<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1995
REGISTRATION NO. 33-60591
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1
ON
FORM S-3
TO
REGISTRATION STATEMENT ON
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SIERRA HEALTH SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEVADA 6324 88-0200415
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
2724 NORTH TENAYA WAY
LAS VEGAS, NEVADA 89128
(702) 242-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ANTHONY M. MARLON, M.D. CHIEF EXECUTIVE OFFICER SIERRA HEALTH SERVICES, INC.
2724 NORTH TENAYA WAY LAS VEGAS, NEVADA 89128 (702) 242-7000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
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COPIES TO:
STEPHEN P. FARRELL, ESQ. RICHARD A. STRONG, ESQ.
MORGAN, LEWIS & BOCKIUS LLP GIBSON, DUNN & CRUTCHER
101 PARK AVENUE 333 SOUTH GRAND AVENUE
NEW YORK, NEW YORK 10178 LOS ANGELES, CALIFORNIA 90071
(212) 309-6000 (213) 229-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
PROSPECTUS
961,132 SHARES
SIERRA HEALTH SERVICES, INC.
COMMON STOCK
In connection with the proposed merger (the "Merger") of Health Acquisition
Corp. ("Sierra Sub"), a wholly-owned subsidiary of Sierra Health Services,
Inc. ("Sierra"), with and into CII Financial, Inc. ("CII"), pursuant to the
Agreement and Plan of Merger, dated as of June 12, 1995, among Sierra, Sierra
Sub and CII (the "Merger Agreement"), CII's 7 1/2% Convertible Subordinated
Debentures due 2001 (the "CII Debentures") will become convertible into
Sierra's Common Stock, par value $0.005 per share (the "Sierra Common Stock"),
upon the effectiveness of the Merger. CII currently has outstanding
$56,800,000 in aggregate principal amount of the CII Debentures. The CII
Debentures will remain outstanding after the Merger. Sierra will enter into a
supplemental indenture providing that the CII Debentures will be convertible
into shares of Sierra Common Stock at a current conversion price of $59.097
per share, subject to further adjustment. Sierra will not otherwise assume
CII's obligations under the CII Debentures and will not guarantee payment of
principal, interest or any premium thereon. As of September 11, there were 49
holders of record of the CII Debentures. The CII Debentures are convertible at
the office of Chemical Trust Company of California (the "Trustee") maintained
for such purpose in Los Angeles, California or New York, New York. This
Prospectus relates to the shares (the "Shares") of Sierra Common Stock
issuable upon conversion of the CII Debentures after the Merger. Sierra and
CII have furnished to their respective shareholders a Joint Proxy
Statement/Prospectus dated September 19, 1995 in connection with the
solicitation of proxies by the respective Boards of Directors for their
special meetings of shareholders to approve the Merger. Additionally, CII has
provided copies of the Joint Proxy Statement/Prospectus to the holders of the
CII Debentures for information purposes.
The Sierra Common Stock is listed on the New York Stock Exchange (Symbol:
"SIE"). On October 4, 1995, the last sale price of the Sierra Common Stock as
reported on the New York Stock Exchange Composite Tape was $24.875 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY SIERRA OR ANY UNDERWRITER, AGENT OR DEALER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES IN RESPECT OF WHICH THIS
PROSPECTUS IS DELIVERED OR AN OFFER OF ANY SECURITIES IN ANY JURISDICTION TO
ANY PERSON WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALES MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF SIERRA SINCE THEIR RESPECTIVE DATES.
AVAILABLE INFORMATION
Sierra is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning Sierra may be inspected and copied
at the Commission's Public Reference Section, Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, where copies may be obtained at
prescribed rates, as well as at the following regional offices: Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048;
and Midwest Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Sierra Common Stock is
listed on the New York Stock Exchange. Copies of reports, proxy statements and
other information concerning Sierra may also be inspected at the office of
such Exchange, 20 Broad Street, New York, New York 10005.
Sierra has filed a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with the Commission with respect to the securities offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement and
reference is hereby made to the Registration Statement for further information
with respect to Sierra and the Sierra Common Stock.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission by Sierra are incorporated
in this Prospectus by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994
filed pursuant to Section 13(a) or 15(d) of the Exchange Act, as amended on
Form 10-K/A filed with the Commission on September 1, 1995 (the "Sierra 10-
K/A").
2. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995
filed with the Commission on May 12, 1995.
3. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995
filed with the Commission on August 14, 1995.
4. Current Report on Form 8-K filed with the Commission on March 2, 1995.
5. Current Report on Form 8-K filed with the Commission on June 21, 1995, as
amended on June 22 and July 11, 1995.
6. Sierra's definitive Joint Proxy Statement/Prospectus dated September 19,
1995 for the Special Meeting of Shareholders to be held October 24, 1995.
7. All other reports filed by Sierra pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year ended December 31, 1994.
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<PAGE>
8. The description of the Sierra Common Stock contained in the Registration
Statement of Sierra on Form 8-A filed pursuant to the Exchange Act on March
31, 1994, and effective on April 14, 1994.
9. The description of certain rights attaching to the Sierra Common Stock to
purchase Series A Junior Participating Preferred Stock contained in the
Registration Statement of Sierra on Form 8-A filed pursuant to the Exchange
Act on July 1, 1994.
All reports and other documents filed by Sierra after the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof.
Statements contained in this Prospectus as to the contents of any contract
or document are not necessarily complete and in each instance such statements
are qualified in their entirety by reference to the copy of such contract or
other document filed as an exhibit to the Registration Statement or
incorporated by reference therein. Any statement contained in a document
incorporated or deemed to be incorporated in this Prospectus by reference
shall be deemed to be modified or superseded for the purpose of this
Prospectus to the extent that a statement contained in this Prospectus or in
any other subsequently filed document which also is or is deemed to be
incorporated in this Prospectus by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
SIERRA, P.O. BOX 15645, LAS VEGAS, NEVADA 89114-5645, ATTENTION: SECRETARY,
TELEPHONE: (702) 242-7189.
THE COMPANY
Sierra is a managed health care company that provides and administers the
delivery of comprehensive health care programs with an emphasis on quality
care and cost management. Sierra's strategy has been to develop and offer a
portfolio of managed health care products to employer groups and individuals.
Sierra's broad range of managed health care services is provided through its
federally qualified health maintenance organization in Nevada, an HMO in
Houston, Texas in which Sierra has a 50% ownership interest, managed indemnity
plans, a third-party administrative services program for employer-funded
health benefit plans and workers' compensation medical management programs.
Ancillary products and services that complement Sierra's managed health care
product lines are also offered.
Sierra's primary types of insurance coverage are two HMO plans and a managed
indemnity plan, which includes a PPO option. In 1994, Sierra enhanced its
product line by introducing the first HMO Point of Service plan in Nevada.
This new product allows members to choose one of the above coverage options
when medical services are required instead of one plan for the entire year. As
of August 1, 1995 the POS membership was approximately 32,000 in Southern
Nevada or approximately 24% of Sierra's total HMO membership. This POS plan is
also available in its Texas HMO.
Sierra, a Nevada corporation, has principal executive offices at 2724 North
Tenaya Way, Las Vegas, Nevada 89128 and its telephone number is (702) 242-
7000.
ACQUISITION OF CII FINANCIAL, INC.
Sierra and CII have furnished the Joint Proxy Statement/Prospectus dated
September 19, 1995 to their respective shareholders in connection with the
solicitation of proxies by their respective Boards of Directors for use at
their respective special meetings of shareholders to be held on October 24,
1995 relating to the Merger. Under the terms of the Merger Agreement, Health
Acquisition Corp., a wholly-owned subsidiary of Sierra, will be merged with
and into CII which thereupon will become a wholly-owned subsidiary of Sierra.
In connection
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<PAGE>
with the Merger, each outstanding share of CII's common stock will be
converted into 0.37 of a share of Sierra Common Stock (the "Exchange Ratio").
Additionally, at the effective time of the Merger, each outstanding option to
purchase shares of CII's common stock issued pursuant to CII's stock option
plans will be assumed by Sierra and will constitute an option to acquire the
same number of shares of Sierra Common Stock into which such shares would have
been converted pursuant to the Merger had such options been exercised
immediately prior to the effective time.
At the effective time of the Merger, the CII Debentures will no longer be
convertible into CII's common stock and will be convertible into Sierra Common
Stock at a conversion price adjusted according to the Exchange Ratio,
currently $59.097 per share. Sierra is entering into a supplemental indenture
with respect to the CII Debentures providing that the CII Debentures will be
so convertible into Sierra Common Stock. Sierra will not otherwise assume
CII's obligations under the CII Debentures and will not guarantee the payment
of principal, interest or any premium thereon. The CII Debentures are
currently listed on the American Stock Exchange, but Sierra anticipates that
CII will delist the CII Debentures after the Merger. Currently, the CII
Debentures are registered under the Exchange Act, but Sierra anticipates that
CII will seek to deregister them after the Merger since it is anticipated that
there will be fewer than three hundred holders of the CII Debentures.
Therefore, after the Merger, CII will not be required to comply with the
periodic reporting requirements of the Exchange Act. Sierra will continue to
comply with its periodic reporting obligations under the Exchange Act.
USE OF PROCEEDS
This Prospectus relates to shares of Sierra Common Stock issuable, after the
Merger, upon conversion of the CII Debentures. There will be no cash proceeds
to Sierra from such conversions.
PLAN OF DISTRIBUTION
The Sierra Common Stock covered by this Prospectus will be issued from time
to time by Sierra upon conversion of the CII Debentures after the effective
time of the Merger.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of Sierra consists of 1,000,000 shares of
Series A Junior Participating Preferred Shares, par value $0.01 per share
("Series A Preferred Shares"), and 40,000,000 shares of Sierra Common Stock,
par value $0.005 per share. As of September 11, 1995, there were 14,812,613
shares of Sierra Common Stock issued and outstanding (excluding treasury
shares). No Series A Preferred Shares are issued and outstanding.
COMMON STOCK
Holders of Sierra Common Stock are entitled to one vote per share held of
record on matters to be voted upon by the shareholders, except in the case of
an election of directors where cumulative voting is invoked.
Holders of Sierra Common Stock are entitled to receive dividends out of
funds legally available for distribution when and if declared by the Board of
Directors and to share ratably in the assets of Sierra legally available for
distribution to its stockholders in the event of liquidation, dissolution or
winding-up of Sierra, subject to preferences that may be applicable to any
shares of Sierra's preferred stock then outstanding.
Pursuant to Sierra's Shareholder Rights Plan, as described below, one right
is attached to each share of Sierra Common Stock, entitling the holder to
purchase one one-hundredth of a Series A Preferred Share upon the occurrence
of certain events.
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Holders of Sierra Common Stock have no subscription, redemption or
conversion rights. Because the Sierra Common Stock is registered under Section
12 of the Exchange Act, under Nevada law holders have no preemptive rights to
acquire unissued shares, treasury shares or securities convertible into such
shares.
PREFERRED STOCK
The Board is authorized to provide for the issuance of preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof. Pursuant to such authority and in connection with
Sierra's Shareholder Rights Plan described below, Sierra has authorized the
issuance of Series A Preferred Shares. Each one one-hundredth of a Series A
Preferred Share (a "Preferred Share Fraction") carries voting and dividend
rights that are intended to produce the equivalent of one share of Sierra
Common Stock. The voting and dividend rights of the Series A Preferred Shares
are subject to adjustment in the event of dividends, subdivisions and
combinations with respect to the Sierra Common Stock. Holders of Series A
Preferred Shares are not entitled to any preemptive rights.
The rights of holders of Sierra Common Stock will be subject to, and may be
adversely affected by, the terms of any Series A Preferred Shares that may be
issued in connection with Sierra's Shareholder Rights Plan described below.
The issuance of Series A Preferred Shares may have the effect of delaying,
deferring or preventing a change of control of Sierra without further action
by the stockholders and may discourage bids for the Sierra Common Stock at a
premium over the market price. In addition, the issuance of Series A Preferred
Shares could adversely affect the voting rights of holders of Sierra Common
Stock. Under certain circumstances, the issuance of Series A Preferred Shares
could adversely affect the market price of the Sierra Common Stock. Sierra is
not aware of any threatened transaction to obtain control of Sierra.
SHAREHOLDER RIGHTS PLAN
On June 14, 1994, the Board of Directors of Sierra authorized and declared a
dividend distribution of one right (a "Right") for each share of Sierra Common
Stock. The Rights were distributed to the holders of record of Sierra Common
Stock as of the close of business on June 30, 1994. Each Right entitles the
registered holder to purchase from Sierra a unit (a "Unit") consisting of one
one-hundredth of a Series A Preferred Share, or a combination of securities
and assets of equivalent value, at a purchase price of $100.00 per Unit,
subject to adjustment. The detailed terms and conditions of the Rights are set
forth in the Rights Agreement by and between Sierra and Continental Stock
Transfer & Trust Company, as Rights Agent, filed as an exhibit to Sierra's
Registration Statement on Form 8-A as filed with the Commission on July 1,
1994 and effective on September 19, 1994. See "Incorporation of Certain
Information by Reference."
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Sierra on
terms not approved by Sierra's Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be redeemed by Sierra at a price
of $.02 per Right prior to the time that a person or group has acquired
beneficial ownership of 20% or more of the Sierra Common Stock.
