UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_______________
FORM 10-K
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|X| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the eight-month period ended December 31, 1996
Commission file number 1-7797
_____________
PHH CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0551284
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11333 McCormick Road, Hunt Valley, Maryland 21031
(Address of principal executive offices) (Zip Code)
(410) 771-3600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ] Aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 1997: $0 Number of shares of PHH
Corporation outstanding on June 30, 1997: 100
PHH Corporation meets the conditions set forth in General Instructions I (1) (a)
and (b) to Form 10-K and is therefore filing this form with the reduced
disclosure format.
<PAGE>
PHH CORPORATION
PART I
Item l. Business
MERGER WITH HFS INCORPORATED
Pursuant to a merger agreement (the "Merger Agreement") by and among PHH
Corporation (the "Company"), HFS Incorporated ("HFS") and Mercury Acquisition
Corp. ("Mercury"), a wholly owned subsidiary of HFS, effective April 30, 1997,
Mercury was merged into the Company, with the Company being the surviving
corporation, and the Company became a wholly owned subsidiary of HFS (the
"Merger"). In connection with the Merger, all outstanding shares of the
Company's common stock, including shares issued to holders of the Company's
employee stock options, were converted into approximately 30.3 million shares of
HFS common stock.
In connection with the Merger, on April 30, 1997, the Company's fiscal year was
changed from a year ending on April 30, to a year ending on December 31. As a
result, the accompanying Consolidated Financial Statements cover the transition
period from May 1, 1996 to December 31, 1996. The Company's next full year will
be for the period January 1, 1997 to December 31, 1997.
GENERAL
The Company provides a broad range of integrated management services, expense
management programs and mortgage banking services to more than 3,000 clients,
including many of the world's largest corporations, as well as government
agencies and affinity groups. Its primary business service segments consist of
vehicle management, real estate and mortgage banking. Information as to
revenues, operating income and identifiable assets by business segment is
included in the Business Segments note in the Notes to Consolidated Financial
Statements.
As of June 30, 1997, the Company and its subsidiaries had approximately 6,264
employees.
Certain statements in this Annual Report on Form 10-K, including without
limitation certain matters discussed in "Item 7. Management's Narrative Analysis
of Results of Operations," constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements.
Important assumptions and other important factors that could cause actual
results to differ materially from those in the forward-looking statements,
include, but are not limited to: the effect of economic and market conditions,
the ability to obtain financing, the level and volatility of interest rates and
other risks and uncertainties. Other factors and assumptions not identified
above were also involved in the derivation of these forward-looking statements,
and the failure of such other assumptions to be realized as well as other
factors may also cause actual results to differ materially from those projected.
The Company assumes no obligation to update these forward-looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting such forward-looking statements.
The Company's principal executive offices are located at 11333 McCormick Road,
Hunt Valley, Maryland 21031 (telephone 410-771-3600).
VEHICLE MANAGEMENT SERVICES
Vehicle management services consist primarily of the management, purchase,
leasing and resale of vehicles for corporate clients and government agencies,
including fuel and expense management programs and other fee-based services for
clients' vehicle fleets.
Fleet Management Services
The Company provides fully integrated vehicle management and leasing programs
through PHH Vehicle Management Services. These programs were developed to meet
the specific needs of companies using large and small numbers of cars and trucks
and consist of managerial, leasing and advisory services, aimed at reducing and
controlling the cost of operating corporate fleets.
The Company's advisory services for automobile fleet management programs include
recommendations on the makes and models of cars and accessories best suited to
the client's use, the determination of persons eligible for company cars, the
method of reimbursing field representatives for actual car expenses, the care
and maintenance of cars and the personal use of company cars.
Managerial services for automobile fleet programs include purchasing
automobiles, arranging for their delivery through new car dealers located
throughout North America, primarily the United States and Canada, the United
Kingdom and the Republic of Ireland, complying with various local registration,
title, tax and insurance requirements, pursuing warranty claims with automobile
manufacturers and selling used cars at replacement time.
The Company offers similar programs and services for vans and light and
heavy-duty truck fleets. Advisory services offered include the determination of
the vehicle specifications, makes, models and equipment best suited to perform
the functions required by the client. Managerial services include purchasing new
vans, light and heavy-duty trucks, trailers, truck bodies and equipment from
manufacturers and franchised dealers, the performance of title, registration,
tax and insurance functions, arranging for them to be titled, licensed and
delivered to locations designated by clients, verifying invoices and selling
used vehicles at replacement time.
The Company offers various leasing plans for its vehicle leasing programs. Under
these plans, the Company provides for the financing primarily through the
issuance of commercial paper and medium-term notes and through unsecured
borrowings under revolving credit agreements and bank lines of credit. See the
Liabilities Under Management Programs note in Notes to Consolidated Financial
Statements.
The Company leases vehicles for minimum lease terms of twelve months or more
under either direct financing or operating lease agreements. The Company's
experience indicates that the full term of the leases may vary considerably due
to extensions beyond the minimum lease term. Under the direct financing lease
agreements, resale of the vehicles upon termination of the lease is generally
for the account of the lessee. The Company has two distinct types of operating
leases. Under one type, the open-end operating lease, resale of the vehicles
upon termination of the lease is for the account of the lessee except for a
minimum residual value which the Company has guaranteed. The Company's
experience has been that vehicles under this type of lease agreement have
consistently been sold for amounts exceeding residual value guarantees. Under
the other type of operating lease, the closed-end operating lease, resale of the
vehicle on termination of the lease is for the account of the Company.
The Company's fleet management services may be the same whether the client owns
or leases the vehicles. In either case, the client generally operates the
vehicles on a net basis, paying all the actual costs incidental to their
operation, including gasoline, oil, repairs, tires, depreciation, vehicle
licenses, insurance and taxes. The fee charged by the Company for its services
is based upon either a percentage of the original cost of the vehicle or a
stated management fee and, in the case of a leasing client, includes the
interest cost incurred in financing the vehicle.
Fuel and Expense Management Programs
The Company offers fuel and expense management programs to corporations and
government agencies for the control of automotive business travel expenses in
each of the United States, Canada, United Kingdom, Republic of Ireland and
Germany. Through a service card and billing service, a client's traveling
representatives are able to purchase various products and services such as
gasoline, tires, batteries, glass and maintenance services at numerous outlets.
The Company also provides a series of safety and accident management related
programs, statistical control reports detailing expenses related to the general
operation of vehicles, and a program which monitors and controls the type and
cost of vehicle maintenance for individual automobiles.
In forming a joint venture, the Company sold 50 percent of its interest in its
US service card business to First USA Paymentech, Inc. The effect of the joint
venture is to reduce net revenues and operating expenses while reflecting 50
percent of joint venture operating income as net revenues. The Company believes
the joint venture will provide opportunities for continued growth in the service
card business in future years.
The Company also provides a fuel and expense management program and a
centralized billing service for companies operating truck fleets in each of the
United Kingdom, Republic of Ireland and Germany. Drivers of the clients' trucks
are furnished with courtesy cards together with a directory listing the names of
strategically located truck stops and service stations which participate in this
program. Service fees are earned for billing, collection and record keeping
services and for assuming credit risk. These fees are paid by the truck stop or
service stations and/or the fleet operator and are based upon the total dollar
amount of fuel purchased or the number of transactions processed.
<PAGE>
Competitive Conditions
The principal methods of competition within vehicle management services are
service quality and price.
In the United States and Canada, an estimated 30% of the market for vehicle
management services is served by third-party providers. There are 5 major
providers of such services in North America, as well as an estimated several
hundred local and regional competitors. The Company is the second largest
provider of comprehensive vehicle management services in North America.
In the United Kingdom, the portion of the fuel card services and vehicle
management services markets served by third-party providers is an estimated 37%
and 45%, respectively. The Company is the market leader among the 4 major
nationwide providers of fuel card services, and the 6 major nationwide providers
of vehicle management services. Numerous local and regional competitors serve
each such market element.
The following sets forth certain statistics concerning automobiles, vans, light,
medium and heavy-duty trucks for which the Company provides managerial, leasing
and/or advisory services primarily in the United States, Canada, the United
Kingdom, the Republic of Ireland and Germany:
<TABLE>
<CAPTION>
As of and for the
eight-month period
ended December 31 As of and for the year ended April 30,
1996 1996 1995 1994 1993
------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ending number of vehicles
under management: ............ 516,139 482,600 463,200 450,400 454,300
Number of vehicles purchased .... 64,847 117,700 112,400 108,000 115,800
Number of fuel and service card
transactions (in thousands) ... 37,800 56,000 51,400 47,300 45,600
Gallons of fuel processed
(in thousands) ................ 433,000 1,069,000 1,136,000 1,073,000 1,039,000
</TABLE>
REAL ESTATE SERVICES
The Company provides employee real estate services principally to large
international corporations, government agencies, affinity groups and financial
institutions in the United States, Canada, the United Kingdom and the Republic
of Ireland through HFS Mobility Services, Inc. (formerly, PHH Real Estate
Services, Inc.). In June 1997, the employee real estate services of two of HFS's
subsidiaries, Worldwide Relocation Management, Inc. and Coldwell Banker
Relocation Services, Inc., were merged (the "Real Estate Services Merger") with
and into the Company's employee real estate services subsidiary, PHH Real Estate
Services, Inc., which was renamed HFS Mobility Services, Inc. in connection
therewith. As a result of the Real Estate Services Merger, HFS Mobility
Services, Inc. will be the largest provider of employee real estate services in
the United States. Principal services consist of counseling transferred
employees of clients and the purchase, management and resale of their homes. The
Company's real estate services offer clients the opportunity to reduce employee
relocation costs and facilitate employee relocation.
The relocation services provided by the Company include facilitating the
purchase and resale of the transferee's residence, providing equity advances on
the transferee's residence and home management services. The home is purchased
under a contract of sale and the Company obtains a deed to the property;
however, it does not generally record the deed or transfer of title.
Transferring employees are provided equity on their home based on an appraised
value determined by independent appraisers, after deducting any outstanding
mortgages. The mortgage is generally retired concurrently with the advance of
the equity and the purchase of the home. Based on its client agreements, the
Company is given parameters under which it negotiates for the ultimate sale of
the home. The gain or loss on resale is generally borne by the client
corporation.
While homes are held for resale, the amount funded for such homes carry an
interest charge computed at a floating rate based on various indices. Direct
costs of managing the home during the period the home is held for resale,
including property taxes and repairs and maintenance are generally borne by the
client. All such advances are generally guaranteed by the client corporation.
The client normally advances funds to cover a portion of such carrying costs.
When the home is sold, a settlement is made with the client corporation netting
actual costs with any advanced billing.
Funds to finance the purchase of homes are provided primarily through the
issuance of commercial paper and medium-term notes and through unsecured
borrowings under revolving credit agreements and bank lines of credit, or may be
provided by the client. Interest costs are billed directly to the Company's
clients. See the Liabilities Under Management Programs note in Notes to
Consolidated Financial Statements.
The Company's real estate services subsidiaries also offer employee programs
which provide group move planning and implementation, home marketing assistance,
property management, household goods movement, destination services and asset
management for financial institutions and government agencies.
