By-Laws of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as an Electing Holder of such Conversion
Shares or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Rules and By-Laws, including,
without limitation, by (A) such Rules or By-Laws, including Schedule E
thereto, shall so require, engaging a "qualified independent
underwriter" (as defined in Schedule E) to participate in the
preparation of the Shelf Registration Statement relating to such
Conversion Shares and to exercise usual standards of due diligence in
respect thereto, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of under writers
provided in Section 5 hereof and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules of Fair Practice of the
NASD.
(t) The Company shall use its best efforts to take all other
steps necessary to effect the registration, offering and sale of the
Conversion Shares covered by the Shelf Registration Statement
contemplated hereby.
<PAGE>
SECTION 4. REGISTRATION EXPENSES. The Company shall bear all
fees and expenses incurred in connection with the performance of its
obligations under Sections 2 and 3 thereof.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION. (a) In connection
with any Shelf Registration Statement, the Company shall indemnify and
hold harmless the Placement Agent, each Electing Holder, each
underwriter who participates in an offering of Conversion Shares, each
person, if any, who controls any of such parties within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and
each of their respective directors, officers, employees, trustees and
agents (each such person being sometimes referred to as an
"indemnified party"), from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified
party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Shelf
Registration Statement under which such Conversion Shares are to be
registered under the Securities Act, or any Prospectus contained
therein or furnished by the Company to any indemnified party, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company hereby agrees to reimburse such
indemnified party for any legal or other expenses reasonably incurred
by them in connection with investigating or defending or preparing to
defend or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Shelf Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such
indemnified party expressly for use therein.
(b) Each Electing Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agent, each
underwriter who participates in an offering of Conversion Shares and
the other Electing Holders and each of their respective directors,
officers (including each officer of the Company who signed the Shelf
Registration Statement), employees, trustees and agents and each
Person, if any, who controls the Company, the Placement Agent, any
under writer or any other Electing Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section
5(a) hereof, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Shelf Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) in reliance upon
<PAGE>
and in conformity with written information furnished to the Company by
such Electing Holder expressly for use in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto); PROVIDED, HOWEVER, that, no such
Electing Holder shall be liable for any claims hereunder in excess of
the amount of net proceeds received by such Electing Holder from the
sale of Conversion Shares pursuant to the Shelf Registration
Statement.
(c) In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be instituted
involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person
(hereinafter called the indemnified party) shall promptly notify the
person against whom such indemnity may be sought (hereinafter called
the indemnifying party) in writing; however, the omission to so notify
the indemnifying party shall relieve the indemnifying party from
liability only to the extent prejudiced thereby. The indemnifying
party, upon request of the indemnified party, shall assume the defense
thereof, including the employment of counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any
others that the indemnifying party may designate and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such action or proceeding any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood that
the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm (in
addition to any local counsel) for all indemnified parties and all
persons, if any, who control such indemnified parties within the
meaning of either Section 15 of the Act or Section 20 of the Exchange
Act.
(d) If the indemnification provided for in this Section 5 is
insufficient or unavailable to an indemnified party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified
party or parties on the other from the offering of the Debentures or
(ii) if the allocation provided by clause (i) above is not permitted
by applicable law or if the indemnified party shall have failed to the
<PAGE>
prejudice of the indemnifying party to give the notice required by
Section 5(c), in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand
and the indemnified party or parties on the other in connection with
the statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company, on the one hand, or by the Electing Holder or such other
indemnified party, in the other hand, and the parties, relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Placement Agent
and the Electing Holders of the Conversion Shares agree that it would
not be just and equitable if contribution pursuant to this Section 5
were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the relevant equitable
considerations. For purposes of this Section 5(d), each director,
officer, employee, trustee, agent and Person, if any, who controls the
Placement Agent or an Electing Holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the
same rights to contribution as the Placement Agent or such Electing
Holder, and each director, officer, employee, trustee and agent of the
Company, and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the
Company. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written
consent. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) Notwithstanding any other provision of this Section 5, in no
event will any (i) Electing Holder be required to undertake liability
to any person under this Section 5 for any amounts in excess of the
dollar amount of the proceeds to be received by such holder from the
sale of such holder's Conversion Shares (after deducting any fees,
discounts and commissions applicable thereto) pursuant to any Shelf
Registration Statement under which such Conversion Shares are to be
registered under the Securities Act and (ii) underwriter, selling
agent or other securities professional be required to undertake
liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such
underwriter, selling agent or other securities professional with
respect to the Conversion Shares underwritten by it and distributed to
the public.