NEW YORK STOCK EXCHANGE LISTING
Sierra's Common Stock is listed on the New York Stock Exchange.
TRANSFER AGENT
Continental Stock Transfer & Trust Company is the transfer agent and
registrar for Sierra's Common Stock.
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<PAGE>
CONVERSION OF CII DEBENTURES
The CII Debentures were issued under the Indenture, dated as of September
15, 1991 (the "Indenture"), between CII and Chemical Trust Company of
California, as successor to Manufacturers Hanover Trust Company, as Trustee
(the "Trustee"). Sierra and the Trustee will enter into an indenture
supplemental providing that, upon the effectiveness of the Merger, the CII
Debentures will become convertible into Sierra Common Stock, instead of CII
Common Stock, at an initial conversion price of $59.097 per share, subject to
adjustment as described below. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Indenture.
The CII Debentures are subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness. At September 30, 1995, CII had $7,000,000 of Senior Indebtedness
outstanding. Additionally, the CII Debentures are redeemable upon not less
than 25 nor more than 60 days' notice by mail at any time, in whole or in
part, at the election of CII at the Redemption Prices set forth in the
Indenture together with accrued interest.
The CII Debentures will be convertible after the Merger only into Sierra
Common Stock. The CII Debentures will be so convertible at any time prior to
redemption, repurchase or maturity initially at the conversion price stated on
the cover page of this Prospectus. The right to convert CII Debentures called
for redemption or to be repurchased will terminate at the close of business on
the Redemption Date or the Repurchase Date, as the case may be, and will be
lost if not exercised prior to that time. The CII Debentures are convertible
at the office of the Trustee maintained for such purpose in Los Angeles,
California or New York, New York.
The conversion price will be subject to adjustment in certain events,
including: (i) the issuance of Sierra Common Stock as a dividend or as a
distribution on the Sierra Common Stock; (ii) the issuance to all holders of
Sierra Common Stock of certain rights or warrants entitling them to subscribe
for Sierra Common Stock at less than the then current market price per share;
(iii) subdivisions and combinations of the Sierra Common Stock; (iv) the
distribution to all holders of Sierra Common Stock of debt securities, shares
of any class of capital stock, cash or assets (including securities, but
excluding any rights or warrants referred to above, excluding any dividend or
distribution paid exclusively in cash and excluding any dividend or
distribution in Sierra Common Stock); (v) the distribution to all holders of
Sierra Common Stock of cash (excluding any cash that is distributed as part of
a distribution referred to above) in an aggregate amount that, together with
the aggregate amount of certain other distributions, exceeds 10% of the
product of the current market price per share of the Sierra Common Stock on
the date fixed for shareholders entitled to receive such distribution and the
number of shares of Sierra Common Stock outstanding on such date; and (vi)
tender offers made by Sierra or any Subsidiary for all or any portion of the
Sierra Common Stock involving an aggregate consideration having a fair market
value on the last time (the "Expiration Time") tenders may be made pursuant to
such tender offer that, together with the aggregate amount of certain other
distributions, exceeds 5% of the product of the current market price per share
of the Sierra Common Stock on the Expiration Time and the number of shares of
Sierra Common Stock outstanding (including any tendered shares) on the
Expiration Time. In addition to the foregoing adjustments, Sierra will be
permitted to make such reductions in the conversion price as it considers to
be advisable in order that any event treated for Federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the recipients.
Sierra is not required to make adjustments in the conversion price of less
than 1% of such price, but any adjustment that would otherwise be required to
be made will be taken into account in the computation of any subsequent
adjustment. In the case of certain consolidations or mergers to which Sierra
is a party or the transfer of substantially all of the assets of Sierra, each
CII Debenture then outstanding would, without the consent of any Holders of
CII Debentures, become convertible only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger
or transfer by a Holder of the number of shares of Sierra Common Stock into
which such Debenture might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Sierra Common Stock
failed to exercise any rights of election and received per share the kind and
amount received per share by a plurality of the non-electing shares). Other
than as set forth above, the conversion price is not subject to adjustment in
the event of the sale of the Sierra Common Stock at less than market value. If
any such sale negatively affects the market price for the Sierra Common Stock,
the value of the CII Debentures may also be adversely affected.
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Fractional shares of Sierra Common Stock will not be issued upon conversion
and, in lieu thereof, Sierra will pay a cash adjustment based upon market
price. The Holders of CII Debentures at the close of business on a record date
will be entitled to receive the interest payable on the CII Debentures on the
corresponding Interest Payment Date notwithstanding the subsequent conversion
thereof or CII's default in payment of the interest due on such Interest
Payment Date, subject to certain provisions applicable to defaulted interest.
No payment or adjustment will be made upon conversion for interest accrued on
the CII Debentures or for dividends on the Sierra Common Stock issued on
conversion. Therefore, CII Debentures surrendered for conversion during the
period from the close of business on any record date to the opening of
business on the corresponding Interest Payment Date (except CII Debentures
called for redemption, or to be repurchased, on such Interest Payment Date or
on a Redemption Date or a Repurchase Date within such period) must be
accompanied by payment of an amount equal to the interest payable on the
Interest Payment Date. The Holder of CII Debentures on a record date who
converts CII Debentures on an Interest Payment Date will receive the interest
and need not include a payment for any such interest upon surrender of CII
Debentures for conversion.
VALIDITY OF SECURITIES
The validity of the issuance of the shares Sierra Common Stock offered
hereby will be passed upon by Morgan, Lewis & Bockius LLP, Los Angeles,
California.
EXPERTS
The Consolidated Financial Statements of Sierra Health Services, Inc. as of
December 31, 1994 and 1993 and for each of the three years in the period ended
December 31, 1994 incorporated in this Prospectus by reference from the Sierra
10-K/A have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be borne by the registrant in
connection with the offering described in this Registration Statement. All of
such amounts are estimated except for the SEC Registration Fee and the New
York Stock Exchange additional listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ Previously Paid
New York Stock Exchange Additional Listing Fee.............. Previously Paid
Printing and Engraving Costs................................ $ 5,000.00
Blue Sky Fees and Expenses.................................. 4,000.00
Legal Fees and Expenses..................................... 10,000.00
Accounting Fees and Expenses................................ 5,000.00
Miscellaneous............................................... 1,000.00
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Total....................................................... $ 25,000.00
===============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada Domestic and Foreign Corporation Law and
Article VII of the registrant's By-laws provide for the indemnification under
certain conditions of directors, officers, employees and agents acting in
their official capacities.
The registrant has not entered into separate indemnification agreements with
any of its officers or directors.
The registrant has purchased directors' and officers' liability insurance
insuring the registrant's officers and directors against certain liabilities
and expenses incurred by such persons in such capacities.
II-1
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ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
*2.1 Agreement and Plan of Merger, dated as of June 12, 1995, among the
registrant, Health Acquisition Corp. and CII Financial, Inc.
3.1 Articles of Incorporation, together with amendments thereto to date,
incorporated by reference to Exhibit 3 to the registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990.
3.2 Certificate of Division of Shares into Smaller Denominations of the
registrant, incorporated by reference to the registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.
3.3 Amended and Restated By-laws of the registrant, incorporated by
reference to Exhibit 3.3 to the registrant's Annual Report on Form 10-
K/A for the fiscal year ended December 31, 1994.
3.4 Rights Agreement, dated as of June 14, 1994, between the registrant
and Continental Stock Transfer & Trust Company, incorporated by
reference to Exhibit 1 to the registrant's Registration Statement on
Form 8-A effective September 19, 1994 (File No. 1-8865).
4.1 Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4(e) to the registrant's Registration Statement on Form S-8 as
filed and effective on August 5, 1994 (Reg. No. 33-82474).
4.2 Indenture, dated as of September 15, 1991, between CII Financial,
Inc., and Chemical Trust Company of California, as successor to
Manufacturers Hanover Trust Company, as Trustee.
4.3 Form of Indenture Supplemental, dated as of October , 1995, among
the registrant, CII Financial, Inc. and Chemical Trust Company of
California.
*5.1 Opinion of Morgan, Lewis & Bockius.
23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1).
*24.1 Power of Attorney.
25.1 Statement of Eligibility of Chemical Trust Company of California on
Form T-1.
</TABLE>
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* Previously filed.
II-2
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ITEM 17. UNDERTAKINGS
(A) The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(C) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(D) The undersigned registrant hereby undertakes that:
(i) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIED THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LAS VEGAS, STATE OF
NEVADA, ON THE 5TH DAY OF OCTOBER, 1995.
SIERRA HEALTH SERVICES, INC.
By /s/ Anthony M. Marlon, M.D.
__________________________________
Anthony M. Marlon, M.D.
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/ Anthony M. Marlon, M.D. Chief Executive Officer and October 5, 1995
____________________________________ Chairman of the Board
Anthony M. Marlon, M.D. (Principal Executive
Officer)
/s/ * Vice President of Finance, October 5, 1995
____________________________________ Chief Financial Officer, and
James L. Starr Treasurer (Principal
Financial and Accounting
Officer)
Director
____________________________________
Thomas Y. Hartley
/s/ * Director October 5, 1995
____________________________________
Erin E. MacDonald
/s/ * Director October 5, 1995
____________________________________
William J. Raggio
/s/ * Director October 5, 1995
____________________________________
Charles L. Ruthe
</TABLE>
*By /s/ Anthony M. Marlon, M.D.
____________________________
Anthony M. Marlon, M.D.
As Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION SEQUENTIALLY
NO. ----------- NUMBERED PAGE
------- -------------
<C> <S> <C>
*2.1 Agreement and Plan of Merger, dated as of June 12, 1995, among the
registrant, Health Acquisition Corp. and CII Financial, Inc.
3.1 Articles of Incorporation, together with amendments thereto to date,
incorporated by reference to Exhibit 3 to the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990.
3.2 Certificate of Division of Shares into Smaller Denominations of the
registrant, incorporated by reference to Exhibit 3.3 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
3.3 Amended and Restated By-laws of the registrant, incorporated by reference
to Exhibit 3.3 to the registrant's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994.
3.4 Rights Agreement, dated as of June 14, 1994, between the registrant and
Continental Stock Transfer & Trust Company, incorporated by reference to
Exhibit 11 to the registrant's Registration Statement on Form 8-A
effective September 19, 1994 (File No. 1-8865).
4.1 Specimen Common Stock Certificate, incorporated by reference to Exhibit
4(e) to the registrant's Registration Statement on Form S-8 as filed and
effective on August 5, 1994 (Reg. No. 33-82474).
4.2 Indenture, dated as of September 15, 1991, between CII Financial, Inc.,
and Chemical Trust Company of California, as successor to Manufacturers
Hanover Trust Company, as Trustee.
4.3 Form of Indenture Supplemental, dated as of October , 1995, among the
registrant, CII Financial, Inc. and Chemical Trust Company of California.
*5.1 Opinion of Morgan, Lewis & Bockius.
23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1).
*24.1 Power of Attorney.
25.1 Statement of Eligibility of Chemical Trust Company of California on Form
T-1.
</TABLE>
- -------
* Previously filed.
<PAGE>
EXHIBIT 4.2
_________________________________________________________________
CII FINANCIAL, INC.