Competitive Conditions
The principal methods of competition within real estate services are service
quality and price. In the United States, Canada and the United Kingdom, an
estimated 22% of the market for real estate services is served by third-party
providers.
In each of the United States, Canada and the United Kingdom, there are 4 major
national providers of such services. There are an estimated several dozen local
and regional competitors in each such country. The Company is the market leader
in the United States and Canada, and third in the United Kingdom.
The following sets forth certain statistics concerning real estate services in
the United States, Canada and the United Kingdom:
<TABLE>
<CAPTION>
For the
eight-month period
ended December 31 For the year ended April 30,
1996 1996 1995 1994 1993
------------------ --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset-based services:
Home purchase authorizations .......... 21,600 32,400 31,000 31,800 31,800
Transferee homes sold ................. 18,600 27,900 25,300 28,900 28,400
Average value of U.S. transferee
homes sold (1) ..................... $188,000 $177,000 $171,000 $165,000 $156,000
Fee-based services transactions:
Home finding .......................... 20,540 25,890 24,020 23,180 15,620
Household goods moves ................. 17,640 17,310 14,700 13,720 8,730
Property dispositions ................. 5,090 8,580 7,250 4,180 3,610
-------- -------- -------- -------- --------
43,270 51,780 45,970 41,080 27,960
</TABLE>
(1) Revenues for real estate services in the United States are
significantly determined based on the value of homes sold, while revenues for
the United Kingdom and Canadian segments are not related to the value of homes
sold; therefore, this table only includes the average value of U.S. homes sold.
MORTGAGE BANKING SERVICES
The Company provides U.S. residential mortgage banking services through PHH
Mortgage Services Corporation. These services consist of the origination, sale
and servicing of residential first mortgage loans. A variety of first mortgage
products are marketed to consumers through relationships with corporations,
affinity groups, credit unions, real estate brokerage
firms and other mortgage banks.
PHH Mortgage Services Corporation is a centralized mortgage lender conducting
business in all 50 states. It utilizes its computer system and an extensive
telemarketing operation to allow the consumer to complete the entire mortgage
transaction over the telephone. Through its own network of appraisers, title
companies and closing attorneys, the Company can effectively administer its
products and services anywhere in the nation.
The mortgage unit customarily sells all mortgages it originates to investors
(which include a variety of institutional investors) either as individual loans,
as mortgage-backed securities or as participation certificates issued or
guaranteed by the Federal National Mortgage Association (FNMA), the Federal Home
Loan Mortgage Corporation (FHLMC), or the Government National Mortgage
Association (GNMA) while generally retaining mortgage servicing rights. The
guarantees provided by FNMA and FHLMC are on a non-recourse basis to the
Company. Guarantees provided by GNMA are to the extent recoverable from certain
government insurance programs.
Mortgage servicing consists of collecting loan payments, remitting principal and
interest payments to investors, holding escrow funds for payment of
mortgage-related expenses such as taxes and insurance, and otherwise
administering the Company's mortgage loan servicing portfolio.
<PAGE>
Competitive Conditions
The principal methods of competition in mortgage banking services are service
quality and price. There are an estimated 20,000 national, regional or local
providers of mortgage banking services across the United States. The Company
ranked in the top twenty among loan originators for 1996.
The following sets forth certain statistics concerning mortgage banking
services:
<TABLE>
<CAPTION>
As of and for the
eight-month period ended
December 31, As of and for the year ended April 30,
1996 1996 1995 1994 1993
------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Mortgage loan closings
(in millions) ......................... $ 5,341 $ 7,853 $ 3,432 $ 8,074 $ 5,618
Mortgage servicing portfolio at
period end (in millions) ................ $24,821 $21,676 $16,017 $16,645 $11,047
Delinquency rate ........................... 1.9% 1.4% 1.3% 1.2% 1.1%
</TABLE>
Significant Customers
No customer purchased services totaling 10% or more of consolidated revenues
during the eight-month period ended December 31, 1996.
Item 2. Properties
The offices of PHH Vehicle Management Services North American operations are
located throughout the US and Canada. Primary office facilities are located in a
six-story, 200,000 square foot office building in Hunt Valley, Maryland, leased
until September 2003; and offices in Mississauga, Canada, having 59,400 square
feet, leased until February 2003.
The offices of HFS Mobility Services North American operations are located
throughout the US and Canada. Two primary office facilities are both located in
Danbury, Connecticut, one having 92,600 square feet, leased until January 2000
and the other having 30,000 square feet, leased until November 1998. The Company
is currently evaluating proposals to consolidate the operations of HFS Mobility
Services.
The offices of PHH Mortgage Services are located primarily in a 127,000 square
foot building in Mount Laurel, New Jersey, which is owned by the Company.
The offices of Vehicle Management Services and HFS Mobility Services operations
located in the United Kingdom and Europe are as follows: a 129,000 square foot
building which is owned by the Company located in Swindon, United Kingdom; and
field offices having 35,400 square feet located in Swindon and Manchester,
United Kingdom; Munich, Germany; and Dublin, Ireland, are leased for various
terms to February 2016.
The Company considers that its properties are generally in good condition and
well maintained and are generally suitable and adequate to carry on the
Company's business.
Item 3. Legal Proceedings
The Company is party to various litigation arising in the ordinary course of
business and is plaintiff in several collection matters which are not considered
material either individually or in the aggregate.
Item 4. Results of Votes of Security Holders
Not Applicable
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
Prior to the Merger, the Company's common stock was publicly traded on the New
York Stock Exchange under the symbol "PHH." The common stock was entitled to
dividends when and as declared by the Board of Directors. The dividends and high
and low prices for each quarter during the eight-month period ended December 31,
1996 and during the fiscal years ended April 30, 1996 and 1995 were as follows:
Dividend Price
Paid High Low
-------- -----------------
Eight-month period ended
December 31, 1996
First quarter $.19 $28 7/8 $25 5/8
Second quarter $.19 $31 7/8 $26
Two-month period ended
December 31, 1996 - $47 7/8 $29 7/8
Fiscal Year 1996
First quarter $.17 $23 3/4 $19 5/8
Second quarter $.17 $23 3/8 $21
Third quarter $.17 $25 3/4 $21 7/8
Fourth quarter $.17 $28 3/8 $24 1/2
Fiscal Year 1995
First quarter $.16 $19 3/8 $17 1/2
Second quarter $.16 $19 $17 3/8
Third quarter $.16 $19 $16 3/4
Fourth quarter $.16 $20 1/4 $17 5/8
In June 1996 the Board of Directors authorized a two-for-one common stock split
which was effected in the form of a 100% stock dividend in July 1996. All share,
per share and stock price information in this report reflect the two-for-one
common stock split.
Item 6. Selected Financial Data
Not Applicable
<PAGE>
Item 7. Management's Narrative Analysis of Results of Operations
MERGER WITH HFS INCORPORATED
Pursuant to a merger agreement (the "Merger Agreement") by and among PHH
Corporation (the"Company"), HFS Incorporated ("HFS") and Mercury Acquisition
Corp. ("Mercury"), a wholly owned subsidiary of HFS, effective April 30, 1997,
Mercury was merged into the Company, with the Company being the surviving
corporation, and the Company became a wholly owned subsidiary of HFS (the
"Merger"). In connection with the Merger, all outstanding shares of the
Company's common stock, including shares issued to holders of the Company's
employee stock options, were converted into approximately 30.3 million shares of
HFS common stock.
In connection with the Merger, the Company's fiscal year was changed from a year
ending on April 30, to a year ending December 31. As a result, the transition
period financial statements cover the period from May 1, 1996 to December 31,
1996. Accordingly, this discussion covers the transition period compared to the
same period in the previous year unless otherwise stated.
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the information contained in
the Consolidated Financial Statements and accompanying Notes thereto of the
Company appearing elsewhere in this Form 10-K. Unaudited comparable period data
is included in the Notes to the Consolidated Financial Statements.
Eight-month Period Ended December 31, 1996 Compared to the Eight-month Period
Ended December 31, 1995:
Consolidated net income and net income per share for the eight-month period
ended December 31, 1996 increased 12 percent to $55.1 million and 9 percent to
$1.53, respectively. The increase for the period was due to an improvement in
the vehicle management services segment offset by declines in mortgage banking
services and real estate services segments.
Consolidated revenues increased 5 percent to $1.28 billion for the eight-month
period ended December 31, 1996. Vehicle management services revenues increased 2
percent to $918.1 million for the same period, primarily from increased leasing
revenues as a result of an increased number of and average carrying amount of
leased vehicles, partially offset by a decrease in other vehicle revenues
primarily due to a decrease in gains on the sale of used vehicles. Real estate
services revenues decreased 2 percent to $198.3 million primarily as a result of
a decrease in transferee homes sold, partially offset by an increase in revenue
due to an increase in the number of fee-based transactions. Mortgage banking
revenue increased 40 percent to $167.6 million. The increase was primarily due
to an increase in loans closed and to servicing revenues generated from a 23
percent growth in the servicing portfolio from $20.1 billion at December 31,
1995 to $24.8 billion at December 31, 1996.
Consolidated expenses increased 5 percent to $1.19 billion for the eight-month
period ended December 31, 1996. Increased depreciation on vehicles under
operating leases are primarily due to increases in leased vehicles as discussed
above. Costs, including interest, of carrying and reselling homes decreased 14
percent, primarily as a result of the effects of the decrease in homes sold as
discussed above. Direct costs of mortgage banking services increased 86 percent
to $76.1 million, primarily due to an increase in amortization of servicing
rights and fees and costs associated with the increase in the loan portfolio.
Interest expense increased 3 percent compared with the same period in the prior
year. The effects of increases in liabilities under management programs and
other debt were partially offset by the effect of lower interest rates.
Selling, general, and administrative costs increased 4 percent for the
eight-month period ended December 31, 1996 compared with the same period in the
prior year. Increases in personnel and other operating costs to support the
growth in real estate services fee-based transactions and mortgage production
and increased US relocation systems costs, were partially offset by decreases in
vehicle management services costs as a result of effective cost management,
reduction in system spending, reduction in vehicles acquired and by the decrease
in the North American truck fuel management subsidiary (NTS, Inc.) expenses as
this operation was sold in February 1996.
The Company's effective tax rate was 40.8 percent for the eight-month period
ended December 31, 1996 as compared to 41.6 percent for the same period a year
ago.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company manages its funding sources to ensure adequate liquidity. The
sources of liquidity fall into three general areas: ongoing liquidation of
assets under management, global capital markets, and committed credit agreements
with various high-quality domestic and international banks. In the ordinary
course of business, the liquidation of assets under management programs, as well
as cash flows generated from operating activities, provide the cash flow
necessary for the repayment of existing liabilities. For the eight-month period
ended December 31, 1996 cash provided by operating activities totaled $300.5
million primarily due to depreciation on vehicles under operating leases, offset
by an increase in mortgage loans held for sale at December 31. 1996. Cash used
in investing activities totaled $1.0 billion primarily as a result of the growth
in investment in leases and leased vehicles under management.