<PAGE>
(f) The obligations of the Company under this Section 5 shall be
in addition to any liability which the Company may otherwise have and
shall extend, or not extend, as the case may be, to any Indemnified
Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified
Person may otherwise have and shall extend, or not extend, as the case
may be, to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may
otherwise be available to an indemnified party at law or in equity.
SECTION 6. UNDERWRITTEN OFFERING. The Electing Holders of
Conversion Shares covered by the Shelf Registration Statement who
desire to do so may sell such Conversion Shares in an underwritten
offering in accordance with the conditions set forth below. In any
such underwritten offering, the investment banker or bankers and
manager or managers that will administer the offering will be selected
by, and the underwriting arrangements with respect thereto will be
approved by the Electing Holders of a majority of the Conversion
Shares to be included in such offering; PROVIDED, HOWEVER, that (i)
with respect to the investment bankers and managers, such investment
bankers and managers will be selected by the Company from a list of
nationally recognized firms to be provided by the Electing Holders and
(ii) the Company shall not be obligated to arrange for more than two
underwritten offering during the Effectiveness Period. No Electing
Holder may participate in any underwritten offering contemplated
hereby unless such Electing Holder (a) agrees to sell such Electing
Holder's Conversion Shares in accordance with any approved
underwriting arrangements and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required
under the terms of such approved underwriting arrangements. Except as
otherwise set forth herein, the Electing Holders of Conversion Shares
covered by the Shelf Registration Statement selling under an
underwritten offering as contemplated hereby will pay such expenses as
are ordinarily and customarily paid in connection with underwritten
secondary offerings.
SECTION 7. MISCELLANEOUS. (a) OTHER REGISTRATION RIGHTS. From
the date of this Agreement, the Company may grant registration rights
that would permit any Person that is a third party the right to
piggy-back on any Shelf Registration Statement; PROVIDED that if the
Managing Underwriter, if any, of such offering delivers an opinion to
the Electing Holders that the total amount of securities which they
and the holders of such piggy-back rights intend to include in any
Shelf Registration Statement is so large as to materially adversely
affect the success of such offering (including the price at which such
securities can be sold), then only the amount, the number or kind of
securities to be offered for the account of holders of such piggy-back
rights granted after the date of this agreement will be reduced to the
extent necessary to reduce the total amount of securities to be
included in such offering to the amount, number or kind recommended by
the Managing Underwriter prior to any reduction in the amount of
Conversion Shares to be included.
<PAGE>
(b) AMENDMENTS AND WAIVERS. This Agreement, including this
Section 7(b), may be amended, and waivers or consents to departures
from the provisions hereof may be given, only upon the written consent
of the Placement Agent or by a written instrument duly executed by the
Company and the holders of a majority in aggregate principal amount of
the Debentures and the holders of a majority of the Conversion Shares
then outstanding. Each holder of the Debentures or Conversion Shares
outstanding at the time of any such amendment, waiver or consent or
thereafter shall be bound by any amendment, waiver or consent effected
pursuant to this Section 7(b), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the
Debentures or the Conversion Shares or is delivered to such holder.
(c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be given as provided in the Indenture.
(d) PARTIES IN INTEREST. The parties to this Agreement intend
that all holders of Debentures and the Conversion Shares shall be
entitled to receive the benefits of this Agreement and that any
Electing Holder shall be bound by the terms and provisions of this
Agreement by reason of such election with respect to the Conversion
Shares which are included in a Shelf Registration Statement. All the
terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto and any holder from time
to time of the Debentures or the Conversion Shares to the aforesaid
extent. In the event that any transferee of any holder of Debentures
or Conversion Shares shall acquire Debentures or Conversion Shares, in
any manner, whether by gift, bequest, purchase, operation of law or
otherwise, such transferee shall, without any further writing or
action of any kind, be entitled to receive the benefits of and, if an
Electing Holder, be conclusively deemed to have agreed to be bound by
and to perform all of the terms and provisions of this Agreement to
the aforesaid extent.