TO
MANUFACTURERS HANOVER TRUST COMPANY,
Trustee
___________________________
Indenture
Dated as of September 15, 1991
___________________________
7 1/2% Convertible Subordinated Debentures Due 2001
_________________________________________________________________
<PAGE>
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of September 15, 1991
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
(S) 310(a)(1)........................ 6.9
(a)(2)........................ 6.9
(a)(3)........................ Not Applicable
(a)(4)........................ Not Applicable
(a)(5)........................ 6.9
(b)........................... 6.8
6.10
(S) 311(a)........................... 6.13(a)
(b)........................... 6.13(b)
(b)(2)........................ 7.3(a)(2)
7.3(b)
(S) 312(a)........................... 7.1
7.2(a)
(b)........................... 7.2(b)
(c)........................... 7.2(c)
(S) 313(a)........................... 7.3(a)
(b)........................... 7.3(b)
(c)........................... 7.3(a)
7.3(b)
(d)........................... 7.3(c)
(S) 314(a)........................... 7.4,10.7
(b)........................... Not Applicable
(c)(1)........................ 1.2
(c)(2)........................ 1.2
(c)(3)........................ Not Applicable
(d)........................... Not Applicable
(e)........................... 1.2
(S) 315(a)........................... 6.1(a)
(b)........................... 6.2
7.3(a)(6)
(c)........................... 6.1(b)
(d)........................... 6.1(c)
(d)(1)........................ 6.1(a)(1)
(d)(2)........................ 6.1(c)(2)
(d)(3)........................ 6.1(c)(3)
(e)........................... 5.14
(S) 316(a)........................... 1.1
(a)(1)(A)..................... 5.2,5.12
(a)(1)(B)..................... 5.13
(a)(2)........................ Not Applicable
(b)........................... 5.8
(c)........................... 1.4
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(S) 317(a)(1)........................ 5.3
(a)(2)........................ 5.4
(b)........................... 10.3
(S) 318(a)........................... 1.7
</TABLE>
_______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE>
ARTICLE 1
Definitions and Other Provisions
of General Application
<TABLE>
<S> <C>
1
Section 1.1 Definitions................................. 1
Act...................................................... 2
Affiliate................................................ 2
Beneficial Owner......................................... 2
Board of Directors....................................... 2
Board Resolution......................................... 2
Business Day............................................. 2
Change in Control........................................ 2
Closing Price............................................ 2
Commission............................................... 3
Common Stock............................................. 3
Company Notice........................................... 3
Company.................................................. 3
Company Request.......................................... 4
Corporate Trust Office................................... 4
Corporation.............................................. 4
Debt..................................................... 4
Defaulted Interest....................................... 4
Event of Default......................................... 4
Holder................................................... 4
Indenture................................................ 4
Interest Payment Date.................................... 4
Maturity................................................. 4
NASDAQ................................................... 5
Officers' Certificate.................................... 5
Opinion of Counsel....................................... 5
Optional Debentures...................................... 5
Outstanding.............................................. 5
Paying Agent............................................. 6
Person................................................... 6
Predecessor Security..................................... 6
Redemption Date.......................................... 6
Redemption Price......................................... 6
Regular Record Date...................................... 6
Responsible Officer...................................... 6
Securities............................................... 7
Security Register........................................ 7
Senior Debt.............................................. 7
Special Record Date...................................... 7
Stated Maturity.......................................... 7
Subsidiary............................................... 7
Trading Day.............................................. 7
Trustee.................................................. 7
Trust Indenture Act...................................... 7
Vice President........................................... 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 1.2 Compliance Certificates and Opinions....... 8
SECTION 1.3 Form of Documents Delivered to Trustee..... 9
SECTION 1.4 Acts of Holders............................ 9
SECTION 1.5 Notices, Etc. to Trustee and Company....... 10
SECTION 1.6 Notice to Holders; Waiver.................. 11
SECTION 1.7 Conflict with Trust Indenture Act.......... 11
SECTION 1.8 Effect of Headings and Table of Contents... 12
SECTION 1.9 Successors and Assigns..................... 12
SECTION 1.10 Separability Clause........................ 12
SECTION 1.11 Benefits of Indenture...................... 12
SECTION 1.12 Governing Law.............................. 12
SECTION 1.13 Legal Holidays............................. 12
SECTION 2.1 Forms Generally............................ 13
SECTION 2.2 Form of Fact of Security................... 13
SECTION 2.3 Form of Reverse of Security................ 16
SECTION 2.4 Form of Trustee's Certificate of
Authentication............................ 20
ARTICLE 3 The Securities............................. 20
SECTION 3.1 Title and Terms............................ 20
SECTION 3.2 Denominations.............................. 21
SECTION 3.3 Execution, Authentication, Delivery and
Dating.................................... 21
SECTION 3.4 Temporary Securities....................... 22
SECTION 3.5 Registration, Registration of
Transfer and Exchange..................... 23
SECTION 3.6 Mutilated, Destroyed, Lost and
Stolen Securities......................... 24
SECTION 3.7 Payment of Interest; Interest
Rights Preserved.......................... 25
SECTION 3.8 Persons Deemed Owners...................... 26
SECTION 3.9 Cancellation............................... 27
SECTION 3.10 Computation of Interest.................... 27
ARTICLE 4 Satisfaction and Discharge................. 27
SECTION 4.1 Satisfaction and Discharge of Indenture.... 27
SECTION 4.2 Application of Trust Money................. 28
ARTICLE 5 Remedies................................... 29
SECTION 5.1 Events of Default.......................... 29
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 5.2 Acceleration of Maturity; Rescission and
Annulment................................. 30
SECTION 5.3 Collection of Debt and Suits for
Enforcement by Trustee.................... 31
SECTION 5.4 Trustee May File Proofs of Claim........... 32
SECTION 5.5 Trustee May Enforce Claims Without
Possession of Securities.................. 33
SECTION 5.6 Application of Money Collected............. 33
SECTION 5.7 Limitation on Suits........................ 34
SECTION 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest
and to Convert............................ 35
SECTION 5.9 Restoration of Rights and Remedies......... 35
SECTION 5.10 Rights and Remedies Cumulative............. 35
SECTION 5.11 Delay or Omission Not Waiver............... 35
SECTION 5.12 Control by Holders......................... 36
SECTION 5.13 Waiver of Past Defaults.................... 36
SECTION 5.14 Undertaking for Costs...................... 36
SECTION 5.15 Waiver of Stay or Extension Laws........... 37
ARTICLE 6 The Trustee................................ 37
SECTION 6.1 Certain Duties and Responsibilities........ 37
SECTION 6.2 Notice of Defaults......................... 38
SECTION 6.3 Certain Rights of Trustee.................. 39
SECTION 6.4 Not Responsible for Recitals or
Issuance of Securities.................... 40
SECTION 6.5 May Hold Securities........................ 40
SECTION 6.6 Money Held in Trust........................ 41
SECTION 6.7 Compensation and Reimbursement............. 41
SECTION 6.8 Disqualification; Conflicting
Interests................................. 41
SECTION 6.9 Corporate Trustee Required;
Eligibility............................... 42
SECTION 6.10 Resignation and Removal; Appointment of
Successor................................. 42
SECTION 6.11 Acceptance of Appointment by Successor..... 43
SECTION 6.12 Merger, Conversion, Consolidation or
Succession to Business.................... 44
SECTION 6.13 Preferential Collection of Claims
Against Company........................... 44
ARTICLE 7 Holders' Lists and Reports by Trustee
and Company............................... 49
SECTION 7.1 Company to Furnish Trustee Names and
Addresses of Holders...................... 49
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 7.2 Preservation of Information;
Communication to Holders.................. 49
SECTION 7.3 Reports by Trustee......................... 50
SECTION 7.4 Reports by Company......................... 52
ARTICLE 8 Consolidation, Merger, Conveyance,
Transfer or Lease......................... 53
SECTION 8.1 Company May Consolidate, Etc., Only on
Certain Terms............................. 53
SECTION 8.2 Successor Substituted...................... 54
ARTICLE 9 Supplemental Indentures.................... 54
SECTION 9.1 Supplemental Indentures Without Consent
of Holders................................ 54
SECTION 9.2 Supplemental Indentures with Consent of
Holders................................... 55
SECTION 9.3 Execution of Supplemental Indentures....... 56
SECTION 9.4 Effect of Supplemental Indentures.......... 56
SECTION 9.5 Conformity with Trust Indenture Act........ 57
SECTION 9.6 Reference in Securities to Supplemental
Indentures................................ 57
ARTICLE 10 Covenants.................................. 57
SECTION 10.1 Payment of Principal, Premium and
Interest.................................. 57
SECTION 10.2 Maintenance of Office or Agency............ 57
SECTION 10.3 Money for Security Payments to be Held
in Trust.................................. 58
SECTION 10.4 Existence.................................. 59
SECTION 10.5 Maintenance of Properties.................. 60
SECTION 10.6 Payment of Taxes and Other Claims.......... 60
SECTION 10.7 Statement by Officers as to Default........ 60
SECTION 10.8 Waiver of Certain Covenants................ 61
SECTION 10.9 Compliance with Rule 13e-4................. 61
ARTICLE 11 Redemption of Securities................... 61
SECTION 11.1 Right of Redemption........................ 61
SECTION 11.2 Applicability of Article................... 62
SECTION 11.3 Election to Redeem; Notice to Trustee...... 62
SECTION 11.4 Selection by Trustee of Securities to Be
Redeemed.................................. 62
SECTION 11.5 Notice of Redemption....................... 63
SECTION 11.6 Deposit of Redemption Price................ 63
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 11.7 Securities Payable on Redemption Date...... 64
SECTION 11.8 Securities Redeemed in Part................ 64
ARTICLE 12 Repurchase of Securities at the
Option of the Holder Upon Change
in Control............................... 65
SECTION 12.1 Right to Require Repurchase................ 65
SECTION 12.2 Notices; Method of Exercising
Repurchase Right, etc..................... 65
SECTION 12.3 Certain Definitions........................ 68
ARTICLE 13 Conversion of Securities................... 69
SECTION 13.1 Conversion Privileges and Conversion
Price..................................... 69
SECTION 13.2 Exercise of Conversion Privilege........... 70
SECTION 13.3 Fractions of Shares........................ 71
SECTION 13.4 Adjustment of Conversion Price............. 72
SECTION 13.5 Notice of Adjustments of Conversion
Price..................................... 79
SECTION 13.6 Notice of Certain Corporate Action......... 79
SECTION 13.7 Company to Reserve Common Stock............ 80
SECTION 13.8 Taxes on Conversions....................... 80
SECTION 13.9 Covenant as to Common Stock................ 81
SECTION 13.10 Cancellation of Converted Securities....... 81
SECTION 13.11 Provisions in the Case of Consolidation,
Merger or Sales of Assets................. 81
ARTICLE 14 Subordination of Securities................ 82
SECTION 14.1 Securities Subordinate to Senior Debt...... 82
SECTION 14.2 Payment Over of Proceeds Upon
Dissolution, Etc.......................... 82
SECTION 14.3 Prior Payment to Senior Debt Union
Acceleration of Securities................ 83
SECTION 14.4 No Payment When Senior Debt in Default..... 84
SECTION 14.5 Payment Permitted if No Default............ 84
SECTION 14.6 Subrogation to Rights of Holders of
Senior Debt............................... 85
SECTION 14.7 Provisions Solely to Define Relative
Rights.................................... 85
SECTION 14.8 Trustee to Effectuate Subordination........ 86
SECTION 14.9 No Waiver of Subordination Provisions...... 86
SECTION 14.10 Notice to Trustee.......................... 87
SECTION 14.11 Reliance on Judicial Order or
Certificate of Liquidating Agent.......... 87
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 14.12 Trustee Not Fiduciary for Holders of
Senior Debt............................... 88
SECTION 14.13 Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's Rights.... 88
SECTION 14.14 Article Applicable to Paying Agents........ 88
SECTION 14.15 Certain Conversions Deemed Payment......... 89
SECTION 14.16 CUSIP Numbers.............................. 89
</TABLE>
<PAGE>
INDENTURE, dated as of September 15, 1991, between CII FINANCIAL,
INC., a corporation duly organized and existing under the laws of the State of
California (herein called the "Company"), having its principal office at 4001
West Alameda Avenue, Burbank, California 91505, and MANUFACTURERS HANOVER TRUST
COMPANY, a corporation duly organized and existing under the laws of the State
of New York, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 7 1/2%
Convertible Subordinated Debentures due 2001 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as
<PAGE>
otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article 6, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting Securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Beneficial Owner" has the meaning specified in Section 12.3.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Los Angeles,
California are authorized or obligated by law or executive order to close.
"Change in Control" has the meaning specified in Section 12.3.
"Closing Price" for any day means the last reported sale price of the
Common Stock regular way on such day or, in case no such reported sale takes
place on such day, the average
-2-
<PAGE>
of the reported closing bid and asked prices regular way on such day, in either
case on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national Securities
exchange on which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national Securities exchange, on the NASDAQ
National Market System or, if the Common Stock is not listed or admitted to
trading on any national Securities exchange or quoted on such National Market
System, the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected from
time to time by the Company for that purpose. If the Common Stock is not listed
or admitted to trading on any national Securities exchange, quoted on such
National Market System or listed in any list of bid and asked prices in the
over-the-counter market, "Closing Price" shall mean the fair market value of the
Common Stock as determined in good faith by the Board of Directors.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company and which is not subject to redemption by the Company. However, subject
to the provisions of Section 13.4, shares issuable on conversion of Securities
shall include only shares of the class designated as Common Stock of the Company
at the date of this instrument or shares of any class or classes resulting from
any reclassification thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which are not subject
to redemption by the Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.
"Company Notice" has the meaning specified in Section 12.2.
"Company" means the party named as such above and any other obligor
under this Indenture or the Securities until a
-3-
<PAGE>
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
Los Angeles, California or New York, New York at which at any particular time
its corporate trust business shall be principally administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Debt" of a Person means (a) all debt of such Person which is (i) for
money borrowed, (ii) evidenced by a note, bond, debenture or similar instrument
given in connection with the acquisition of any businesses, properties or assets
of any kind, excluding any other trade accounts payable or accrued liabilities
arising in the ordinary course of business or (iii) purchase money indebtedness
with respect to the purchase of any real or personal property or any interest
therein, (b) obligations of such Person as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles and leases of property or assets made as part of any sale
and lease-back transaction to which such Person is a party, (c) amendments,
renewals, extensions, modifications and refundings of any debt or obligations
referred to in clause (a) or (b), and (d) any debt or obligations of the type
referred to in clause (a), (b) or (c) in respect of which the Company is liable,
contingently or otherwise, to pay or advance money or property as a guarantor,
endorser, or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Event of Default" has the meaning specified in Section 5.1.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
-4-
<PAGE>
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, repurchase pursuant to Article 12 or
otherwise.
"NASDAQ" means the automated quotation system of the National
Association of Securities Dealers, Inc. or another comparable quotation system.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Optional Debentures" has the meaning specified in Section 3.1.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
--------
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
-5-
<PAGE>
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows to
be so owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized from time to time by the
Company to pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company. The Paying Agent initially appointed
hereunder shall be Manufacturers Hanover Trust Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means March 1 or September 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
-6-
<PAGE>
"Responsible Officer", when used with respect to the Trustee, means
any officer in the Corporate Trust office or any other officer of the Trustee
customarily performing functions similar to those performed by any such officers
and also means, with respect to a particular corporate trust matter, any other
officer of the Trustee to whom such matter is referred because of his knowledge
of and familiarity with the particular subject.