Using historical information, the Company projects the time period that a
client's vehicle will be in service or the length of time that a home will be
held in inventory before being sold on behalf of a client. Once the relevant
asset characteristics are projected, the Company generally matches the projected
dollar amount, interest rate and maturity characteristics of the assets within
the overall funding program. This is accomplished through stated debt terms or
effectively modifying such terms through other instruments, primarily interest
rate swap agreements and revolving credit agreements. (See Liabilities Under
Management Programs in Notes to Consolidated Financial Statements.) Within
mortgage banking services, the Company funds the mortgage loans on a short-term
basis until sale to unrelated investors, which generally occurs within sixty
days. Interest rate risk on mortgages originated for sale is managed through the
use of forward delivery contracts, financial futures and options.
The Company has maintained broad access to global capital markets by maintaining
the quality of its assets under management. This is achieved by establishing
credit standards to minimize credit risk and the potential for losses. Depending
upon asset growth and financial market conditions, the Company utilizes the
United States, Euro and Canadian commercial paper markets, as well as other
cost-effective short-term instruments. In addition, the Company utilizes public
and private debt markets to issue unsecured senior corporate debt. Augmenting
these sources, the Company has reduced outstanding debt by the sale or transfer
of managed assets to third parties while retaining fee-related servicing
responsibility. The Company's aggregate commercial paper outstanding totaled
$3.1 billion at December 31, 1996. At December 31, 1996, $1.7 billion in
medium-term notes and $337 million in other debt securities were outstanding.
Cash provided by financing activities was $727.3 million for the eight-month
period ended December 31, 1996 largely due to an increase in borrowings with
terms of less than 90 days due to increase in mortgage loans held for sale as
discussed above. From a risk management standpoint, borrowings not in the local
currency of the business unit are converted to the local currency through the
use of foreign currency forward contracts. The Company maintains a leverage
ratio between 7 to 1 and 8 to 1.
To provide additional financial flexibility, the Company's current policy is to
ensure that minimum committed bank facilities aggregate 80 percent of the
average amount of outstanding commercial paper. The Company has a $2.5 billion
syndicated unsecured credit facility. The facility is backed by 22 domestic and
foreign banks and is comprised of $1.25 billion of lines maturing in 364 days
and $1.25 billion maturing in five years. In addition, the Company has
approximately $300 million of uncommitted lines of credit with various financial
institutions. Management closely evaluates not only the credit quality of the
banks but the terms of the various agreements to ensure ongoing availability.
The full amount of the Company's committed facilities at December 31, 1996, was
undrawn and available. Management believes that its current policy provides
adequate protection should volatility in the financial markets limit the
Company's access to commercial paper or medium-term note funding.
Management believes that these established means of effectively matching
floating and fixed interest rate and maturity characteristics of funding to
related assets, the variety of short- and long-term domestic and international
funding sources, and the committed banking facilities minimize the Company's
exposure to interest rate and liquidity risk.
<PAGE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." The statement provides
accounting and reporting standards for transfers and servicing of financial
assets and, among other things, SFAS No. 125 also requires that previously
recognized servicing receivables that exceed contractually specified servicing
fees shall be reclassified as interest-only strips receivable, and subsequently
measured under the provisions of SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The Company will adopt the
provisions of SFAS No. 125 on January 1, 1997 and will reclassify a portion of
its excess servicing fees to interest-only strips. The effect of adopting SFAS
No. 125 is not expected to be material to the Company's operations or financial
condition.
<PAGE>
Item 8. Financial Statements and Supplementary Data
See Financial Statement and Financial Statement Schedule Index commencing on
page F-1 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
(a) As reported in the Company's Report on Form 8-K filed on May 14, 1997,
the Board of Directors of the Company engaged the accounting firm of Deloitte
and Touche LLP, as independent accountants for the Company, effective as of May
12, 1997 and, accordingly, dismissed KPMG Peat Marwick LLP in such capacity
effective with the completion of their report on the financial statements of PHH
Corporation included in this transition report on Form 10-K for the period ended
December 31, 1996.
(b) During the eight-month transition period ended December 31, 1996 and
the two most recent fiscal years ended April 30, 1996 and 1995, and the
subsequent interim period through May 12, 1997, there have been no disagreements
with KPMG Peat Marwick LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure or any reportable
events.
(c) The reports of KPMG Peat Marwick LLP on the financial statements for
the transition period and past the two fiscal years contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
PART III
Item 10. Directors and Executive Officers of the Registrant
Not applicable.
Item 11. Executive Compensation
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Not applicable.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Item 14(a)(1) Financial Statements
See Index to Financial Statements and Financial Statement Schedules
Item 14(a)(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement Schedules
<PAGE>
Item 14(a)(3) Exhibits
The exhibits identified by an asterisk (*) are on file with the Commission and
such exhibits are incorporated by reference from the respective previous
filings. The exhibits identified by a double asterisk (**) are being filed with
this report.
Exhibit No.
2-1 Agreement and Plan of Merger dated as of November 10, 1996, by and
among HFS Incorporated, PHH Corporation and Mercury Acquisition Corp.,
filed as Annex I in the Joint Proxy Statement/Prospectus included
as part of Registration No. 333-24031(*).
3-1 Charter of PHH Corporation, as amended August 23, 1996(**).
3-2 By-Laws of PHH Corporation, as amended October 1990(*).
4-1 Indenture between the Company and Bank of New York, Trustee, dated
as of May 1, 1992, filed as Exhibit 4(a)(iii) to Registration
Statement 33-48125(*).
4-2 Indenture between the Company and First National Bank of Chicago,
Trustee, dated as of March 1, 1993, filed as Exhibit 4(a)(i) to
Registration Statement 33-59376(*).
4-3 Indenture between the Company and First National Bank of Chicago,
Trustee, Dated as of June 5, 1997(**).
4-4 Indenture between the Company and the Bank of New York, Trustee Dated
as of June 5, 1997,(**).
4-5 364-Day Credit Agreement Among the Company, PHH Vehicle Management
Services, Inc., the Lenders, the Chase Manhattan Bank, as
Administrative Agent and the Chase Manhattan Bank of Canada, as
Canadian Agent, Dated March 4, 1997, filed as Exhibit 10.1 to
Registration Statement 333-27715(*).
4-6 Five-year Credit Agreement among the Company, the Lenders, and
Chase Manhattan Bank, as Administrative Agent, dated March 4, 1997
filed as Exhibit 10.2 to Registration Statement 333-27715(*).
10-17 Distribution Agreement between the Company and Credit Suisse;
First Boston Corporation; Goldman Sachs & Co. and Merrill Lynch &
Co., dated June 5, 1997(**).
11 Schedule containing information used in the computation of net income
per share(**).
12 Schedule containing information used in the computation of the ratio
of earnings to fixed charges(**).
23 Consent of KPMG Peat Marwick LLP(**).
27 Financial Data Schedule (filed electronically only)(**).
The registrant hereby agrees to furnish to the Commission upon request a copy of
all constituent instruments defining the rights of holders of long-term debt of
the registrant and all its subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed under which instruments the total
amount of securities authorized does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis.
<PAGE>
(b) Reports on Form 8-K
There was one report on Form 8-K filed during the two-month period ended
December 31, 1996 as follows:
The Company filed a Current Report on Form 8-K on November 15, 1996, describing
that the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with HFS Incorporated ("HFS"), and Mercury Acquisition
Corp., a wholly-owned subsidiary of HFS.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHH CORPORATION
By /s/ Robert D. Kunich
Robert D. Kunisch
Chief Executive Officer
and President
July 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Principal Executive Officer:
/s/ Robert D. Kunisch July 29, 1997
Robert D. Kunisch
Chief Executive Officer
and President
Principal Financial Officer:
/s/ Michael P. Monaco July 29, 1997
Michael P. Monaco
Executive Vice President,
Chief Financial Officer and Assistant Treasurer
Principal Accounting Officer:
/s/ Nan A. Kreamer July 29, 1997
Nan A. Kreamer
Corporate Controller
Board of Directors:
/s/ James E. Buckman July 29, 1997
James E. Buckman
Director
/s/ Stephen P. Holmes July 29, 1997
Stephen P. Holmes
Director
<PAGE>
Index to Financial Statements
and
Financial Statement Schedules
Consolidated Financial Statements of the Company:
Independent Auditors' Report
Consolidated Statement of Income
for the eight-month period ended December 31, 1996.
Consolidated Balance Sheet at December 31, 1996.
Consolidated Statement of Cash Flows
for the eight-month period ended December 31, 1996.
Consolidated Statement of Stockholders' Equity
for the eight-month period ended December 31, 1996.