(e) COUNTERPARTS. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(f) HEADINGS. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by
law.
(i) SURVIVAL. The respective indemnities, agreements,
representations, warranties and other provisions set forth in this
Agreement or made pursuant hereto shall remain in full force and
effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Electing Holder, any
director, officer or partner of such holder, any agent or underwriter,
any director, officer or partner of such agent or underwriter, or any
controlling person of any of the foregoing, and shall survive the
transfer and registration of the Conversion Shares of such holder.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
SOURCE CAPITAL CORPORATION,
By: /s/ D.M. JONES
---------------------------------
Name: D.M. Jones
Title: President
The foregoing Registration Rights Agreement is hereby confirmed and
accepted as of the date first above written:
PACIFIC CREST SECURITIES, INC.
By: /s/ A.V. GLOWASKY
----------------------------
Name: Albert V. Glowasky
Title: Senior Vice President
<PAGE>
EXHIBIT 99.1
News Release
Source Capital Corporation
1825 N. Hutchinson Rd.
P.O. Box 141146
Spokane, Washington 99214-1146
Contact Person: Lester L. Clark
Chief Financial Officer
509-928-0908
Source Capital earns $738,960 or $.54 per share in 1997
Spokane, Wa -- February 12, 1998 -- Source Capital Corporation (NASDAQ
SMALL CAP: SOCC), a commercial lender, today reported net income of
$738,960 or $.54 per share for the year ended December 31, 1997, a 13%
decrease from net income of $846,955 or $.59 per share in the
preceding year.
Net income in 1996 included a gain after income taxes from the sale of
a shopping center in the amount of $376,000 or $.26 per share.
Results of operations in 1997 did not contain any similar sale of a
large piece of real estate, although the Company was successful in
further reducing other real estate owned by $360,000, resulting in a
net gain after income taxes of $29,000 or $.02 per share. Exclusive
of gains on the sale of real estate, net operating income improved in
1997 by 57% over comparable results in 1996.
During 1997 the Company started two new lines of business, equipment
leasing and factoring, to diversify and strengthen sources of income.
However, the startup phase of these businesses had a negative impact
on the results of operations in 1997 in the amount of $66,000 or $.05
per share. Source Capital Leasing Company at the end of the year
began to produce net income on a monthly basis and is expected to be a
positive contributor to net income in 1998. Source Capital Finance
Inc., the factoring subsidiary, is expected to begin recording net
income on a monthly basis in the third quarter of 1998.
The Company reported fourth quarter net income of $209,759 or $.15 per
share as compared to $414,434 or $.29 per share in the fourth quarter
of 1996. Results in the fourth quarter of 1996 contained the gain on
the sale of the shopping center previously reported.
Loans and leases receivable increased 52% to $39.6 million at
December 31, 1997 from $26.1 million outstanding a year earlier. The
Company did not incur any loan losses in 1997. Loans past due as to
principal or interest more than sixty days total $824,000 at year end,
approximately the same level as at the end of the previous year.
Other real estate owned was $556,000 at year end, down 39% from the
amount of other real estate owned at the end of 1996.
<PAGE>
The Company also reported the sale of $6 million of 7-1/2% convertible
subordinated debentures to ten institutional investors that were not
previously shareholders of the Company. The debentures are due in
2008 and are convertible into common stock of the Company at a
conversion price of $8.01 per share. Proceeds from the debenture sale
will be used to fund equity investment in the leasing and factoring
subsidiary plus provide additional funding for the growth of the
Company's commercial real estate loan portfolio. It is expected that
over time the addition of institutional investors could improve the
marketability and bid-ask price spread of the Company's common stock.
Source Capital Corporation is a commercial financial services company
with approximately 1400 shareholders. The Company is headquartered in
Spokane, Washington with lending offices in Portland, Oregon, Seattle
and Spokane, Washington.
<PAGE>