"Securities" means the 7 1/2% Convertible Subordinated Debentures due
2001 of the Company.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt" means the principal of (and premium, if any) and
interest on all Debt of the Company, whether outstanding on the date of this
Indenture or thereafter created, incurred, guaranteed or assumed, other than (i)
the Securities and (ii) any Debt which provides, or in respect of which any
instrument creating or evidencing such Debt or pursuant to which the same is
outstanding provides, that such Debt is not superior in right of payment to the
Securities.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" 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.
"Trading Day" means, with respect to the Common Stock, each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on which Securities
are not traded on the exchange or market on which the Common Stock is traded.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of
-7-
<PAGE>
this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 9.5.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president so designated by the Board of Directors of the
Company or the Trustee, whether or not designated by a number or a word or words
added before or after the title "vice president".
SECTION 1.2 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including any covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and, if reasonably requested by the Trustee, an
opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent (including any covenants compliance with which constitutes
a condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than annual
certificates provided pursuant to Section 10.7) shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as
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<PAGE>
to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel has actual knowledge that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby
-9-
<PAGE>
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section. The Company may set a record date for purposes of
determining the identity of Holders entitled to vote or consent to any action by
vote or consent authorized or permitted under this Indenture, which record date
shall be the later of 10 days prior to the first solicitation of such consent or
the date of the most recent list of Holders furnished to the Trustee pursuant to
Section 7.1 of this Indenture prior to such solicitation. If a record date is
fixed, those persons who were Holders of Securities at such record date (or
their duly designated proxies), and only those persons, shall be entitled to
take such action by vote or consent or to revoke any vote or consent previously
given, whether or not such persons continue to be Holders after such record
date. No such vote or consent shall be valid or effective for more than 120 days
after such record date.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. When such
execution is by a signer acting in capacity other than his individual capacity,
such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 1.5 Notices, Etc. to Trustee and Company.
------------------------------------
-10-
<PAGE>
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the initial Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at Manufacturers Hanover Trust Company,
450 West 33rd Street, 15th Floor, New York, New York 10001,
Attention: Corporate Trust Administration, with simultaneous copy to
Manufacturers Hanover Trust Company of California, 300 South Grand Avenue,
2nd Floor, Los Angeles, California 90071, Attention: Corporate Trust, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6 Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice
to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or
after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such
filings shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
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<PAGE>
SECTION 1.7 Conflict with Trust Indenture Act.
---------------------------------
If any provisions hereof limits, qualifies or conflicts with the
duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture
Act through operation of Section 318(c), such imposed duties shall control.
SECTION 1.8 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 1.9 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10 Separability Clause.
-------------------
In case any provision 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 1.11 Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Paying Agent, the Holders of Senior Debt and the
Holders of Securities, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 1.12 Governing Law.
-------------
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 1.13 Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security or the last date on which
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<PAGE>
a Holder has the right to convert his Securities shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) or
conversion of the Securities need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, or on such last day for conversion, provided that no interest
--------
shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE 2
Security Forms
SECTION 2.1 Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
Securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of
any Securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 2.2 Form of Fact of Security.
------------------------
7 1/2% Convertible Subordinated Debentures due 2001
No. ________________________ $ ____________________________
CUSIP
CII FINANCIAL, INC., a corporation duly organized and existing
under the laws of the State of California (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby
-13-
<PAGE>
promises to pay to ____________________, or registered assigns, the principal
sum of ________________________ Dollars on September 15, 2001, and to pay
interest thereon from September 26, 1991, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 15 and September 15 in each year, commencing March 15, 1992, at the
rate of 7 1/2% per annum, until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be March 1 or September 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice of which shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any Securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in Los Angeles, California or New York, New
York, in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
--------
however, that at the option of the Company payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
-14-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated: CII FINANCIAL, INC.
By_______________________
[Title]
Attest:
______________________
[Assistant] Secretary
-15-
<PAGE>
SECTION 2.3 Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its 7 1/2% Convertible Subordinated Debentures due 2001
(herein called the "Securities"), limited in aggregate principal amount to
$63,250,000 (of which $55,000,000 is being originally issued as of the date
hereof and of which $8,250,000 may only be issued as "Optional Debentures"
pursuant to an over-allotment option granted to underwriters of the Securities)
issued and to be issued under an Indenture dated as of September 15, 1991
(herein called the "Indenture"), between the Company and Manufacturers Hanover
Trust Company, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the Holders of Senior Debt and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time on or before
the close of business on August 1, 2001, or in case this Security or a portion
hereof is called for redemption or is to be repurchased, then in respect of this
Security or such portion hereof until and including, but (unless the Company
defaults in making the payment due upon redemption or repurchase) not after, the
close of business on the Redemption Date or the Repurchase Date, to convert this
Security (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into fully paid and non-assessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock of the Company at a conversion
price equal to $21.866 aggregate principal amount of Securities for each share
of Common Stock (or at the current adjusted conversion price if an adjustment
has been made as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank, to the Company at its office or
agency in Los Angeles, California or New York, New York, accompanied by written
notice to the Company that the Holder hereof elects to convert this Security, or
if less than the entire principal amount hereof is to be converted, the portion
hereof to be converted, and, in case such surrender shall be made during the
period from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
(unless this Security or the portion thereof being converted has been called for
redemption, or is to be repurchased, on such Interest Payment Date or on a
Redemption Date or a Repurchase Date within such
-16-
<PAGE>
period), also accompanied by payment in New York Clearing House or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement for payment and, in the case of
a conversion after the Regular Record Date next preceding any Interest Payment
Date and on or before such Interest Payment Date, to the right of the Holder of
this Security (or any Predecessor Security) of record at such Regular Record
Date to receive an installment of interest (with certain exceptions provided in
the Indenture), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the Indenture. The conversion price
is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the transfer of substantially all of the assets of the
Company, the Indenture shall be amended, without the consent of any Holders of
Securities, so that this Security, if then outstanding, will be convertible
thereafter during the period this Security shall be convertible as specified
above, only into the kind and amount of Securities, cash and other property
receivable upon the consolidation, merger or transfer by a Holder of the number
of shares of Common Stock into which this Security might have been converted
immediately prior to such consolidation, merger or transfer (assuming such
Holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount received per share by an plurality of non-electing
shares).
The Securities are subject to redemption upon hot less than 25 days'
notice by mail, in any year; commencing at any time after September 15, 1994, as
a whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount); if redeemed during
the 12month period beginning September 15 of the years indicated,
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ------- ----------- ---- ----------
<S> <C> <C> <C>
1994 105.25% 1997 103.00
1995 104.50 1998 102.25
1996 103.75 1999 101.50
</TABLE>
-17-
<PAGE>
and thereafter at a Redemption Price equal to 100.75% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, provided that interest installments whose Stated Maturity is on
or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Regular or Special Record Dates referred to on the face
hereof, all as provided in the Indenture.
If, at any time prior to September 15, 2001 there occurs any Change in
Control (as defined in the Indenture) of the Company, then each Holder of
Securities shall have the right, at the Holder's Option, to require the Company
to repurchase all of such Holder's Securities, or any portion thereof which is
$1,000 or any integral multiple thereof, on the date (the "Repurchase Date")
that is 45 days after the date that the Company gives notice of the Change in
Control, at a purchase price equal to 100% of the principal amount of Securities
to be repurchased (the "Repurchase Price"), together with accrued interest to
the Repurchase Date; provided, however, that interest installments whose Stated
-------- -------
Maturity is on or prior to such Repurchase Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture. At the option of the Company, the Repurchase
Price may be paid in cash or by delivery of shares of Common Stock of the
Company valued as provided in the Indenture; provided that payment may not be
made in Common Stock unless such stock is listed on a national Securities
exchange or quoted on the automated quotation system of the National Association
of Securities Dealers, Inc. or another comparable quotation system at the time
of payment. If the Company elects to pay the Repurchase Price in its Common
Stock, no fractions of shares or scrip representing fractions of shares will be
issued, but instead of any fractional interest the Company shall pay an
adjustment in cash as provided in the Indenture.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to
-18-
<PAGE>
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.
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.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in Los Angeles, California or New York, New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof and may be transferred
only by surrender of the
-19-
<PAGE>
Securities and the reissuance by the Company of Securities to the transferee. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentation of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 2.4 Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
Manufacturers Hanover Trust
Company as Trustee
By_____________________________
Authorized Officer
ARTICLE 3
The Securities
SECTION 3.1 Title and Terms.
---------------
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The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $63,250,000 (of
which $55,000,000 is being originally issued as of the date hereof and of which
$8,250,000 may only be issued as "Optional Debentures" pursuant to an over-
allotment option granted to the underwriters of the Securities), except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6,
9.6, 11.8, 12.2 or 13.2.
The Securities shall be known and designated as the "7 1/2%
Convertible Subordinated Debentures Due 2001" of the Company. Their Stated
Maturity shall be September 15, 2001, and they shall bear interest at the rate
of 7 1/2% per annum, from September 26, 1991 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable semiannually on March 15 and September 15, commencing March 15,
1992, until the principal thereof is paid or made available for payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in Los Angeles,
California or New York, New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
-------- -------
that at the option of the Company payment of interest may be made
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.
The Securities shall be redeemable as provided in Article 11.
The Securities shall be repurchased by the Company if required by the
Holders thereof, as provided in Article 12.
The Securities shall be convertible as provided in Article 13.
The Securities shall be subordinated in right of payment to Senior
Debt as provided in Article 14.
SECTION 3.2 Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------
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The Securities shall be executed of behalf to the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, which Company Order, if given in
connection with Optional Debentures, states that such Optional Debentures are
issued in accordance with Section 3.1; and the Trustee in accordance with such
Company Order shall authenticate and deliver such Securities as in this
Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of one of its authorized officers,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.4 Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will
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cause definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities and Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5 Registration, Registration of Transfer and Exchange.
---------------------------------------------------
All of the Securities issued under this Indenture shall be registered
as to both principal and interest. The Company shall cause to be kept at the
Corporate Trust office of the Trustee a register (the register maintained in
such office being herein sometimes referred to as the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfer of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.2 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount. The transfer of any Security shall be effected only by surrender of the
Security and the reissuance by the Company of one or more Securities to the
transferee or transferees.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the
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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.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6, 11.8, 12.2 or 13.2 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.4 and ending at the close of business
on the day of such mailing or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen 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 (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of actual
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.
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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 proportionally with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such
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<PAGE>
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefore having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
Securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice is given by
the Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest shall be payable on such Interest Payment Date notwithstanding such
conversion, and such interest (whether or not punctually paid or duly provided
for) shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on such Regular
Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Security which is converted,
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<PAGE>
interest after the date of conversion of such Security shall not be payable.
SECTION 3.8 Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9 Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
SECTION 3.10 Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a year of
twelve 30-day months.
ARTICLE 4
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the
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Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.6 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company, and the Company, in the case of (i), (ii) or (iii)
above, has deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if money shall
have been deposited with the Trustee pursuant
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to subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2 Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section 4.1 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.
ARTICLE 5
Remedies
SECTION 5.1 Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article 14 or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon the Security when it
becomes due and payable, if such default continues for a period of 30
consecutive days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) default in the performance, or breach, of 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), if such default or breach continues for a period
of 60 consecutive 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
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10% in principal amount of the 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; or
(4) a default under any Senior Debt 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 such 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 10% in principal amount of the 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
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and if any such decree or order for relief or any such other
decree or order continues unstayed and in effect for a period of 60
consecutive days; or
(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, of the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the
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consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or of any substantial part
of its property, or the making by it of any assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company in furtherance of any such action.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If any Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal of all the Securities to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise then by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of Securities which have become due solely
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by such declaration of acceleration, have been cured or waived as provided
in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3 Collection of Debt and Suits for Enforcement by Trustee.
-------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of all or any part of the principal
of (or premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legal and enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amount forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 5.4 Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise;
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, agreement, adjustment or composition affecting the Securities or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
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SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6 Application of Money Collected.
------------------------------
Subject to Article 14, money held by the Trustee at the time of an
Event of Default or collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
SECTION 5.7 Limitation on Suits.
-------------------
No Holder of a Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest and to Convert.
-----------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption or repurchase, on the
Redemption Date or Repurchase Date) and to convert such Security in accordance
with Article 13 and to institute suit for the enforcement of any such payment
and right to convert, and such rights shall not be impaired without the consent
of such Holder.
SECTION 5.9 Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to
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such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12 Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
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SECTION 5.13 Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article 9
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trust for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Security on or after the respective Stated Maturities expressed
in such Security (or, in the case of redemption or repurchase, on or after the
Redemption Date or the Repurchase Date) or for the enforcement of the right to
convert any Security in accordance with Article 13.
SECTION 5.15 Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or
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plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage or any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE 6
The Trustee
SECTION 6.1 Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
------
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
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(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; and
(4) no provisions of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.2 Notice of Defaults.