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
PHH Corporation:
We have audited the consolidated financial statements of PHH Corporation and
subsidiaries as listed in the accompanying index on page F-1. In connection with
our audit of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PHH Corporation and
subsidiaries at December 31, 1996, and the results of their operations and their
cash flows for the eight-month period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Baltimore, Maryland
April 30, 1997
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
For the eight-month period ended December 31, 1996
(In thousands except per share data)
- --------------------------------------------------------------------------------
Revenues:
Vehicle management services ................................... $ 918,088
Real estate services .......................................... 198,324
Mortgage banking services ..................................... 167,581
----------
1,283,993
----------
Expenses:
Depreciation on vehicles under operating leases ............... 645,143
Costs, including interest, of carrying and reselling homes .... 98,934
Direct costs of mortgage banking services ..................... 76,100
Interest ...................................................... 151,129
Selling, general and administrative .......................... 219,599
----------
1,190,905
----------
Income before income taxes ........................................ 93,088
Income taxes ...................................................... 37,981
----------
Net income ........................................................ $ 55,107
----------
Net income per share ............................................... $ 1.53
----------
See Notes to Consolidated Financial Statements
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1996
(Dollars in thousands)
- --------------------------------------------------------------------------------
Assets:
Cash ............................................................. $ 13,779
Restricted cash .................................................. 89,849
Accounts receivable,
less allowance for doubtful accounts of $6,319 ............. 540,569
Carrying costs on homes under management ......................... 49,000
Mortgage loans held for sale ..................................... 1,248,299
Mortgage servicing rights and fees ............................... 288,943
Property and equipment, net ...................................... 92,145
Goodwill, net .................................................... 47,279
Other assets .................................................... 138,453
-----------
2,508,316
-----------
Assets Under Management Programs:
Net investment in leases and leased vehicles ................. 3,418,666
Equity advances on homes ....................................... 647,664
-----------
4,066,330
-----------
$6,574,646
-----------
Liabilities:
Accounts payable and accrued expenses ...............................$ 460,294
Advances from clients and deferred revenue .......................... 116,649
Other debt .......................................................... 1,185,647
Deferred income taxes ............................................. 237,200
-----------
1,999,790
-----------
Liabilities Under Management Programs ............................. 3,904,296
-----------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, authorized 3,000,000 shares ................. --
Common stock, no par value, authorized 75,000,000 shares;
issued and outstanding shares of 34,956,835 ............... 101,155
Cumulative foreign currency translation adjustment .......... (8,364)
Retained earnings ................................................ 577,769
-----------
670,560
-----------
$ 6,574,646
-----------
See Notes to Consolidated Financial Statements.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the eight-month period ended December 31, 1996
(In thousands)
- --------------------------------------------------------------------------------
Operating Activities:
Net income .................................................. $ 55,107
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation on vehicles under operating leases .......... 645,143
Other depreciation and amortization ...................... 22,650
Amortization and write-down of servicing rights and fees . 35,272
Additions to originated mortgage servicing rights ........ (56,583)
Additions to excess mortgage servicing fees .............. (38,277)
Gain on sales of mortgage servicing rights ............... (1,449)
Deferred income taxes .................................... 28,700
Gain on sale of subsidiary ............................... (2,944)
Changes in:
Accounts receivable .................................... (64,128)
Carrying costs on homes under management ............... (2,083)
Mortgage loans held for sale ........................... (373,505)
Accounts payable and accrued expenses .................. 23,911
Advances from clients and deferred revenue ............. 19,294
All other operating activity ........................... 9,417
-----------
Cash provided by operating activities ....................... 300,525
-----------
Investing Activities:
Investment in leases and leased vehicles .................... (1,207,150)
Repayment of investment in leases and leased vehicles ....... 392,758
Equity advances on homes under management ................... (2,220,660)
Repayment of advances on homes under management ............. 2,138,595
Proceeds from sales of mortgage servicing rights ............ 2,303
Additions to property and equipment ......................... (16,950)
Proceeds from sale of subsidiary ............................ 4,400
Funding of grantor trusts ................................... (89,849)
All other investing activities .............................. (2,678)
-----------
Cash used in investing activities ............................ (999,231)
-----------
Financing Activities:
Net change in borrowings with terms of less than 90 days ..... 875,775
Proceeds from issuance of other borrowings .................. 1,243,241
Principal payment on other borrowings ....................... (1,383,565)
Stock option plan transactions .............................. 5,074
Payment of dividends ........................................ (13,236)
-----------
Cash provided by financing activities ....................... 727,289
-----------
Effect of exchange rate changes on cash ......................... (24,092)
-----------
Increase in cash ................................................ 4,491
Cash at beginning of period ..................................... 9,288
-----------
Cash at end of period ........................................... $ 13,779
-----------
See Notes to Consolidated Financial Statements
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the eight-month period ended December 31, 1996
<TABLE>
<CAPTION>
Cumulative Foreign
Common Stock Currency Translation
(Dollars in thousands except per data) Shares Amount Adjustment Retained Earnings
- ---------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance April 30, 1996 34,661,524 $ 96,081 $ (23,483) $ 535,898
Net income 55,107
Cash dividend declared ($.38 per share) (13,236)
Foreign currency translation adjustment 15,119
Stock option plan transactions,
net of related income tax benefits 295,311 5,074
- ---------------------------------------------------- -------------------------------------------------------
Balance December 31, 1996 34,956,835 $101,155 $ (8,364) $ 577,769
- ---------------------------------------------------- -------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands except per share data)
Merger with HFS Incorporated
Pursuant to a merger agreement (the "Merger Agreement") by and among PHH
Corporation (the "Company"), HFS Incorporated ("HFS") and Mercury Acquisition
Corp. ("Mercury"), a wholly owned subsidiary of HFS, effective April 30, 1997,
Mercury was merged into the Company, with the Company being the surviving
corporation, and the Company became a wholly owned subsidiary of HFS (the
"Merger"). In connection with the Merger, all outstanding shares of the
Company's common stock, including shares issued to holders of the Company's
employee stock options, were converted into approximately 30.3 million shares of
HFS common stock. Pursuant to the Merger Agreement, the number of HFS shares
issued to complete the Merger was determined by multiplying the outstanding
shares of the Company as of April 30, 1997 by the conversion number of 0.825,
calculated in accordance with the terms of the Merger Agreement plus 0.7 million
shares of HFS common stock issued in exchange for outstanding options to
purchase shares of the Company's common stock. The 30.3 million shares of HFS
common stock issued to shareholders and option holders of the company represent
19.2% of the total outstanding shares of HFS at April 30, 1997.
Under the change in control provisions of certain grantor trusts established in
connection with the Company's Senior Executive Severance Plan, Supplemental
Executive Retirement Plan and the PHH Excess Benefits Plan, the Company was
required to fund the trusts for the present value of amounts expected to be paid
under the Plans. At December 31, 1996, the funded amounts of the grantor trusts
are shown as restricted cash in the Consolidated Balance Sheets.
Change in Fiscal Year
On April 30, 1997, the Compan's fiscal year was changed from a year ending on
April 30, to a year ending on December 31. As a result, these consolidated
financial statements cover the transition period from May 1, 1996 to December
31, 1996. The Company's next full year will be for the period January 1, 1997 to
December 31, 1997.
Accounting Policies
The accounting policies of the Company conform to generally accepted accounting
principles. The consolidated financial statements include the accounts of the
Company and its wholly owned domestic and foreign subsidiaries (the Company).
Policies outlined below include all policies considered significant. All
significant intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosures of
contingencies at the date of the financial statements, and revenues and expenses
recognized during the reporting period. Actual results could differ from those
estimates.
Vehicle Management Services
Vehicle management services primarily consist of the management, purchase,
leasing, and resale of vehicles for corporate clients and government agencies.
These services also include fuel, maintenance, safety and accident management
programs and other fee-based services for clients' vehicle fleets. Revenues from
these services other than leasing are taken into income over the periods in
which the services are provided and the related expenses are incurred.
The Company leases vehicles primarily to corporate fleet users under operating
and direct financing lease arrangements. Open-end operating leases and direct
financing leases generally have a minimum lease term of 12 months with monthly
renewal options thereafter. Closed-end operating leases typically have a longer
term, usually 30 months or more, but are cancelable under certain conditions.
The Company records the cost of leased vehicles as an "investment in leases and
leased vehicles." Amounts charged to lessees for interest on the unrecovered
investment are credited to income on a level yield method which approximates the
contractual terms. Vehicles under operating leases are amortized using the
straight-line method over the expected lease term.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Real Estate Services
The relocation services provided by the Company include facilitating the
purchase and resale of the transferee's residence, providing equity advances on
the transferee's residence and home management services. The home is purchased
under a contract of sale and the Company obtains a deed to the property;
however, it does not generally record the deed or transfer of title.
Transferring employees are provided equity on their home based on an appraised
value determined by independent appraisers, after deducting any outstanding
mortgages. The mortgage is generally retired concurrently with the advance of
the equity and the purchase of the home. Based on its client agreements, the
Company is given parameters under which it negotiates for the ultimate sale of
the home. The gain or loss on resale is generally borne by the client
corporation.
While homes are held for resale, the amount funded for such homes carry an
interest charge computed at the floating rate based on various indices. Direct
costs of managing the home during the period the home is held for resale,
including property taxes and repairs and maintenance are generally borne by the
client. All such advances are generally guaranteed by the client corporation.
The client normally advances funds to cover a portion of such carrying costs.
When the home is sold, a settlement is made with the client corporation netting
actual costs with any advanced billing.
Revenues and the related "costs, including interest, of carrying and reselling
homes" are recognized at closing on the resale of a home. Real estate services
revenue is shown net of costs reimbursed by client corporations. Under the terms
of contracts with clients, the Company is generally protected against losses
from changes in real estate market conditions.
The Company also offers fee-based programs such as home marketing assistance,
household goods moves, destination services, and property dispositions for
financial institutions and government agencies. Revenues from these fee-based
services are taken into income over the periods in which the services are
provided and the related expenses are incurred.
Mortgage Banking Services
Mortgage banking services primarily include the origination, sale and servicing
of residential first mortgage loans. The Company markets a variety of first
mortgage products to consumers through relationships with corporations, affinity
groups, financial institutions, real estate brokerage firms and other mortgage
banks. Loan origination fees, commitment fees paid in connection with the sale
of loans, and direct loan origination costs associated with loans held for
resale, are deferred until the loan is sold. Fees received for servicing loans
owned by investors are based on the difference between the weighted average
yield received on the mortgages and the amount paid to the investor, or on a
stipulated percentage of the outstanding monthly principal balance on such
loans. Servicing fees are credited to income when received. Costs associated
with loan servicing are charged to expense as incurred.
Sales of mortgage loans are generally recorded on the date a loan is delivered
to an investor. Sales of mortgage securities are recorded on the settlement
date. Gains or losses on sales of mortgage loans are recognized based upon the
difference between the selling price and the carrying value of the related
mortgage loans sold. The carrying value of the loans excludes the cost assigned
to originated servicing rights (see note for Mortgage Servicing Rights and
Fees). Such gains and losses are also increased or decreased by the amount of
deferred mortgage servicing fees recorded.
The Company acquires mortgage servicing rights and excess servicing fees by
originating or purchasing mortgage loans and selling those loans with servicing
retained, or it may purchase mortgage servicing rights separately. The carrying
value of mortgage servicing rights and excess servicing fees is amortized over
the estimated life of the related loan portfolio.
Gains or losses on the sale of mortgage servicing rights are recognized when
title and all risks and rewards have irrevocably passed to the buyer and there
are no significant unresolved contingencies.
The Company reviews the recoverability of excess servicing fees by discounting
anticipated future excess servicing cash flows at original discount rates
utilizing externally published prepayment rates.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
If the discounted value is less than the recorded balance, due to higher than
expected prepayments, the difference is recognized as a write-down in the
consolidated statement of income.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation of property and equipment is provided by charges to
income over the estimated useful lives of such assets. Buildings are depreciated
using the straight-line method (25 to 50 years); building improvements, using
the straight-line method (10 to 20 years); equipment and leasehold improvements,
using either the double-declining balance or straight-line method (3 to 10
years); and externally developed software is capitalized and amortized using the
straight-line method (5 years). Expenditures for improvements that increase
value or that extend the life of the assets are capitalized; maintenance and
repairs are charged to operations. Gains or losses from retirements and
disposals of property and equipment are included in selling, general
and administrative expense.
Goodwill, Net
Goodwill, net represents the excess of cost over the net tangible and intangible
assets of businesses acquired net of accumulated amortization. It is being
amortized by the straight-line method over various periods up to 40 years and
such amortization is included in selling, general and administrative expense.
Assets Under Management Programs
Assets under management programs are held subject to leases or other client
contracts. The effective interest rates and maturity characteristics of the
leases and other contracts are generally matched with the characteristics of the
overall funding program.
Translation of Foreign Currencies
Assets and liabilities of the foreign subsidiaries are translated at the
exchange rates as of the balance sheet dates; equity accounts are translated at
historical exchange rates and revenues, expenses and cash flows are translated
at the average exchange rates for the period presented. Translation gains and
losses are included in stockholders' equity including, for years prior to 1991,
transaction gains and losses resulting from forward exchange contracts on
foreign equity amounts net of income tax effects. Gains and losses resulting
from the change in exchange rates realized upon settlement of foreign currency
transactions are substantially offset by gains and losses realized upon
settlement of forward exchange contracts. Therefore, the resulting net income
effect of transaction gains and losses for the eight-month period ended December
31, 1996 was not significant.
Interest
Interest expense consists of interest on debt incurred to fund working capital
requirements and to finance vehicle leasing activities, real estate services and
mortgage banking operations. Interest on borrowings used to finance equity
advances on homes is included in "costs, including interest, of carrying and
reselling homes" and was $23,127 for the eight-month period ended December 31,
1996. Total interest paid, including amounts within "costs, including interest,
of carrying and reselling homes," was $183,256 for the eight-month period ended
December 31, 1996.
Income Taxes
The provision for income taxes includes deferred income taxes resulting from
items reported in different periods for income tax and financial statement
purposes. Deferred tax assets and liabilities represent the expected future tax
consequences of the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. The effects
of changes in tax rates on deferred tax assets and liabilities are recognized in
the period that includes the enactment date. No provision has been made for US
income taxes on cumulative undistributed earnings of foreign subsidiaries since
it is the present intention of management to reinvest the undistributed earnings
indefinitely in foreign operations. Undistributed earnings of the foreign
subsidiaries at December 31, 1996, were approximately $115,000. The
determination of unrecognized deferred US tax liability for unremitted earnings
is not practicable. However, it is estimated that foreign withholding taxes of
approximately $5,700 may be payable if such earnings were remitted.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Net Income Per Share
Net income per share is based on the weighted average number of shares of common
stock outstanding during the period and common stock equivalents arising from
the assumed exercise of outstanding stock options under the treasury stock
method. The number of shares used in the calculations, adjusted to reflect the
two-for-one common stock split (See note for Capital Stock) were 36,082 for the
eight-month period ended December 31, 1996.
Derivative Financial Instruments
As a matter of policy, the Company does not engage in derivatives trading or
market-making activities. Rather, derivative financial instruments such as
interest rate swaps are used by the Company principally in the management of its
interest rate exposures and foreign currency exposures on intercompany
borrowings. Additionally, the Company enters into forward delivery contracts,
financial futures programs and options to reduce the risks of adverse price
fluctuation with respect to both mortgage loans held for sale and anticipated
mortgage loan closings arising from commitments issued.
Amounts to be paid or received under interest rate swap agreements are accrued
as interest rates change and are recognized over the life of the swap agreements
as an adjustment to interest expense. The fair value of the swap agreements is
not recognized in the consolidated financial statements since they are accounted
for as hedges. Market value gains and losses on the Company's foreign currency
transaction hedges are recognized in income and substantially offset the foreign
exchange gains and losses on the underlying transactions. Market value gains and
losses on positions used as hedges in the mortgage banking services operations
are deferred and considered in the valuation of lower of cost or market value of
mortgage loans held for sale.
New Accounting Pronouncements
The Company adopted the provisions of the Financial Accounting Standards Board's
(FASB) statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," effective in 1996. Application of this statement requires the Company to
review long-lived assets and certain intangibles for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Adoption of this statement had no impact on the consolidated
financial statements of the Company.
The Company uses the intrinsic value method to account for stock-based employee
compensation plans. Under this method, compensation cost is recognized for
awards of shares of common stock to employees under compensatory plans only if
the quoted market price of the stock at the grant date (or other measurement
date, if later) is greater than the amount the employee must pay to acquire the
stock. In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement permits companies to adopt a new fair
value-based method to account for stock-based employee compensation plans or to
continue using the intrinsic value method. If the intrinsic value method is
used, information concerning the pro forma effects on net income and net income
per share of adopting the fair value-based method is required to be presented in
the notes to the financial statements. Pursuant to the Merger Agreement, options
granted under employee compensation plans were converted to HFS stock on April
30, 1997. Accordingly, the Company has not provided disclosures about its
stock-based employee compensation plans.
In 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." The statement provides
accounting and reporting standards for transfers and servicing of financial
assets and, among other things, SFAS No. 125 also requires that previously
recognized servicing receivables that exceed contractually specified servicing
fees shall be reclassified as interest-only strips receivable, and subsequently
measured under the provisions of SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The Company will adopt the
provisions of SFAS No. 125 on January 1, 1997 and will reclassify a portion of
its excess servicing fees to interest-only strips. The effect of adopting SFAS
No. 125 is not expected to be material to the Company's operations or
financial condition.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Mortgage Loans Held for Sale
Mortgage loans held for sale represent mortgage loans originated by the Company
and held pending sale to permanent investors. Such mortgage loans are recorded
at the lower of cost or market value as determined by outstanding commitments
from investors or current investor yield requirements calculated on the
aggregate loan basis. The valuation reserve was $10,141 at December 31, 1996.
The Company issues mortgage-backed certificates insured or guaranteed by the
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC), Government National Mortgage Association (GNMA) and other
private insurance agencies. The insurance provided by FNMA and FHLMC and other
private insurance agencies are on a non-recourse basis to the Company. However,
the guarantee provided by GNMA is only to the extent recoverable from insurance
programs of the Federal Housing Administration and the Veterans Administration.
The outstanding principal balance of mortgages backing GNMA certificates issued
by the Company aggregated approximately $3.4 billion at December 31, 1996.
Additionally, the Company sells mortgage loans as part of various
mortgage-backed security programs sponsored by FNMA, FHLMC and GNMA. Certain of
these sales are subject to recourse or indemnification provisions in the event
of default by the borrower. As of December 31, 1996, mortgage loans sold with
recourse amounted to $83,034. The Company believes adequate reserves are
maintained to
cover all potential losses.
Mortgage Servicing Rights and Fees
Mortgage servicing rights and fees activity was as follows for the for the eight
- -month period ended December 31, 1996:
<TABLE>
<CAPTION>
Excess Purchased Originated
Servicing Servicing Servicing Impairment
Fees Rights Rights Allowance Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance April 30, 1996 $ 122,045 $ 25,977 $ 83,500 $ (1,313) $ 230,209
Additions 38,277 - 56,583 - 94,860
Amortization (20,953) (3,563) (11,488) - (36,004)
Write-down/Provision - - - 732 732
Sales (854) - - - (854)
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 $138,515 $ 22,414 $ 128,595 $ (581) $ 288,943
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Excess servicing fees represent the present value of the differential between
the actual servicing fees and normal servicing fees which are capitalized at the
time loans are sold with servicing rights retained. Purchased servicing rights
represent the cost of acquiring the rights to service mortgage loans for others.
In May 1995, the FASB issued Statement of Financial Accounting Standards No. 122
"Accounting for Mortgage Servicing Rights" (SFAS No. 122). This Statement
requires that mortgage servicing rights be recognized when a mortgage loan is
sold and servicing rights are retained. The Company adopted SFAS No. 122
effective May 1, 1995, and, accordingly, capitalized originated servicing
rights, net of amortization and valuation allowances, of $45,827 for the
eight-month period ended December 31, 1996.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
SFAS No. 122 requires that a portion of the cost of originating a mortgage loan
be allocated to the mortgage servicing rights based on the servicing rights'
fair value relative to the loan as a whole. To determine the fair value of
mortgage servicing rights, the Company uses market prices for comparable
mortgage servicing, when available, or alternatively uses a valuation model that
calculates the present value of future net servicing income using assumptions
that market participants would use in estimating future net servicing income.
SFAS No. 122 also requires the impairment of originated and purchased servicing
rights to be measured based on the difference between the carrying amount and
current fair value of the servicing rights. In determining impairment, the
Company aggregates all mortgage servicing rights, excluding those capitalized
prior to the adoption of SFAS No. 122, and stratifies them based on the
predominant risk characteristic of interest rate band. For each risk
stratification, a valuation allowance is maintained for any excess of amortized
book value over the current fair value by a charge or credit to income.
Property and Equipment
Property and equipment at December 31, 1996 consisted of the following:
- --------------------------------------------------------------------------------
Land .............................................................. $ 9,122
Buildings and leasehold improvements .............................. 61,359
Equipment ......................................................... 109,198
accumulated depreciation and amortization ......................... (93,588)
---------
86,091
Capitalized software costs, net .................................... 6,054
---------
$ 92,145
---------
Other Assets
Other assets at December 31, 1996 consisted of the following:
- --------------------------------------------------------------------------------
Mortgage-related notes receivable ................................. $ 66,053
Residential properties held for resale ............................ 7,788
Income taxes receivable ........................................... 19,165
Other.............................................................. 45,447
---------
$ 138,453
---------
Mortgage-related notes receivable are loans secured by residential real estate.
Residential properties held for resale are located primarily in the US and are
carried at the lower of cost or net realizable value.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Assets Under Management Programs
Net Investment in Leases and Leased Vehicles
The net investment in leases and leased vehicles at December 31, 1996 consisted
of the following:
- --------------------------------------------------------------------------------
Vehicles under open-end operating leases .......................... $2,617,263
Vehicles under closed-end operating leases ........................ 443,853
Direct financing leases ........................................... 356,699
Accrued interest on leases ......................................... 851
----------
$3,418,666
----------
The Company leases vehicles for initial periods of twelve months or more under
either operating or direct financing lease agreements. The Company's experience
indicates that the full term of the leases may vary considerably due to
extensions beyond the minimum lease term. Lessee repayments of investments in
leases and leased vehicles for the eight-month period ended December 31, 1996
were $1,026,826 and the ratio of such repayments to the average net investment
in leases and leased vehicles was 47.74%.
The Company has two types of operating leases. Under one type, open-end
operating leases, resale of the vehicles upon termination of the lease is
generally for the account of the lessee except for a minimum residual value
which the Company has guaranteed. The Company's experience has been that
vehicles under this type of lease agreement have consistently been sold for
amounts exceeding the residual value guarantees. Maintenance and repairs of
vehicles under these agreements are the responsibility of the lessee. The
original cost and accumulated depreciation of vehicles under this type of
operating lease was $4,604,552 and $1,987,289 respectively, at December 31,
1996.
Under the other type of operating lease, closed-end operating leases, resale of
the vehicles on termination of the lease is for the account of the Company. The
lessee generally pays for or provides maintenance, vehicle licenses and
servicing. The original cost and accumulated depreciation of vehicles under
these agreements was $600,560 and $156,707 respectively, at December 31, 1996.
The Company believes adequate reserves are maintained in the event of loss on
vehicle disposition.
Under the direct financing lease agreements, resale of the vehicles upon
termination of the lease is generally for the account of the lessee. Maintenance
and repairs of these vehicles are the responsibility of the lessee.
Leasing revenues are included in revenues from vehicle management services.
Following is a summary of leasing revenues for the eight-month period ended
December 31, 1996:
- --------------------------------------------------------------------------------
Operating leases $ 767,823
Direct financing leases, primary interest 25,172
- --------------------------------------------------------------------------------
$ 792,995
- --------------------------------------------------------------------------------
Other managed vehicles are subject to leases serviced by the Company for others,
and neither the vehicles nor the leases are included as assets of the Company.
The Company receives a fee under such agreements which covers or exceeds its
cost of servicing.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has transferred existing managed vehicles and related leases to
unrelated investors and has retained servicing responsibility. Credit risk for
such agreements is retained by the Company to a maximum extent in one of two
forms: excess assets transferred, which were $7,109 at December 31, 1996; or
guarantees which was $0 at December 31, 1996. All such credit risk has been
included in the Company's consideration of related reserves. The outstanding
balances under such agreements aggregated $158,481 at December 31, 1996.
Other managed vehicles with balances aggregating $93,901 at December 31, 1996
are included in a special purpose entity which is not owned by the Company. This
entity does not require consolidation as it is not controlled by the Company and
all risks and rewards rest with the owners. Additionally, managed vehicles
totaling $47,418 at December 31, 1996 are owned by special purpose entities
which are owned by the Company. However such assets and related liabilities have
been netted in the balance sheet since there is a two-party agreement with
determinable accounts, a legal right of offset exists and the Company expercises
its right of offset in settlement with client corporations.