------------------
If a default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to security holders a notice of the
default or Event of Default within 90 days after it occurs; provided, however,
-------- -------
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer in good faith
determines that the withholding of such notice is in the interest of the
Holders; and provided, further, that in the case of any default of the character
-------- -------
specified in Section 5.1(5), no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. Notwithstanding anything to the
contrary expressed in this Indenture, the Trustee shall not be deemed to have
knowledge of any Event of Default hereunder unless and until it shall have
actual knowledge thereof or shall have received written notice thereof from the
Company at its corporate trust office in Los Angeles, California or New York,
New York. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
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SECTION 6.3 Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall reasonably determine to make such further inquiry or
investigation, it shall be entitled to examine the books,
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records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, and the contents
of all written materials related to the registration, offering and sale of the
Securities, except the Trustee's certificates of authentication and information
provided in the Trustee's Form T-1, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to Sections 6.8 and
6.13, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 6.6 Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 6.7 Compensation and Reimbursement.
------------------------------
The Company agrees
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(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provisions of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Securities.
SECTION 6.8 Disqualification; Conflicting Interests.
---------------------------------------
The Trustee shall be subject to the provisions of Section 310(b) of
the Trust Indenture Act during the period of time provided for therein. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of Section 310(b) of the Trust
Indenture Act.
SECTION 6.9 Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $55,000,000, subject to supervision or examination by Federal or
State authority and having its Corporate Trust Office in Los Angeles, California
or New York, New York. If such
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corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article. Neither the Company nor any person directly or indirectly
controlling, controlled by, or under common control with the Company shall serve
as trustee for the Securities.
SECTION 6.10 Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8(a) after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to all Holders as
their names and addresses appear in the Security Register. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 6.11 Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject, nevertheless, to its lien provided in
Section 6.7.
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Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. in case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13 Preferential Collection of Claims Against Company.
-------------------------------------------------
(a) Subject to Subsection (b) of this Section, if the Trustee shall be
or shall become a creditor, directly or indirectly, secured or unsecured, of the
Company within three months prior to a default, as defined in Subsection (c) of
this Section, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the Holders of other indenture Securities, as defined in
Subsection (c) of this Section:
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of set-
off which the Trustee could have exercised if a petition in bankruptcy had
been
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filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three
months' period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
------- -------
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (ii) the proceeds of the bona fide sale of any such claim by the
Trustee to a third Person, and (iii) distributions made in cash, Securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such three
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default, as defined in
Subsection (c) of this Section, would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three months' period for property held as security
at the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released,
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and, to the extent that any claim referred to in any of such paragraphs is
created in renewal of or in substitution for or for the purpose of repaying or
refunding any pre-existing claim of the Trustee as such creditor, such claim
shall have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned among
the Trustee, the Holders and the holders of other indenture Securities in such
manner that the Trustee, the Holders and the holders of other indenture
Securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, the same percentage of their respective
claims, figured before crediting to the claim of the Trustee anything on account
of the receipt by it from the Company of the funds and property in such special
account and before crediting to the respective claims of the Trustee and the
Holders and the holders of other indenture Securities dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
but after crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such dividends and
from the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash, Securities or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion among the Trustee, the Holders and the holders of
other indenture Securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and proceeds-thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee and the Holders and the holders of
other indenture Securities with respect to their respective claims, in which
event it shall not be necessary to liquidate or to appraise the value of any
Securities or other property held in such special account or as security for any
such claim, or to make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph as a mathematical formula.
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Any Trustee which has resigned or been removed after the beginning of
such three months' period shall be subject to the provisions of this Subsection
as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such three months' period, it
shall be subject to the provisions of this Subsection if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such three months' period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from:
(1) the ownership or acquisition of Securities issued under any
indenture, or any security or Securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under any indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
Securities sold in a cash transaction, as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other Securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; and
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(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment in full of
the principal of or interest on any of the Securities or upon the other
indenture Securities when and as such principal or interest becomes due and
payable;
(2) the term "other indenture securities" means Securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
which a default exists at the time of the apportionment of the funds and
property held in such special account;
(3) the term "cash transaction" means any transaction in which full
payment for goods or Securities sold is made within seven days after
delivery of the goods or Securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill or
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act or
Title 11 of the United States Code.
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ARTICLE 7
Holders' Lists and Reports by Trustee and Company
SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
SECTION 7.2 Preservation of Information; Communication to Holders.
-----------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Security for a period of at least six
months preceding the date of such application, and such application states that
the applicants desire to communicate with other Holders with respect to their
rights under this Indenture or under the Securities and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the Trustee shall, within five business days after the receipt of
such application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 7.2(a), or
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(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 7.2(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 7.2(a) a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such a mailing would be contrary to the best interest of the
Holders or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If the Commission, after opportunity
for a hearing upon the objections specified in the written statement so filed,
shall enter an order refusing to sustain any of such objections or if, after the
entry of an order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Holders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 7.2(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 7.2(b).
SECTION 7.3 Reports by Trustee.
------------------
(a) On or prior to September 1 of each year commencing with the year
1992, the Trustee shall transmit by mail to all Holders, as their names and
addresses appear in the Security
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Register, a brief report dated as of July 1 of such year with respect to any of
the following events which may have occurred during the twelve months preceding
such date (but if no such event has occurred within such period, no report need
be transmitted):
(1) any change to its eligibility under Section 6.9 and its
qualifications under Section 6.8;
(2) the creation of or any material change to a relationship specified
in paragraph (1) through (10) of Section 310(b) of the Trust Indenture Act;
(3) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities, on any property or funds held or collected
by it as Trustee, except that the Trustee shall not be required (but may
elect) to report such advances if such advances so remaining unpaid
aggregate not more than 1/2 of 1% of the principal amount of the
Securities Outstanding on the date of such report;
(4) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 6.13(b)(2), (3),
(4) or (6);
(5) any change to the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(6) any additional issue of Securities which the Trustee has not
previously reported; and
(7) any Action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 6.2.
(b) The Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Security Register, a brief report with respect to
the character and amount of any
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advances (and if the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) since the date of the last
report transmitted pursuant to Subsection (a) of this Section (or if no such
report has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities, on property or funds held or collected
by it as Trustee and which it has not previously reported pursuant to this
Subsection, except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate 10%
or less of the principal amount of the Securities Outstanding at such time, such
report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 7.4 Reports by Company.
------------------
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, 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 Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national Securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture
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as may be required from time to time by such rules and regulations;
(3) file with the Trustee the certificates and notices required by
Section 10.7 within the times required thereunder; and
(4) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
ARTICLE 8
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of (and premium, if any) and interest 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 13.11;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of
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Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 8.2 Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in
accordance with Section 8.1, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named
as the Company herein, and thereafter, except in the case of a lease, the
Company shall be relieved of all obligations and covenants under this
Indenture and the Securities.
ARTICLE 9
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
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(3) to secure the Securities; or
(4) to make provision with respect to the conversion rights of Holders
pursuant to the requirements of Section 13.11; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, provided such action pursuant to this clause (5) shall not
--------
adversely affect the interests of the Holders in any material respect; or
(6) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of this
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted, and to add to this Indenture such other
provisions as may be expressly permitted by the Trust Indenture Act,
excluding, however, the provisions referred to in Section 316(a)(2) of the
Trust Indenture Act as in effect at the date as of which this instrument
was executed or any corresponding provision provided for in any similar
federal statue hereafter enacted.
SECTION 9.2 Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of a majority in principal amount
of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into any indenture or indentures
supplemental hereto for the pupose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
-------- -------
consent of the Holder of each outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption or
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repurchase, on or after the Redemption Date or the Repurchase Date) or
adversely affect the right to require the Company to repurchase any
Security, or adversely affect the right to convert any Security as provided
in Article 13 (except as permitted by Section 9.1(4)), or modify the
provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.8, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities
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theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.5 Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6 Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE 10
Covenants
SECTION 10.1 Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 10.2 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in Los Angeles, California or New York, New
York an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will (a) give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency and (b) cause the Trustee to give such notice to the Holders. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may
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be made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside Los Angeles, California or New York, New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in Los Angeles, California or
New York, New York for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 10.3 Money for Security Payments to be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in Los Angeles, California and New York, New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 10.4 Existence.
---------
Subject to Article 8, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
-------- -------
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no
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longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.5 Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 10.6 Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 10.7 Statement by Officers as to Default.
-----------------------------------
The Company will, within 120 days after the close of each fiscal year,
commencing with the first fiscal year following the issuance of the Securities,
file with the Trustee a certificate of the principal executive officer, the
principal financial officer or the principal accounting officer of the Company,
covering the period from the date of issuance of the Securities to the end of
the fiscal year in which the Securities were issued, in the case of the first
such certificate, and covering the preceding fiscal year in the case of each
subsequent certificate, and stating whether or not, to the knowledge of the
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signer, the Company has complied with all conditions and covenants on its part
contained in this Indenture, and, if the signer has obtained knowledge of any
default by the Company in the performance, observance or fulfillment of any such
condition or covenant, specifying each such default and the nature thereof. For
the purpose of this Section 10.7, compliance shall be determined without regard
to any grace period or requirement of notice provided pursuant to the terms of
this Indenture.
The Company shall deliver to the Trustee within 15 days after the
occurrence thereof written notice of any event which with the giving of notice
or the lapse of time would constitute an Event of Default under Section 5.1(4)
hereof.
SECTION 10.8 Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.4 to 10.6, inclusive, if before
the time for such compliance the Holders of a majority in principal amount of
the Outstanding Securities shall, by Act of such Holders, either waive such
Compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.
SECTION 10.9 Compliance with Rule 13e-4.
--------------------------
The Company will comply with Rule 13e-4 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to the extent applicable at the
date of the Company Notice (as defined in Section 12.2(a)).
ARTICLE 11
Redemption of Securities
SECTION 11.1 Right of Redemption.
-------------------
The Securities may be redeemed, at the election of the Company, as a
whole or from time to time in part, at any time, at the Redemption Prices
specified in the form of Security hereinbefore set forth for redemptions,
together with accrued interest to the Redemption Date; provided, however, that
-------- -------
the
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Company may not redeem any of the Securities pursuant to such election prior
to September 15, 1994.
SECTION 11.2 Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 11.3 Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Trustee as outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
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For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.5 Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 25 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amounts) of the particular securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(5) the conversion price, the date on which the right to convert the
principal of the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay
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the Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are to be redeemed
on that date other than any Securities called for redemption on that date which
have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security shall (subject
to any right of the Holder of such Security or any Predecessor Security to
receive interest as provided in the last paragraph of Section 3.7) be paid to
the Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
SECTION 11.7 Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
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Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 11.8 Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of
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any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE 12
Repurchase of Securities at the Option
of the Holder Upon Change in Control.
SECTION 12.1 Right to Require Repurchase.
---------------------------
In the event that, prior to September 15, 2001 there shall occur a
Change in Control (as hereinafter defined) of the Company, then each Holder
shall have the right, at the Holder's option, to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase,
all of such Holder's Security, or any portion of the principal amount thereof
that is an integral multiple of $1,000, on the date (the "Repurchase Date") that
is 45 days after the date of the Company Notice (as defined in Section 12.2(a))
at a purchase price equal to 100% of the principal amount of Securities to be
repurchased (the "Repurchase Price"), together with accrued interest to the
Repurchase Date. Such right to require the repurchase of the Securities shall
not continue after a discharge of the Company from its obligations with respect
to the Securities in accordance with Article 4, unless a Change in Control shall
have occurred prior to such discharge. At the option of the Company, the
Repurchase Price may be paid in cash or by delivery of shares of Common Stock
having a fair market value equal to the Repurchase Price; provided that payment
--------
may not be made in Common Stock unless at the time of payment such stock is
listed on a national Securities exchange or quoted on the NASDAQ National Market
System. For purposes of this Section 12.1, the fair market value of shares of
Common Stock shall be equal to 95% of the average of the Closing Prices for the
five consecutive Trading Days ending on and including the third Trading Day
immediately preceding the Repurchase Date.
SECTION 12.2 Notices; Method of Exercising Repurchase Right, etc.
----------------------------------------------------
(a) Unless the Company shall have theretofore called for redemption
all the outstanding Securities pursuant to Article 11, on or before the 30th day
after the occurrence of a Change in Control, the Company or, at the request of
the Company, the Trustee, shall mail to all Holders in the manner provided in
Section 11.5 a notice (the "Company Notice") of the occurrence of
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the Change in Control and of the repurchase right set forth herein arising as a
result thereof. The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee and cause a copy of such notice of a repurchase
right to be published in a newspaper of general circulation in Los Angeles,
California and the Borough of Manhattan, The City of New York.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right, and
(5) the conversion price then in effect, the date on which the
right to convert the principal amount of the Securities to be
repurchased will terminate and the place or places where such
Securities may be surrendered for conversion.
In addition, at least two Trading Days preceding the Repurchase Date,
the Company shall cause to be published, in a newspaper of general circulation
in Los Angeles, California and the Borough of Manhattan, The City of New York, a
notice specifying whether the Repurchase Price will be payable in cash or in
shares of Common Stock.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Securities to be
repurchased, a statement that an election to exercise the repurchase right is
being made thereby, and, in the event that the Repurchase Price shall be paid in
shares of Common Stock, the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock shall be issued, and (ii)
the Securities with respect to which the repurchase right is being exercised,
duly endorsed for transfer to the Company. Such written notice shall
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be irrevocable, except that the right of the holder to convert the Securities
with respect to which the repurchase right is being exercised shall continue
until the close of business on the Repurchase 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 Repurchase
Price in cash or shares of Common Stock, as provided above, to the Holder on the
Repurchase Date, together with accrued and unpaid interest to the Repurchase
Date payable with respect to the Securities as to which the repurchase right has
been exercised; provided, however, that installments of interest whose Stated
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Maturity is on or prior to the Repurchase Date shall be payable in cash to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.7.