Equity Advances on Homes
Equity advances on homes represent advances paid to transferring employees of
clients for their equity based on appraised values of their homes.
Other Debt
Other debt at December 31, 1996 consisted of the following:
- --------------------------------------------------------------------------------
Commercial paper $ 1,085,647
Medium-term note 100,000
- --------------------------------------------------------------------------------
$ 1,185,647
- --------------------------------------------------------------------------------
Commercial paper programs are more fully described in the note for Liabilities
Under Management Programs. The medium-term notes represented an unsecured
obligation having a fixed interest rate of 6.5% with interest payable
semi-annually and a term of seven years payable in full in fiscal 2000.
Income Taxes
Provisions for income taxes were comprised as follows for the eight-month period
ended December 31, 1996:
- --------------------------------------------------------------------------------
Current income taxes:
Federal $ 1,196
State and local 2,177
Foreign 5,908
- --------------------------------------------------------------------------------
9,281
- --------------------------------------------------------------------------------
Deferred income taxes:
Federal 25,400
State and local 3,200
Foreign 100
- --------------------------------------------------------------------------------
28,700
- --------------------------------------------------------------------------------
$ 37,981
- --------------------------------------------------------------------------------
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Deferred income taxes are recorded based upon differences between the financial
statement and the tax bases of assets and liabilities and available tax credit
carryforwards. There was no valuation allowance relating to deferred tax assets.
Net deferred tax liabilities as of December 31, 1996 were comprised as follows:
- --------------------------------------------------------------------------------
Depreciation $ (245,146)
Accrued liabilities and deferred income 46,107
Unamortized mortgage servicing rights (51,239)
Alternative minimium tax and net operating loss carryforwards 13,078
- --------------------------------------------------------------------------------
$ (237,200)
- --------------------------------------------------------------------------------
The portions of the income tax liability and provision classified as current and
deferred are subject to final determination based on the actual income tax
returns to be filed for the twelve-month period ended April 30, 1997.
The Company paid income taxes of $8,126 for the eight-month period ended
December 31, 1996.
A summary of the differences between the statutory federal income tax rate and
the Company's effective income tax rate follows for the eight-month period ended
December 31, 1996:
- --------------------------------------------------------------------------------
Federal income tax statutory rate 35.0%
State income taxes, net of federal benefit 3.9%
Amortization of goodwill 0.5%
Foreign tax in excess of domestic rate 1.0%
Other 0.4%
- --------------------------------------------------------------------------------
Effective tax rate 40.8%
- --------------------------------------------------------------------------------
The Company's US federal income tax returns have been examined by the Internal
Revenue Service through April 30, 1993.
Liabilities Under Management Programs
Borrowings to fund assets under management programs are classified as
"liabilities under management programs" and, at December 31, 1996 consisted of
the following:
- --------------------------------------------------------------------------------
Commercial paper $ 2,005,196
Medium-term note 1,562,200
Limited recourse debt 9,653
Secured notes payable on vehicles under lease 16,147
Other unsecured debt 311,100
- --------------------------------------------------------------------------------
$ 3,904,296
- --------------------------------------------------------------------------------
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Commercial paper, all of which matures within 90 days, is supported by committed
revolving credit agreements described below and short-term lines of credit. The
weighted average interest rate on the Company's outstanding commercial paper was
5.4% at December 31, 1996.
Medium-term notes represent unsecured loans which mature in 1997. The weighted
average interest rate on medium-term notes was 5.7% at December 31, 1996.
Limited recourse debt and secured notes payable on vehicles under lease
primarily consist of secured loans arranged for certain clients for their
convenience. The lenders hold a security interest in the lease payments and the
clients' leased vehicles. The debt and notes payable mature concurrently with
the related lease payments. The aggregate lease payments due from the lessees
exceed the loan repayment requirements. The weighted average interest rate on
secured debt was 5.3% at December 31, 1996.
The Company has a $2.5 billion syndicated unsecured credit facility backed by 22
domestic and foreign banks. The facility is comprised of $1.25 billion of lines
maturing in 364 days and $1.25 billion maturing in five years. Under the credit
facilities, the Company is obligated to pay annual commitment fees of
approximately 7 basis points. The Company has other unused lines of credit of
$301,468 at December 31, 1996 with various banks.
Other unsecured debt, all of which matures in 1997, includes other borrowings
under short-term lines of credit and other bank facilities. The weighted average
interest rate on unsecured debt was 5.8% at December 31, 1996.
Although the period of service for a vehicle is at the lessee's option, and the
period a home is held for resale varies, management estimates, by using
historical information, the rate at which vehicles will be disposed and the rate
at which homes will be resold. These projections of estimated liquidations of
assets under management programs and the related estimated repayment of
liabilities under management programs as of December 31, 1996, as set forth in
the table below, indicate that the actual repayments of liabilities under
management programs will be different than required by contractual maturities.
Assets Under Liabilities Under
Management Programs Management Programs
------------------- -------------------
1997 $2,163,260 $2,070,029
1998 1,135,667 1,089,109
1999 513,964 496,119
2000 163,695 160,041
2001 53,843 51,617
2002-2006 35,901 37,381
---------- ----------
$4,066,330 $3,904,296
- --------------------------------------------------------------------------------
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Stock Option Plans
Prior to the Merger, the Company had stock option plans for key employees and
outside Directors of the Company. On April 30, 1997 all unexercised options were
canceled and converted to shares of HFS as provided by the Merger Agreement. The
plans allowed for the purchase of common stock at prices not less than fair
market value on the date of grant. Either incentive stock options or
non-statutory stock options were granted under the plans. Options became
exercisable after one year from date of grant on a vesting schedule provided by
the plans, and expired ten years after the date of the grant. Option
transactions are summarized as follows for the eight-month period ended December
31, 1996:
Number of Option Price
Shares per Share
- --------------------------------------------------------------------------------
Outstanding April 30, 1996 2,615,970 $ 9.94 to $26.56
Granted 1,098,100 $27.00 to $30.75
Exercised (306,192) $12.25 to $19.94
Canceled (25,200) $19.94 to $28.44
Outstanding December 31, 1996 3,382,678 $ 9.94 to $30.75
- --------------------------------------------------------------------------------
Exercisable December 31, 1996 2,291,578 $ 9.94 to $21.00
- --------------------------------------------------------------------------------
Capital Stock
On June 24, 1996, the Board of Directors authorized a two-for-one common stock
split, effected in the form of a 100% stock dividend which was paid on July 31,
1996. All share amounts and per share amounts herein, have been adjusted for the
common stock split.
Pension and Other Employee Benefit Plans
Pension and Supplemental Retirement Plans The Company has a non-contributory
defined benefit pension plan covering substantially all US employees of the
Company and its subsidiaries. The Company's subsidiary located in the UK has a
contributory defined benefit pension plan, with participation at the employee's
option. Under both the US and UK plans, benefits are based on an employee's
years of credited service and a percentage of final average compensation. The
Company's policy for both plans is to contribute amounts sufficient to meet the
minimum requirements plus other amounts as the Company deems appropriate from
time to time. The Company also sponsors two unfunded supplemental retirement
plans to provide certain key executives with benefits in excess of limits under
the federal tax law and to include annual incentive payments in benefit
calculations.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Net costs included the following components for the eight-month period ended
December 31, 1996:
- --------------------------------------------------------------------------------
Service cost $ 3,919
Interest cost 5,732
Actual return on assets (6,652)
Net amortization and deferral 2,067
- --------------------------------------------------------------------------------
Net cost $ 5,066
- --------------------------------------------------------------------------------
A summary of the plans' status and the Company's recorded liability recognized
in the Consolidated Balance Sheet at December 31, 1996 follows:
Funded Plans
- --------------------------------------------------------------------------------
Accumulated benefit obligation:
Vested $ 69,743
Unvested 7,058
- -------------------------------------------------------------------------------
$ 76,801
- --------------------------------------------------------------------------------
Projected benefit obligation $ 97,145
Funded assets, at fair value
(primarily common stock and bond mutual funds) (88,416)
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions (4,544)
Unrecognized prior service cost (761)
Unrecognized net obligation (356)
- --------------------------------------------------------------------------------
Recorded liability $ 3,068
- --------------------------------------------------------------------------------
Unfunded Plans
- --------------------------------------------------------------------------------
Accumulated benefit obligation:
Vested $ 13,031
Unvested 601
- -------------------------------------------------------------------------------
$ 13,632
- --------------------------------------------------------------------------------
Projected benefit obligation $ 17,977
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions (3,087)
Unrecognized prior service cost (2,641)
Unrecognized net obligation (1,237)
Minimum liability adjustment 2,620
- --------------------------------------------------------------------------------
Recorded liability $ 13,632
- --------------------------------------------------------------------------------
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Significant percentage assumptions used in determining the cost and related
obligations under the US pension and unfunded supplemental retirement plans are
as follows for the eight-month period ended December 31, 1996:
- --------------------------------------------------------------------------------
Discount rate 8.00%
Rate of increase in compensation 5.00%
Long-term rate of return on assets 10.00%
- --------------------------------------------------------------------------------
Postretirement Benefits Other Than Pensions
The Company provides healthcare and life insurance benefits for certain retired
employees up to the age of 65. A summary of the plan's status and the Company's
recorded liability recognized in the consolidated balance sheet at December 31,
1996 follows:
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Active employees $ 5,811
Current retirees 1,670
- --------------------------------------------------------------------------------
7,481
Unrecognized transition obligation (4,799)
Unrecognized net gain 1,832
- --------------------------------------------------------------------------------
Recorded liability $ 4,514
- --------------------------------------------------------------------------------
Net periodic postretirement benefit costs included the following components for
the eight-month period ended December 31, 1996.
- --------------------------------------------------------------------------------
Service costs $ 568
Interest cost 353
Net amortization and deferral 126
- --------------------------------------------------------------------------------
$ 1,047
- --------------------------------------------------------------------------------
Significant percentage assumptions used in determining the cost and obligations
under the postretirement benefit plan are as follows for the eight-month period
ended December 31, 1996:
- --------------------------------------------------------------------------------
Discount rate 8.00%
Health care costs trend rate for subsequent year 10.00%
- --------------------------------------------------------------------------------
The health care cost trend rate is assumed to decrease gradually through 2004
when the ultimate trend rate of 4.75% is reached. At December 31, 1996, a
one-percentage-point increase in the assumed health care cost trends rate for
each future year would increase the annual service and interest cost by
approximately $126 and the accumulated postretirement benefit obligation by
approximately $582.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Investment Plan
Under provisions of the Company's employee investment plan, a qualified
retirement plan, eligible employees may generally have up to 10% of their base
salaries withheld and placed with an independent custodian and elect to invest
in common stock of the Company, an index equity fund, a growth equity fund, an
international equity fund, a fixed income fund, an asset allocation fund and/or
a money market fund. The Company's contributions vest proportionately in
accordance with an employee's years of vesting service, with an employee being
100% vested after three years of vesting service. The Company matches, in common
stock of the Company, employee contributions to 3% of their base salaries, with
up to an additional 3% match available at the end of the year based on the
Company's operating results for the twelve month period beginning May 1 and
ending April 30. The Company's additional matches of employee contributions
greater than 3% up to 6%, were 75% in 1996. The additional match, initially
invested in a money market fund, can be redirected by the employee into any of
the investment elections noted above. The Company recorded contribution expense
of $3,412 for the eight-month period ended December 31, 1996.