(d) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such repurchase shall be deemed to have become on the Repurchase
Date the Holder or Holders of record of the shares represented thereby;
provided, however, that any surrender for repurchase on a date when the stock
- -------- -------
transfer books of the Company shall be closed shall constitute the Person or
Persons in whose name or names the certificate or certificates for such shares
are to be issued as the recordholder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open. No payment or adjustment shall be made for dividends or
distributions on any Common Stock issued upon conversion of any Security.
(e) No fractions of shares or scrip representing fractions of shares
shall be issued upon repurchase of Securities. If more than one Security shall
be repurchased from the same Holder and the Repurchase Price shall be payable in
shares of Common Stock, the number of full shares which shall be issuable upon
such repurchase shall be computed on the basis of the aggregate principal amount
of the Securities so repurchased. Instead of any fractional share of Common
Stock which would otherwise be issuable on the repurchase of any Security or
Securities, the Company shall make payment in lieu thereof in an amount of
United States dollars equal to the value of such fraction computed on the basis
of the Closing Price of the Common Stock on the last Trading Day prior to the
Repurchase Date.
(f) Any issuance and delivery of certificates for shares of Common
Stock on repurchase of Securities shall be made
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without charge to the Holder of Securities being repurchased for such
certificates or for any tax or duty in respect of the issuance or delivery of
such certificates or the Securities represented thereby; provided, however, that
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the Company shall not be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of certificates for
shares of Common Stock in a name other than that of the Holder of the Securities
being repurchased, and no such issue or delivery shall be made unless and until
the Person requesting such issue or delivery has paid to the Company the amount
of any such tax or duty or has established, to the satisfaction of the Company,
that such tax or duty has been paid.
(g) If any shares of Common Stock to be issued upon repurchase of
Securities hereunder require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon repurchase, the Company covenants that it will in good
faith and as expeditiously as Possible endeavor to secure such registration or
approval, as the case may be; provided, however, that nothing in this Section
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shall be deemed to affect in any way the obligations of the Company to
repurchase Securities as provided in this Article and if such registration is
not completed or does not become effective or such approval is not obtained
prior to the Repurchase Date, the Repurchase Price shall be paid in cash.
(h) The Company covenants that all shares of Common Stock which may be
issued upon repurchase of Securities will upon issue be duly and validly issued
and fully paid and non-assessable.
(i) If any Security surrendered for repurchase shall not be so paid on
the Repurchase Date, the principal shall, until paid, bear interest to the
extent permitted by applicable law from the Repurchase Date at the rate borne by
the Security and such Security shall remain convertible into Common Stock until
the principal of such Security shall have been paid or duly provided for.
(j) Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 10.2 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
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for the unrepurchased portion of the principal of the Security so surrendered.
SECTION 12.3 Certain Definitions.
-------------------
For purposes of this Article:
(a) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, and for the purpose of
this Article 12, "Person" shall include any syndicate or group which would
be deemed to be a "person" under Section 13(d) (3) of such Act (attached
hereto as Exhibit A) as in effect on the date of the original execution of
this Indenture; and
(b) a "Change in Control" of the company shall be deemed to have
occurred at such time as any Person is or becomes the beneficial owner,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock of the
Company entitling such Person to exercise 50% or more of the total voting
power of all shares of capital stock of the Company entitled to vote in
elections of directors; provided, however, that a Change in Control shall
-------- -------
not be deemed to have occurred if either (i) the Closing Price on any five
Trading Days during the 10 Trading-Day period immediately preceding the
date of the Change in Control shall equal or exceed 105% of the conversion
price in effect on such Trading Days or (ii) all of the consideration
(excluding cash payments for fractional shares) to be paid for the Common
Stock in the transaction or transactions constituting the Change in Control
consists of shares of common stock traded on a national Securities exchange
or quoted on the NASDAQ National Market System and as a result of such
transaction or transactions the Securities become convertible solely into
such common stock.
ARTICLE 13
Conversion of Securities
SECTION 13.1 Conversion Privileges and Conversion Price.
------------------------------------------
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Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $1,000 or an integral multiple of $1,000 may be
converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company, at the conversion
price, determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on September 15,
2001. In case a Security or portion thereof is called for redemption or is
repurchased, such conversion right in respect of the Security or portion so
called shall expire at the close of business on the Redemption
Date or the Repurchase Date, unless the Company defaults in making the payment
due upon redemption or repurchase.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $21.866 per
share of Common Stock. The conversion price shall be reduced in certain
instances as provided in paragraphs (1), (2), (3), (4), (5), (6), (7) and (9) of
Section 13.4 and shall be increased in certain instances as provided in
paragraph (3) of Section 13.4.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in paragraph (4) or (5) of Section
13.4, the Holder of each Security, upon the conversion thereof pursuant to this
Article subsequent to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution and prior to
the effectiveness of the conversion price adjustment in respect of such
distribution pursuant to paragraph (4) or (5) of Section 13. 4, shall also be
entitled to receive for each share of Common Stock into which such Security is
converted, the portion of the evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of Common Stock,
provided that, at the election of the Company (whose election shall be evidenced
- --------
by a Board Resolution) with respect to all Holders so converting, the company
may, in lieu of distributing to such Holder any portion of such distribution not
consisting of cash or Securities of the Company, pay such Holder an amount in
cash equal to the fair market value thereof (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution). If any conversion of a Security described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
Holders of Common Stock which the Holder of the Security so converted is
entitled to receive in accordance with the immediately preceding sentence, the
Company may elect (such election to be evidenced by a Board Resolution) to
distribute to such Holder a due bill for the evidences of
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indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled, provided that such due bill (i) meets any applicable requirements of
--------
the principal national Securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such evidences of
indebtedness, shares of capital stock, cash or assets no later than the date of
payment or delivery thereof to Holders of Common Stock receiving such
distribution.
SECTION 13.2 Exercise of Conversion Privilege.
--------------------------------
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 10.2, accompanied by written
notice to the Company at such office or agency that the Holder elects to convert
such Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Securities surrendered for
conversion during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date shall (except in the case of Securities or portions
thereof which have been called for redemption, or are to be repurchased, on such
Interest Payment Date or on a Redemption Date or a Repurchase Date within the
period beginning on such Regular Record Date and ending on such Interest Payment
Date) be accompanied by payment by wire transfer or certified check or other
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of Securities being
surrendered for conversion. Except as provided in the preceding sentence and
subject to the fourth paragraph of Section 3.7, no payment or adjustment shall
be made upon any conversion on account of any interest accrued on the Securities
surrendered for conversion or on account of any dividends on the Common Stock
issued upon conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the person or persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record Holder or Holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock
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issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 13.3.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 13.3 Fractions of Shares.
-------------------
No fractional shares of Common Stock shall be issued upon conversion
of Securities. If more than one Security shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the Closing Price at
the close of business on the day of conversion.
SECTION 13.4 Adjustment of Conversion Price.
------------------------------
(1) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the conversion
price in effect at the opening of business on the day following the day 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 and the total number of
shares 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 paragraph (1),
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 shall not pay any dividend
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or make any distribution on shares of Common Stock held in the treasury of the
Company.
(2) Subject to the last sentence of paragraph (7) of this Section, in
case the Company shall pay or make a dividend or other distribution on its
Common Stock consisting exclusively of, or shall otherwise issue to all Holders
of its Common Stock, rights or warrants entitling the Holders thereof to
subscribe for or purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in paragraph (8) of
this Section) 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 paragraph (2), 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 shall not issue any rights or warrants in respect of shares
of Common Stock held in the treasury of the Company.
(3) 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.
(4) Subject to the last sentence of this paragraph (4), in case the
Company shall, by dividend or otherwise,
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distribute to all Holders of its Common Stock evidences of its indebtedness,
shares of any class of capital stock, cash or assets (including Securities, but
excluding any rights or warrants referred to in paragraph (2) of this Section,
excluding any dividend or distribution paid exclusively in cash and excluding
any dividend or distribution referred to in paragraph (1) of this Section), the
conversion price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the effectiveness of the conversion price reduction contemplated by this
paragraph (4) by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (8) of this Section) of the
Common Stock on the date of such effectiveness less the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), on the date of such
effectiveness, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets 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 reduction to become effective immediately prior to the
opening of business on the day following the later of (a) the date fixed for the
payment of such distribution and (b) the date 20 days after the notice relating
to such distribution is given pursuant to Section 13.6(a) (such later date of
(a) and (b) being referred to as the "Reference Date"). If the Board of
Directors determines the fair market value of any distribution for purposes of
this paragraph (4) by reference to the actual or when issued trading market for
any Securities comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the current market
price per share pursuant to paragraph (8) of this Section. For purposes of this
paragraph (4), any dividend or distribution that includes shares of Common
Stock, rights or warrants to subscribe for or purchase shares of Common Stock or
other Securities convertible into or exchangeable for shares of Common Stock
shall be deemed instead to be (a) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than such shares of
Common Stock, such rights or warrants or such other convertible or exchangeable
Securities (making any conversion price reduction required by this paragraph
(4)), immediately followed by (b) in the case of such shares of Common Stock or
such rights or warrants, a dividend or distribution thereof (making any further
conversion price reduction required by paragraph (1) or (2) of this Section,
except (i) the Reference Date of such dividend or distribution as defined in
this paragraph (4) shall be substituted for "the date fixed for the
determination of stockholders entitled to receive such distribution" and "the
date fixed for such determination" within the meaning of paragraphs (1) and (2)
of this Section and (ii) any shares of Common Stock included in such dividend or
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distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of paragraph (1) of this
Section) or (c) in the case of such other convertible or exchangeable
Securities, a dividend or distribution of such number of shares of Common Stock
as would then be issuable upon the conversion or exchange thereof, whether or
not the conversion or exchange of such Securities is subject to any conditions
(making any further conversion price reduction required by paragraph (1) of this
Section, except (i) the Reference Date of such dividend or distribution as
defined in this paragraph (4) shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such distribution" and "the
date fixed for such determination" and (ii) the shares deemed to constitute such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination," each within the meaning of
paragraph (1) of this Section).
(5) In case the Company shall, by dividend or otherwise, at any time
distribute to all Holders of its Common Stock cash (excluding any cash that is
distributed as part of a distribution referred to in paragraph (4) of this
Section) in an aggregate amount that, together with (i) the aggregate amount of
any other distributions to all Holders of its Common Stock made exclusively in
cash within the 12 months preceding the date of payment of such distribution and
in respect of which no conversion price adjustment pursuant to this paragraph
(5) has been made and (ii) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of consideration payable in
respect of any tender offer by the Company or a Subsidiary for all or any
portion of the Company's Common Stock concluded within the 12 months preceding
the date of payment of such distribution and in respect of which no conversion
price adjustment pursuant to paragraph (6) of this Section has been made,
exceeds l0% of the product of the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock on the date fixed
for stockholders entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date, the conversion price shall be
reduced so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this paragraph (5) by a fraction of
which the numerator shall be the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock of such
effectiveness less the amount of cash 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 reduction to become effective immediately prior to the
opening of business on the later of (a)
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the day following the date fixed for the payment of such distribution and (b)
the date 20 days after the notice relating to such distribution is given
pursuant to Section 13.6(a).
(6) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Company's Common Stock shall expire and such tender
offer shall involve an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) on the last time (the "Expiration Time")
tenders may be made pursuant to such tender offer (as it may be amended) that,
together with (i) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution), as of the expiration of such tender offer,
of consideration payable in respect of any tender offer by the Company, or a
Subsidiary for all or any portion of the Company's Common Stock expiring within
the 12 months preceding the expiration of such tender offer and in respect of
which no conversion price adjustment pursuant to this paragraph (6) has been
made and (ii) the aggregate amount of any distributions to all Holders of the
Company's Common Stock made exclusively in cash within the 12 months preceding
the expiration of such tender offer and in respect of which no conversion price
adjustment pursuant to paragraph (5) of this Section has been made, exceeds 5%
of the Product of the current market price per share determined as provided in
paragraph (8) of this Section) of the Common Stock on the Expiration Time times
the number of shares of Common Stock outstanding (including any tendered shares)
on the Expiration Time, the conversion price shall be reduced so that the same
shall equal the price determined by multiplying the conversion price in effect
immediately prior to the Expiration Time by a fraction of which the numerator
shall be (i) the product of the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock on the Expiration
Time times the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time minus (ii) the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
offer) of all shares validly tendered and not withdrawn as of the Expiration
Time, (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and the denominator shall be the product of (i) such
current market price per share on the Expiration Time times (ii) such number of
outstanding shares on the Expiration Time less the number of Purchased Shares,
such reduction to become effective immediately prior to the opening of business
on the day following the Expiration Time. No such adjustment shall be made in
the event of any purchase pursuant to Rule ba-18 under the Exchange Act.
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(7) The reclassification of Common Stock into Securities including
Securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 13.10 applies) 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 Reference Date" within the meaning of paragraph (4) of this
Section), 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 paragraph (3) of this Section) . Rights or warrants issued by the
Company to all Holders of its Common Stock entitling the Holders thereof to
subscribe for or purchase shares of Common Stock, which rights or warrants (i)
are deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, in each case in clauses (i) through (iii) until the occurrence of a
specified event or events ("Trigger Event"), shall for purposes of this Section
13.4 not be deemed issued and the distribution thereof not be deemed made or
paid until the occurrence of the earliest Trigger Event.
(8) For the purpose of any computation under this paragraph and
paragraphs (2), (4) and (5) of this Section, the current market price per share
of Common Stock on any date shall be deemed to be the average of the Closing
Prices for the five consecutive Trading Days selected by the Company commencing
not more than 20 Trading Days before, and ending not later than, the date in
question; provided, however, that (i) if the "ex" date for any event (other than
-------- -------
the issuance or distribution requiring such computation) that requires an
adjustment to the conversion price occurs on or after the 20th Trading Day prior
to the day in question and prior to the "ex" date for the issuance or
distribution requiring such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the conversion price is so
required to be adjusted as a result of such other event, (ii) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the conversion price occurs on or
after the "ex" date for the issuance or distribution requiring such computation
and on or prior to the day in question, the Closing Price for each Trading Day
on and after the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction
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by which the conversion price is so required to be adjusted as a result of such
other event, and (iii) if the "ex" date for the issuance or distribution
requiring such computation is on or prior to the day in question, after taking
into account any adjustment required pursuant to clause (ii) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value on
the day in question (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of paragraph (4) or
(5) of this Section, whose determination shall be conclusive and described in a
Board Resolution) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For the purpose of any computation
under paragraph (6) of this Section, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the Company commencing
on or after the latest (the "Commencement Date") of (i) the date 20 Trading Days
before the date in question, (ii) the date of commencement of the tender offer
requiring such computation and (iii) the date of the last amendment, if any, of
such tender offer involving a change in the maximum number of shares for which
tenders are sought or a change in the consideration offered, and ending not
later than the Expiration Time of such tender offer; provided, however, that if
-------- -------
the "ex" date for any such event (other than the tender offer requiring such
computation) that requires an adjustment to the conversion price occurs on or
after the Commencement Date and prior to the Expiration Time for the tender
offer requiring such computation, the Closing Price for each Trading Day prior
to the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the same fraction by which the conversion price is so required
to be adjusted as a result of such other event. For purposes of this paragraph
the term "'ex' date", (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution, (ii)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any tender
offer means the first date on which the Common Stock trades regular way on such
exchange or in such market after the Expiration Time
of such tender offer.
(9) The Company may make such reductions in the conversion price, in
addition to those required by this Section,
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as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
(10) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason of
-------- -------
this paragraph (10) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(11) Notwithstanding any other provision of this Section 13.4, no
adjustment to the conversion price shall reduce the conversion price below the
then par value per share of the Common Stock, and any such purported adjustment
shall instead reduce the conversion price to such par value. The Company hereby
covenants not to take any action that would or does result in any adjustment in
the conversion price that, if made without giving effect to the previous
sentence, would cause the conversion price to be less than the then par value
per share of the Common Stock.
SECTION 13.5 Notice of Adjustments of Conversion Price.
-----------------------------------------
Whenever the conversion price is adjusted as herein provided and at
such other times as the Trustee shall request:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 13.4 and shall prepare a certificate signed by
the Treasurer of the Company setting forth the adjusted conversion
price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be delivered
to the Trustee and filed at each office or agency maintained for the
purpose of conversion of Securities pursuant to Section 10.2; and
(b) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be
required, and, when the conversion price is adjusted, as soon as
practicable after it is required, the Company shall cause such notice
to be mailed to all Holders at their last addresses as they shall
appear in the Security Register.
SECTION 13.6 Notice of Certain Corporate Action.
----------------------------------
In case:
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(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out
of its retained earnings; or
(b) the Company shall authorize the granting to the Holders of
its Common Stock generally of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other
rights; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company
is required, or of the sale or transfer of all or substantially all of
the assets of the company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer
for all or a portion of the Company's outstanding shares of Common
Stock (or shall amend any such tender offer);
then the Company shall notify the Trustee and cause to be filed at each office
or agency maintained for the purpose of conversion of Securities pursuant to
Section 10.2, and shall cause to be mailed to all Holders at their last
addresses as they shall appear in the Security Register, at least 20 days (or 10
days in any case specified in clause (a) or (b) above) prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the Holders
of Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that Holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for Securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto).
SECTION 13.7 Company to Reserve Common Stock.
-------------------------------
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The Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all outstanding Securities.
SECTION 13.8 Taxes on Conversions.
--------------------
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 13.9 Covenant as to Common Stock.
---------------------------
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be fully paid and
nonassessable and, except as provided in Section 13.8, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
SECTION 13.10 Cancellation of Converted Securities.
------------------------------------
All Securities delivered for conversion shall be delivered to the
Trustee to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.9.
SECTION 13.11 Provisions in the Case of Consolidation, Merger or Sales of
-------------------------------------------------- --------
Assets.
------
In case of any consolidation of the Company with, or merger of the
Company into, any other corporation,, or in case of any merger of another
corporation into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), or in case of any sale or transfer of all or
substantially all of the assets of the Company, the corporation formed by such
consolidation or resulting from such merger or
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which acquires such assets, as the case may be, shall execute and deliver to the
trustee a supplemental indenture providing that the Holder of each Security then
outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 13.1, to convert such Security only
into the kind and amount of Securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a Holder of the number of shares
of Common Stock of the Company into which such Security might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such Holder of Common Stock of the Company failed to exercise his
rights of election, if any, as to the kind or amount of Securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of Securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same for
each share of Common Stock of the Company in respect of which such rights of
election shall not have been exercised ("non-electing share"), then for the
purpose of this Section the kind and amount of Securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares).
Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, sales or transfers.
ARTICLE 14
Subordination of Securities
SECTION 14.1 Securities Subordinate to Senior Debt.
-------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of (and premium,
if any) and interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt.
SECTION 14.2 Payment Over of Proceeds Upon Dissolution, Etc.
-----------------------------------------------
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<PAGE>
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any Liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the Holders of Senior Debt shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior Debt, or
provision shall be made for such payment, before the Holders of the Securities
are entitled to receive any payment on account of principal of (or premium, if
any) or interest on the Securities, and to that end the Holders of Senior Debt
shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
Securities, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities, which may be payable or
deliverable in respect of the Securities in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or Securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Debt is paid in full or payment thereof provided
for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the Holders of Senior Debt.
For purposes of this Article only, the words "cash, property or
Securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or Securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Debt which may at the time be outstanding
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to substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to another Person upon
the terms and conditions set forth in Article 8 shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshalling Of assets and liabilities of the Company for the
purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article 8.
SECTION 14.3 Prior Payment to Senior Debt Union Acceleration of Securities.
-------------------------------------------------------------
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the Holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt, or provision shall be made for such payment before the Holders of
the Securities are entitled to receive any payment (including any payment which
may be payable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities) by the Company on account
of the principal of (or premium, if any) or interest on the Securities or on
account of the purchase or other acquisition of Securities.
In the event that notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event payment shall be paid over and delivered
forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 14.2 would be applicable.
SECTION 14.4 No Payment When Senior Debt in Default.
--------------------------------------
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or
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interest of any Senior Debt beyond any applicable grace period with respect
thereto, or in the event that any event of default with respect to any Senior
Debt shall have occurred and be continuing and shall have resulted in such
Senior Debt becoming or being declared due and payable, or (b) in the event any
judicial proceeding shall be pending with respect to any such default, then no
payment (including any payment which may be payable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities) shall be made by the Company on account of principal of (or premium,
if any) or interest on the Securities or on account of the repurchase or other
acquisition of Securities or Securities which have been converted pursuant to
Article 13.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event payment shall be paid over and delivered
forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 14.2 would be applicable.
SECTION 14.5 Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 14.2 or under the conditions
described in Section 14.3 or 14.4, from making payments at any time of principal
of (and premium, if any) or interest on the Securities, or (b) the application
by the Trustee of any money deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest on the Securities
or the retention of such payment by the Holders, if, at the time of such
application by the Trustee, it did not have knowledge that such payment would
have been prohibited by the provisions of this Article.
SECTION 14.6 Subrogation to Rights of Holders of Senior Debt.
-----------------------------------------------
Subject to the payment in full of all Senior Debt, the Holders of the
Securities shall be subrogated to the extent of the payments or distributions
made to the Holders of such Senior Debt pursuant to the provisions of this
Article (equally and
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ratably with the Holders of all indebtedness of the Company which by its express
terms is subordinated to indebtedness of the Company to substantially the same
extent as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the Holders of such Senior Debt to receive
payments and distributions of cash, property and Securities applicable to the
Senior Debt until the principal of (and premium, if any) and interest on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the Holders of the Senior Debt of any cash, property or
Securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the Holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors (other than Holders of Senior Debt) and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 14.7 Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the Holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors (other than Holders of
Senior Debt) and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under this
Article of the Holders of Senior Debt, is tended to rank equally with all other
general obligations of the Company), to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Securities
and creditors of the Company other than the Holders of Senior Debt; or (c)
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the Holders of Senior Debt to
receive cash, property and Securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 14.8 Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the
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subordination provided in this Article and appoints the Trustee his attorney-in-
fact for any and all such purposes.
SECTION 14.9 No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future Holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such Holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such Holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the Holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 14.10 Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer shall have received written notice thereof from
the Company or a Holder of Senior Debt or from any trustee therefor; and, prior
to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if a Responsible Officer shall not
-------- -------
have received the notice provided for in this Section at least two Business Days
prior to the date
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upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a Holder of Senior Debt (or a trustee therefor) to
establish that such notice has been given by a Holder of Senior Debt (or by a
trustee therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a Holder
of Senior Debt to participate in any payment or distribution pursuant to this
Article, 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, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, 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 14.11 Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution
delivered to the Trustee or to the Holders of Securities, 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 and all other facts pertinent
thereto or to this Article.
SECTION 14.12 Trustee Not Fiduciary for Holders of Senior Debt.
------------------------------------------------
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The Trustee shall not be deemed to owe any fiduciary duty to the
Holders of Senior Debt and shall not be liable to any such Holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the company or to any other Person cash property or Securities to which any
Holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 14.13 Rights of Trustee as Holder of Senior Debt; Preservation of
-----------------------------------------------------------
Trustee's Rights.
----------------
The Trustee in its individual capacity 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 this Indenture shall deprive the Trustee of any of its rights as
such Holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
SECTION 14.14 Article Applicable to Paying Agents.
-----------------------------------
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 otherwise
requires) 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 Section 14.14 shall not apply to the Company or any Affiliate of
- -------
the Company if it or such Affiliate acts as Paying Agent.
SECTION 14.15 Certain Conversions Deemed Payment.
----------------------------------
For the purposes of this Article only, (1) the issuance and delivery
of junior Securities upon conversion of Securities in accordance with Article 13
shall not be deemed to constitute a payment or distribution on account of the
principal of, or premium or interest on, Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or Securities (other than junior Securities) upon
conversion of a Security shall be deemed to constitute payment on account of the
principal of such Security. For the purposes of this Section, the term "junior
Securities" means (a) shares of any stock of any class of the Company and (b)
Securities of the Company which are subordinated in right of
-90-
<PAGE>
payment to all Senior Debt which may be outstanding at the time of issuance or
delivery of such Securities to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than Holders of Senior Debt and the Holders of the Securities, the right
which is absolute and unconditional, of the Holder of any Security to convert
such security in accordance with Article 13.
SECTION 14.16 CUSIP Numbers
-------------
Neither the Trustee nor the Company shall have responsibility for a
defect in the CUSIP number that appears on any Security or in any redemption
notice. A redemption notice may provide that the CUSIP numbers have been
assigned by an independent service and are included in the notice solely for the
convenience of Holders of the Securities and that the Trustee and the Company
shall not be liable in any way for inaccuracies in said numbers.
-----------------------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-91-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CII FINANCIAL, INC.
By /s/ Joseph G. Havlick
-----------------------------------
Chairman of the Board and
President
Attest:
- ---------------------------
MANUFACTURERS HANOVER TRUST COMPANY,
as Trustee
By /s/ F. J. Guippo
-----------------------------------
Vice President
Attest:
- ----------------------------
-92-
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On the 26th day of September, 1991, before me personally came Joseph
G. Havlick, to me known, who, being by me duly sworn, did depose and say that he
is the Chairman of the Board and President of CII Financial, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ Daniel F. Plucinski
- ------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1991 before me personally came F. J.
Guippo, to me known, who being by me duly sworn, did depose and say that he is
Vice President of Manufacturers Hanover Trust Company, a corporation duly
organized and existing under the laws of the State of New York, described in and
which executed the foregoing instrument; that he knows the seal of said
association; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
association, and that he signed his name thereto by like authority.