Lease Commitments
Total rental expenses relating to office facilities and equipment were $16,407,
for the eight-month period ended December 31, 1996. Minimum rental commitments
under non-cancelable leases with remaining terms in excess of one year are as
follows:
- --------------------------------------------------------------------------------
1997............... $16,797 2001...................... $5,567
1998............... 15,245 2002-2006............. 9,094
1999............... 10,222 2007 and thereafter.. 4,568
2000............... 7,555
- --------------------------------------------------------------------------------
These leases provide for additional rentals based on the lessors' increased
property taxes, maintenance and operating expenses.
Contingent Liabilities
The Company and its subsidiaries are involved in pending litigation of the usual
character incidental to the business transacted by them. In the opinion of
management, such litigation will not have a material effect on the Company's
consolidated financial statements.
The Company is contingently liable under the terms of an agreement involving its
discontinued aviation services segment for payment of Industrial Revenue Bonds
issued by local governmental authorities operating at two airports, one of which
comes due in the year 2013 and the other which comes due in the year 2014, each
of which is in the amount of $3,500. The Company believes its allowance for
disposition loss is sufficient to cover all potential liability.
Fair Value of Financial Instruments and Servicing Rights
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments:
- - Cash, accounts receivable, certain other assets and commercial paper
borrowings. Due to the short-term nature of these financial instruments, the
carrying value equals or approximates fair value.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- - Mortgage loans held for sale. Fair value is estimated using the quoted
market prices for securities backed by similar types of loans and current dealer
commitments to purchase loans. These loans are priced to be sold with servicing
rights retained. Gains (losses) on mortgage-related positions, used to reduce
the risk of adverse price fluctuations, for both mortgage loans held for sale
and anticipated mortgage loan closings arising from commitments issued, are
included in the carrying amount of mortgage loans held for sale.
- - Mortgage servicing rights and fees. Fair value is estimated by discounting
the expected net cash flow of servicing rights and deferred mortgage servicing
fees using discount rates that approximate market rates and externally published
prepayment rates, adjusted, if appropriate, for individual portfolio
characteristics.
- - Borrowings. Fair value of borrowings, other than commercial paper, is
estimated based on quoted market prices or market comparables.
- - Interest rate swaps, foreign exchange contracts, forward delivery
commitments, futures contracts and options. The fair value of interest rate
swaps, foreign exchange contracts, forward delivery commitments, futures
contracts and options is estimated, using dealer quotes, as the amount that the
Company would receive or pay to execute a new agreement with terms identical to
those remaining on the current agreement, considering interest rates at the
reporting date.
- - The following table sets forth information about financial instruments,
except for those noted above for which the carrying value approximates fair
value, at December 31, 1996:
<TABLE>
<CAPTION>
Estimated
--------------------------
Notional Carrying Fair
Amount Amount Value
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Mortgage loans held for sale .................. $ - $ 1,248,299 $ 1,248,299
Excess mortgage servicing fees .................. - 138,515 155,033
Originated mortgage servicing
rights ...................................... - 128,014 139,776
Purchased mortgage servicing
rights ..................................... - 22,414 29,326
Liabilities
Medium-term notes ............................. - 1,662,200 1,662,220
Off balance sheet
Interest rate swaps ........................... 1,670,155
In a gain position ......................... - 2,457
In a loss position ......................... - (10,704)
Foreign exchange forwards .......................... 329,088 - 10,010
Mortgage-related positions:*
Forward delivery commitments ..... 1,703,495 11,425 7,448
Option contracts to sell ..................... 265,000 952 746
Option contracts to buy ...................... 350,000 1,346 (463)
Treasury options used to hedge servicing rights * . 313,900 1,327 278
- ------------------------------------------------------------------------------------------------
</TABLE>
* Gains (losses) on mortgage-related positions are already included in the
determination of market value of mortgage loans held for sale.
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Derivative Financial Instruments
The Company employs interest rate swap agreements to match effectively the fixed
or floating rate nature of liabilities to the assets funded. A key assumption in
the following information is that rates remain constant at December 31, 1996
levels. To the extent that rates change, both the maturity and variable interest
rate information will change. However, the net rate the Company pays remains
matched with the assets funded.
The following table summarizes the maturity and weighted average rates of the
Company's interest rate swaps employed at December 31, 1996. These
characteristics are effectively offset within the portfolio of assets funded by
the Company.
<TABLE>
<CAPTION>
Maturities
----------------------------------------------------------------------------
Total 1997 1998 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
United States
Commercial Paper:
Pay fixed/receive floating:
Notional value $ 427,181 $ 199,528 $ 136,176 $ 59,346 $ 20,531 $ 4,625 $ 6,975
Weighted average receive rate 5.72% 5.72% 5.72% 5.72% 5.72% 5.72%
Weighted average pay rate 6.21% 6.33% 6.47% 6.37% 6.51% 6.60%
Medium-Term Notes:
Pay floating/receive fixed:
Notional value 336,000 250,000 86,000
Weighted average receive rate 6.59% 6.50%
Weighted average pay rate 5.95% 5.86%
Pay floating/receive floating:
Notional value 357,200 357,200
Weighted average receive rate 5.51%
Weighted average pay rate 5.90%
Canada
Commercial Paper:
Pay fixed/receive floating:
Notional value 68,255 32,631 22,849 10,585 2,190
Weighted average receive rate 3.11% 3.11% 3.11% 3.11%
Weighted average pay rate 6.25% 5.89% 5.63% 4.58%
Pay floating/receive floating:
Notional value 52,730 28,010 14,961 4,342 2,853 2,564
Weighted average receive rate 7.21% 7.09% 6.93% 7.61% 7.61%
Weighted average pay rate 3.38% 3.38% 3.38% 3.38% 3.38%
Pay floating/receive fixed
Notional value 36,481 36,481
Weighted average receive rate 4.92%
Weighted average pay rate 3.07%
UK
Commercial Paper:
Pay fixed/receive floating:
Notional value 379,308 37,708 93,070 138,834 109,696
Weighted average receive rate 6.56% 6.56% 6.56% 6.56%
Weighted average pay rate 6.17% 7.85% 6.96% 7.10%
Germany
Commercial Paper:
Pay fixed/receive fixed:
Notional value 13,000 1,950 2,925 (6,825) 3,575 11,375
Weighted average receive rate 3.25% 3.25% 3.25% 3.25% 3.25%
Weighted average pay rate 5.34% 5.34% 5.34% 5.34%
- -----------------------------------------------------------------------------------------------------------------------------
$1,670,155 $ 943,508 $ 269,981 $ 292,282 $ 138,845 $ 18,564 $ 6,975
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the eight-month period ended December 31, 1996, the Company's hedging
activities increased interest expense $3,653 and had no effect on its weighted
average borrowing rate.
The Company enters into foreign exchange contracts as hedges against currency
fluctuation on certain intercompany loans. Such contracts effectively offset the
currency risk applicable to approximately $329,088 of obligations at December
31, 1996.
The Company is exposed to credit-related losses in the event of non-performance
by counterparties to certain derivative financial instruments. The Company
manages such risk by periodically evaluating the financial condition of
counterparties and spreading its positions among multiple counterparties. The
Company presently does not expect non-performance by any of the counterparties.
Comparable Prior Year Income Statement (unaudited)
As described in the note on Change in Fiscal Year, the Company changed its
fiscal year. Comparable results of operations for the eight-month period ended
December 31, 1995 are as follows:
Revenues ............................................ $1,217,647
Operating expenses .................................. 1,133,631
----------
Operating income .................................... 84,016
Income Taxes ....................................... 34,934
----------
Net Income .......................................... $ 49,082
==========
Quarterly Financial Data (Unaudited)
(In thousands except per share data)
Eight-month period ended December 31, 1996
-------------------------------------------------
First Second Third Eight-Month
Quarter Quarter Quarter* Period
---------- ---------- ---------- -----------
Revenues ......................$ 475,761 $ 473,002 $ 335,230 $1,283,993
Income before income taxes .... 37,113 39,963 16,012 93,088
Net income .................... 21,772 23,966 9,369 55,107
---------- ---------- ---------- ----------
Net income per share...........$ 0.61 $ 0.68 $ 0.26 $ 1.53
---------- ---------- ---------- ----------
* Comprised of the two-month period ended December 31, 1996.
Business Segments
The Company's operations are classified into three business segments: vehicle
management services, real estate services and mortgage banking services. Vehicle
management services and real estate services are provided in North America and
Europe. Mortgage banking services are provided in the US. Selected information
by business segment and geographic area for the eight-month period ended
December 31, 1996 are as follows:
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Business Segments (In thousands)
- -------------------------------------------------------------------------------
Revenues:
Vehicle management services .... $ 918,088
Real estate services ........... 198,324
Mortgage banking services .......... 167,581
----------
Consolidated ................... $1,283,993
----------
Income Before Income Taxes:
Vehicle management services .... $ 45,706
Real estate services ........... 23,529
Mortgage banking services ...... 23,853
----------
Consolidated ................... $ 93,088
----------
Identifiable Assets:
Vehicle management services .... $3,866,907
Real estate services ........... 965,330
Mortgage banking services ...... 1,742,409
----------
Consolidated ................... $6,574,646
----------
Capital Expenditures:
Vehicle management services .... $ 6,369
Real estate services ........... 1,982
Mortgage banking services ...... 8,599
----------
Consolidated ................... $ 16,950
----------
Depreciation and Amortization:
Vehicle management services .... $ 657,541
Real estate services ........... 7,016
Mortgage banking services ...... 38,508
----------
Consolidated .................. $ 703,065
----------
Geographic Areas (In thousands)
----------
Revenues:
North America (principally U.S.) $1,129,831
Europe ......................... 154,162
----------
Consolidated ................... $1,283,993
----------
Income Before Income Taxes:
North America (principally U.S.) $ 79,458
Europe ......................... 13,630
----------
Consolidated ................... $ 93,088
----------
Identifiable Assets:
North America (principally U.S.) $5,854,657
Europe ......................... 719,989
----------
Consolidated ................... $6,574,646
----------
<PAGE>
PHH Corporation and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE
EIGHT-MONTH PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
CHARGED
(CREDITED)
BALANCE AT TO OPERATING BALANCE AT
DESCRIPTION APRIL 30, 1996 EXPENSES OTHERS (a) DEDUCTIONS (b) DECEMBER 31, 1996
- --------------------------------- -------------- --------------------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
VALUATION ACCOUNTS DEDUCTED
IN THE BALANCE SHEET FROM
ASSETS TO WHICH THEY APPLY
Accounts receivable $ 5,478,000 $1,960,000 $ - $ 1,119,000 $ 6,319,000
Net investment in leases and
leased vehicles 9,362,000 3,108,000 - 160,000 12,310,000
Carrying costs on homes under
management 1,650,000 - - 1,650,000
Mortgages held for sale and
mortgage-related notes receivable 18,547,000 (5,796,000) - - 12,751,000
Real estate management programs 340,000 - - - 340,000
-------------- ----------- ------- ------------ -----------
TOTAL $ 35,377,000 $ (728,000) $ - $ 1,279,000 $33,370,000
-------------- ----------- ------- ------------ -----------
</TABLE>
Note: (a) Amounts relate to acquisitions, divestitures and reclassifications
of prior year amounts.