/s/ G. John Kirsch
- -----------------------------
Notary Public
<PAGE>
EXHIBIT 4.3
- --------------------------------------------------------------------------------
CII FINANCIAL, INC.
SIERRA HEALTH SERVICES, INC.
and
CHEMICAL BANK,
as Trustee
----------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of October __, 1995
to
INDENTURE
Dated as of September 15, 1991
----------------------------
7 1/2% Convertible Subordinated Debentures Due 2001
- --------------------------------------------------------------------------------
<PAGE>
First Supplemental Indenture dated as of October __, 1995, among CII
Financial, Inc., a California corporation (the "Company"), Sierra Health
Services, Inc., a Nevada corporation ("Sierra"), and Chemical Trust Company of
California, a California corporation and successor to Manufacturers Hanover
Trust Company, as trustee (the "Trustee").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company has duly authorized, executed and delivered to
the Trustee that certain Indenture dated as of September 15, 1991 pursuant to
which the Company's 7 1/2% Convertible Subordinated Debentures Due 2001 (the
"Securities") were issued (all capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Indenture);
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
as of June 12, 1995 among Sierra, Health Acquisition Corp., a wholly-owned
subsidiary of Sierra ("Sierra Subsidiary"), and the Company, Sierra Subsidiary
would merge (the "Merger") with and into the Company and each outstanding share
of Common Stock, stated value $.50 per share (the "CII Common Stock"), of the
Company would be converted into 0.37 of a share of Common Stock, $.005 par value
(the "Sierra Common Stock"), of Sierra as fully described in the Joint Proxy
Statement/Prospectus dated September 19, 1995 of the Company and Sierra;
WHEREAS, in connection with the Merger, the Boards of Directors of the
Company and Sierra have determined that it is in the best interests of the
Company and Sierra to provide that the Securities will be convertible into
Sierra Common Stock instead of CII Common Stock after the consummation of the
Merger pursuant to Section 13.11 of the Indenture;
WHEREAS, the Boards of Directors of the Company and Sierra adopted
Board Resolutions on _____________, 1995 authorizing the Company and Sierra,
among other things, to enter into a supplemental indenture to provide for the
conversion of the Securities into Sierra Common Stock after the consummation of
the Merger pursuant to Section 13.11 of the Indenture;
WHEREAS, pursuant to Section 9.1(4) of the Indenture, without the
consent of any Holders, the Company, when authorized by Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Indenture, for, among other purposes, to make
provision with respect to the conversion rights of Holders pursuant to Section
13.11 of the Indenture;
<PAGE>
NOW, THEREFORE, the Company and Sierra each covenant and agree with
the Trustee, for the equal and proportionate benefit of those who shall hold the
Securities from time to time, as hereinafter set forth.
ARTICLE ONE
Conversion of Securities
------------------------
Section 1.1. Conversion Privileges. Upon the consummation of the
---------------------
Merger and the execution and delivery of this First Supplemental Indenture to
the Trustee, the Holder of each Security then outstanding shall have the right
thereafter, during the period such Security shall be convertible as specified in
Article 13 of the Indenture, to convert such Security only into Sierra Common
Stock at a price of $59.097 per share, subject to adjustment as provided in
Article 13.
Section 1.2 Conversion Covenants. Upon the consummation of the
--------------------
Merger and effectiveness of this First Supplemental Indenture, Sierra agrees to
be bound by the covenants set forth in Sections 13.7 and 13.9 of the Indenture
with respect to the Sierra Common Stock issuable upon conversion of the
Securities.
ARTICLE TWO
Miscellaneous Provisions
------------------------
Section 2.1. Interpretation. This First Supplemental Indenture is a
--------------
supplemental indenture executed pursuant to Section 9.1(4) of the Indenture.
Upon execution, delivery and effectiveness pursuant to Article One of this First
Supplemental Indenture, the Indenture shall be modified and amended in
accordance with this First Supplemental Indenture, and all the terms and
conditions of both shall be read together as though they constitute one
instrument, except that, in case of conflict, the provisions of this First
Supplemental Indenture will control. In case of conflict between the terms and
conditions contained in the Securities and those contained in the Indenture, as
modified and amended by this First Supplemental Indenture, the provisions of the
Indenture, as modified and amended by this First Supplemental Indenture, shall
control.
Except as set forth in this First Supplemental Indenture, Sierra will
not assume the Company's obligations with respect to the Securities and will not
guarantee payment of principal, interest or any premium thereon.
Section 2.2. Successors and Assigns. All the covenants,
----------------------
stipulations, promises and agreements in this First Supplemental Indenture made
by or on behalf of the Company and Sierra, or the Trustee, shall bind and inure
to the benefit of their respective successors and assigns.
Section 2.3. Counterparts. This First Supplemental Indenture may be
------------
executed in any number of counterparts, and all such counterparts taken together
shall be deemed to constitute one and the same agreement.
Section 2.4. Title and Section Headings. The titles of the Articles
--------------------------
and the Section headings are for convenience only and shall not affect the
construction hereof.
2
<PAGE>
Section 2.5. Recitals. The recitals contained herein and in the
--------
Securities, as amended hereby, (except the Trustee's certificates of
authentication) shall be taken as the statements of the Company and Sierra, and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations as to the validity or sufficiency of this First Supplemental
Indenture or of the Securities, as amended hereby, or coupons.
Section 2.6. Governing Law. This First Supplemental Indenture shall
-------------
be governed by and construed in accordance with the laws of the State of
California.
Section 2.7. Opinion of Counsel. In accordance with Section 8.1(3)
------------------
of the Indenture, the Company shall provide the Trustee with an Officers'
Certificate and Opinion of Counsel for the Company, reasonably acceptable to the
Trustee, that the Merger and this First Supplemental Indenture comply with the
provisions of Article 8 of the Indenture and that all conditions precedent
therein relating to the Merger have been complied with.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date above written.
CII FINANCIAL, INC.
By:
----------------------------------
Attest:
- --------------------------------
SIERRA HEALTH SERVICES, INC.
By:
----------------------------------
Attest:
- ---------------------------------
CHEMICAL TRUST COMPANY OF CALIFORNIA,
as Trustee
By:
----------------------------------
Attest:
- --------------------------------
4
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of CII FINANCIAL, INC.,
one of the parties described in and who executed the above instrument; and that
he signed his name thereto by authority of the Board of Directors of said
company.
WITNESS my hand and official seal.
--------------------------------
Notary Public in and for
said State
[Seal]
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of CII FINANCIAL, INC.,
one of the parties described in and who executed the above instrument; and that
he signed his name thereto by authority of the Board of Directors of said
company.
WITNESS my hand and official seal.
----------------------------------
Notary Public in and for
said State
[Seal]
5
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October, 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of SIERRA HEALTH
SERVICES, INC., one of the parties described in and who executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors of said Company.
WITNESS my hand and official seal.
---------------------------------
Notary Public in and for
said State
[Seal]
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October, 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of SIERRA HEALTH
SERVICES, INC., one of the parties described in and who executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors of said Company.
WITNESS my hand and official seal.
----------------------------------
Notary Public in and for
said State
[Seal]
6
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October, 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of CHEMICAL TRUST
COMPANY OF CALIFORNIA, one of the parties described in and who executed the
above instrument; and that he signed his name thereto by authority of the Board
of Directors of said company.
WITNESS my hand and official seal.
------------------------------------
Notary Public in and for
said State
[Seal]
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the ____ day of October, 1995, before me, personally came
_______________________________ to me known, who, being by me duly sworn, did
depose and say that he resides at _________________________________,
______________; that he is ____________________________ of CHEMICAL TRUST
COMPANY OF CALIFORNIA, one of the parties described in and who executed the
above instrument; and that he signed his name thereto by authority of the Board
of Directors of said company.
WITNESS my hand and official seal.
------------------------------------
Notary Public in and for
said State
[Seal]
7
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-effective
Amendment No. 1 to Registration Statement No. 33-60591 of Sierra Health
Services, Inc. on Form S-3 to Registration Statement on Form S-4 of our report
dated February 10, 1995, appearing in the Annual Report on Form 10-K as
amended by the Form 10-K/A of Sierra Health Services, Inc. for the year ended
December 31, 1994 and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
October 5, 1995
<PAGE>
EXHIBIT 25.1
_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM T-l
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)_________
___________________________
CHEMICAL TRUST COMPANY OF CALIFORNIA
(formerly Manufacturers Hanover Trust Company of California)
(Exact name of trustee as specified in its charter)
CALIFORNIA 94-2926573
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
50 California Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
___________________________
CII FINANCIAL, INC.
AND
SIERRA HEALTH SERVICES, INC.
(Exact name of obligor as specified in its charter)
CALIFORNIA 95-4188244
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
5627 Gibraltar Drive
Pleasanton, California 94588
(Address of principal executive offices) (Zip Code)
___________________________
7 1/2% Convertible Subordinated Debentures due 2001
(Title of the indenture securities)
__________________________________
<PAGE>
[.EX251]
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the State of California,
235 Montgomery Street, San Francisco, California 94104-2980.
Board of Governors of the Federal Reserve System,
Washington, D.C. 20551
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Incorporation of the Trustee as now in
effect, including the Restated Articles of Incorporation dated December 23, 1986
and the Certificate of Amendment dated March 26, 1992 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 33-55136, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (See Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-55136, which is incorporated by reference).
3. Authorization to exercise corporate trust powers (Contained in
Exhibit 2).
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 33-55136, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 21(b) of the Act (See
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
55136, which is incorporated by reference).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chemical Trust Company of California, a corporation organized and
existing under the laws of the State of California, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles and State of
California, on the 5th day of October, 1995.
CHEMICAL TRUST COMPANY OF CALIFORNIA
By /s/ Hans H. Helley
----------------------------------
HANS H. HELLEY
Assistant Vice President
3
<PAGE>
EXHIBIT 7. Report of Condition of the Trustee.
4
<PAGE>
TRUST COMPANY
CONSOLIDATED REPORT OF CONDITION OF Chemical Trust Company of California
--------------------------------------
(Legal Title)
LOCATED AT San Francisco San Francisco CA 94111
--------------------------------------------------------------------
(City) (County) (State) (Zip)
AS OF CLOSE OF BUSINESS ON June 30, 1995 BANK NO. 1476
------------------ ----------------------
<TABLE>
<CAPTION>
=============================================================================================
ASSETS DOLLAR AMOUNT IN THOUSANDS
<C> <S> <C>
1. Cash and due from banks 6,759
2. U.S. Treasury securities 6,013
3. Obligations of other U.S. Government agencies and corporations 2,499
4. Obligations of States and political subdivisions
5. Other securities (including $ corporate stock)
--------------------
(a) Loans
(b) Less: Reserve for possible loan losses
(c) Loans (Net)
7. Bank Premises, furniture and fixtures and other assets representing bank
premises (including $ -0- capital leases) 185
-----------
8. Real estate owned other than bank premises
9. Investments in subsidiaries not consolidated
10. Other assets (complete schedule on reverse) (including $2,255 intangibles) 5,328
------
11. TOTAL ASSETS 20,784
======
LIABILITIES
12. Liabilities For borrowed money
13. Mortgage indebtedness (including $ capital leases)
----------------
14. Other liabilities (complete on schedule on reverse) 3,399
15. TOTAL LIABILITIES 3,399
======
16. Capital notes and debentures
SHAREHOLDERS EQUITY
17. Preferred stock--
(Number shares outstanding ) Amount $
-------------------
18. Common stock--
(Number shares authorized 100 ) Amount $
-------------------
(Number shares outstanding 100 ) Amount $ 10
-------------------
19. Surplus Amount $9,990
20. TOTAL CONTRIBUTED CAPITAL 10,000
21. Retained earnings and other capital reserves 7,385
22. TOTAL SHAREHOLDERS EQUITY 17,385
23. TOTAL LIABILITIES AND CAPITAL ACCOUNTS 20,784
======
</TABLE>
5
<PAGE>
MEMORANDA
1. Assets deposited with State Treasurer to qualify for exercise of
fiduciary powers (market value) 605
- -------------------------------------------------------------------------------
The undersigned, Francis J. Farrell, VP & Manager
-------------------------------- and
(Name and Title)
Patrick D. Fleck, Vice President & CFO
--------------------------------------
(Name and Title)
of the above named trust company, each declares, for himself alone and not for
the other: I have a personal knowledge of the matters contained in this report
(including the reverse side hereof), and I believe that each statement in said
report is true. Each of the undersigned, for himself alone and not for the
other, certifies under penalty of perjury that the foregoing is true and
correct.
Executed on 7/24/95 at San Francisco, California
----------- --------------- ----------
(Date) (City) (State)
/s/ Francis J. Farrell /s/ Patrick D. Fleck
---------------------- --------------------
(Signature) (Signature)
SCHEDULE OF OTHER ASSETS
Cost of Business Acquisitions 2,486
Accounts Receivable 87
Accrued Interest 108
Deferred Taxes 298
* Other 2,349
-----
Total (same as Item 10) 5,328
SCHEDULE OF OTHER LIABILITIES
Accrued Income Taxes 2,239
Accrued Expenses & A/P 158
Accrued Inter company Exp/Pay 213
Accrued Pension & Benefits 1,020
Other (231)
-----
Total (same as Item 14) 3,399
* Includes business segment being held for sale at book value of $2,255,000.
6