(b) Deductions from reserves represent accounts charged off, less
recoveries, and foreign translation gains and losses.
PHH CORPORATION AND SUBSIDIARIES
PHH CORPORATION
ARTICLES OF AMENDMENT
PHH Corporation, a Maryland corporation, having its principal office at
11333 McCormick Road, Hunt Valley, Baltimore County, Maryland 21031 (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation that:
FIRST: The Corporation's Charter is hereby amended by striking out the
first full paragraph of Article FIFTH thereof in its entirety, and substituting
in lieu thereof the following:
FIFTH: The total number of shares which the Corporation has authority
to issue is Seventy-Eight Million (78,000,000) shares, without par
value, consisting of Seventy-Five Million (75,000,000) shares of
Common Stock without par value and Three Million (3,000,000) shares
of Preferred Stock without par value."
SECOND: The total number of shares of stock of all classes which the
Corporation has authority to issue was 53 million before this amendment, and 78
million hereafter.
THIRD: The number of shares of common stock, without par value, which the
Corporation has authority to issue was 50 million before this amendment, and 75
million hereafter.
FOURTH: The number of shares of preferred stock, without par value, which
the Corporation has authority to issue was 3 million before this amendment, and
remains unchanged hereafter.
FIFTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of such common and preferred stock were not changed by
this amendment.
SIXTH: By action taken pursuant to and in accordance with CA Para 2-408 at
a meeting on June 24, 1996, the board of directors of the Corporation duly
advised the foregoing amendment, and at the Corporation's annual meeting on
August 19, 1996, such amendment was approved by the stockholders of the
Corporation by the affirmative vote of more than two-thirds of all the votes
entitled to be cast on
the matter.
IN WITNESS WHEREOF, PHH Corporation has caused these presents to be signed
in its name and on its behalf by its Vice President and its corporate seal to be
hereunder affixed and attested by its Assistant Secretary on this 23rd day of
August, 1996, and its Vice President acknowledges that these Articles of
Amendment are the act and deed of PHH Corporation and, under the penalties of
perjury, that the matters and facts set forth herein with respect to
authorization and approval are true in all material respects to the best of his
knowledge, information and belief.
ATTEST: PHH CORPORATION
By: Gordon W. Priest, Jr. By: Samuel H. Wright
Gordon W. Priest, Jr. Samuel H. Wright
Assistant Secretary Vice President
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
PHH CORPORATION
Articles Supplementary
PHH Corporation, a Maryland corporation, having its principal office in
Baltimore County, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Articles of Incorporation, as amended
and as supplemented by the Articles Supplementary (the "Articles Supplementary")
creating the class of Series A Junior Participating Preferred Stock and filed
with the State Department of Assessments and Taxation of Maryland on March 24,
1986, the Board of Directors has duly divided and classified 175,000 additional
shares of the Preferred Stock of the Corporation into shares of the class
designated as Series A Junior Participating Preferred Stock, and provided for
the issuance of such Series, bringing the total number of shares of such Series
to 375,000.
SECOND: The terms of the Series A Junior Participating Stock established by
the Board of Directors are as set forth in the Articles Supplementary in
addition to those set forth in Article FIFTH of the Charter of the Corporation
applicable to all classes of Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be signed in its name and on its behalf by its President and witnessed by its
Secretary on August 23, 1996.
WITNESS: PHH CORPORATION
By: /s/ Gordon W. Priest, Jr. By: /s/ Roy A. Meierhenry
Gordon W. Priest, Jr. Roy A. Meierhenry
Assistant Secretary Senior Vice President &
Chief Financial Officer
PHH CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
INDENTURE
DATED AS OF JUNE 5, 1997
SENIOR DEBT SECURITIES
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES.......................................................................1
RECITALS OF THE COMPANY.......................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:....................................................1
Act..................................................................2
Affiliate; control...................................................2
Authenticating Agent.................................................2
Beneficial Owner.....................................................2
Board of Directors...................................................2
Board Resolution.....................................................2
Business Day.........................................................2
Commission...........................................................2
Company..............................................................2
Company Request; Company Order.......................................3
Corporate Trust Office...............................................3
Corporation..........................................................3
Defaulted Interest...................................................3
Depositary...........................................................3
Dollar...............................................................3
ECU..................................................................3
Event of Default.....................................................3
Fixed Rate Security..................................................3
Floating Rate Security...............................................3
Foreign Currency.....................................................3
Global Security......................................................3
Holder...............................................................4
Indenture............................................................4
Interest.............................................................4
Interest Payment Date................................................4
Market Exchange Rate.................................................4
Maturity.............................................................4
Officers' Certificate................................................4
NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE>
PAGE
Opinion of Counsel...................................................4
Original Issue Discount Security.....................................4
Outstanding..........................................................4
Paying Agent.........................................................5
Person...............................................................5
Place of Payment.....................................................5
Predecessor Security.................................................5
Property.............................................................6
Redemption Date......................................................6
Redemption Price.....................................................6
Regular Record Date..................................................6
Responsible Officer..................................................6
Securities...........................................................6
Security Register and Security Registrar.............................6
Special Record Date..................................................6
Stated Maturity......................................................6
Subsidiary...........................................................6
Trustee..............................................................7
Trust Indenture Act..................................................7
Vice President.......................................................7
SECTION 102. Compliance Certificates and Opinions............................8
SECTION 104. Acts of Holders................................................ 8
SECTION 105. Notices, Etc., to Trustee and Company...........................9
SECTION 106. Notices to Holders; Waiver.....................................10
SECTION 107. Conflict with Trust Indenture A................................10
SECTION 108. Effect of Headings and Table of Contents.......................10
SECTION 109. Successors and Assigns.........................................10
SECTION 110. Separability Clause............................................10
SECTION 111. Benefits of Indenture..........................................11
SECTION 112. Governing Law..................................................11
SECTION 113. Legal Holidays.................................................11
SECTION 114. Indenture and Securities Solely Corporate Obligations..........11
SECTION 115. Consent of Holders of Securities in a Foreign Currency or ECU..11
SECTION 116. Payment Currency...............................................12
SECTION 117. Officers' Certificate Regarding Withholding Obligations........12
<PAGE>
PAGE
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally................................................13
SECTION 202. Form of Trustee's Certificate of Authentication................13
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series...........................14
SECTION 302. Denominations 16
SECTION 303. Execution, Authentication, Delivery and Dating.................16
SECTION 304. Temporary Securities...........................................17
SECTION 305. Registration, Registration of Transfer and Exchange............18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...............19
SECTION 307. Payment of Interest; Interest Rights Preserved................20
SECTION 308. Persons Deemed Owners..........................................21
SECTION 309. Cancellation ................................................ 21
SECTION 310. Computation of Interest........................................21
SECTION 311. Global Securities..............................................21
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Securities of any Series.........23
SECTION 402. Satisfaction and Discharge of Indenture........................25
SECTION 403. Application of Trust Money.....................................25
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default..............................................26
SECTION 502. Acceleration of Maturity; Rescission and Annulment.............27
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.........................................28
SECTION 504. Trustee May File Proofs of Claim...............................29
SECTION 505. Trustee May Enforce Claims Without Possession of Securities....30
SECTION 506. Application of Money Collected.................................30
SECTION 507. Limitation on Suits............................................30
<PAGE>
PAGE
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.................31
SECTION 509. Restoration of Rights and Remedies.............................31
SECTION 510. Rights and Remedies Cumulative.................................31
SECTION 511. Delay or Omission Not Waiver...................................32
SECTION 512. Control by Holders.............................................32
SECTION 513. Waiver of Past Defaults........................................32
SECTION 514. Undertaking for Costs..........................................33
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities............................33
SECTION 602. Notice of Defaults.............................................34
SECTION 603. Certain Rights of Trustee......................................35
SECTION 604. Not Responsible for Recitals or Issuance of Securities.........36
SECTION 605. May Hold Securities............................................36
SECTION 606. Money Held in Trust............................................36
SECTION 607. Compensation and Reimbursement.................................36
SECTION 608. Disqualification; Conflicting Interests........................37
SECTION 609. Corporate Trustee Required; Eligibility........................42
SECTION 610. Resignation and Removal; Appointment of Successor..............42
SECTION 611. Acceptance of Appointment by Successor.........................44
SECTION 612. Merger, Conversion, Consolidation or Succession to Business....45
SECTION 613. Preferential Collection of Claims Against Company..............45
SECTION 614. Appointment of Authenticating Agent............................49
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders......51
SECTION 702. Preservation of Information; Communications to Holders.........51
SECTION 703. Reports by Trustee.............................................53
SECTION 704. Reports by Company.............................................53
<PAGE>
PAGE
ARTICLE EIGHT
RESTRICTIVE COVENANTS; SUCCESSOR CORPORATION
SECTION 801. Certain Definitions............................................54
SECTION 802. Limitation on Liens............................................55
SECTION 803. Limitation on Sale-Leaseback Transactions......................56
SECTION 804. (Intentionally Omitted)........................................56
SECTION 805. No Lien Created, etc...........................................56
SECTION 806. When Company May Merge, etc....................................57
SECTION 807. When Securities Must Be Secured................................57
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.............57
SECTION 902. Supplemental Indentures With Consent of Holders................58
SECTION 903. Execution of Supplemental Indentures...........................60
SECTION 904. Effect of Supplemental Indentures..............................60
SECTION 905. Conformity With Trust Indenture Act............................60
SECTION 906. Reference in Securities to Supplemental Indentures.............60
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest....................61
SECTION 1002. Maintenance of Office or Agency...............................61
SECTION 1003. Money for Securities Payments to Be Held in Trust.............61
SECTION 1004. Corporate Existence...........................................63
SECTION 1005. Statement as to Compliance....................................63
SECTION 1006. Waiver of Certain Covenants...................................64
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article......................................64
SECTION 1102. Election to Redeem; Notice to Trustee.........................64
SECTION 1103. Selection by Trustee of Securities to be Redeemed.............64
SECTION 1104. Notice of Redemption..........................................65
SECTION 1105. Deposit of Redemption Price...................................66
<PAGE>
PAGE
SECTION 1106. Securities Payable on Redemption Date.........................66
SECTION 1107. Securities Redeemed in Part...................................66
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article......................................67
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.........67
SECTION 1203. Redemption of Securities for Sinking .........................67
<PAGE>
INDENTURE, dated as of June 5, 1997, between PHH Corporation, a corporation
duly organized and existing under the laws of the State of Maryland (herein
called the "Company"), and The First National Bank of Chicago, a national
banking association duly incorporated and existing under the laws of the United
States of America, Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured and
unsubordinated debentures, notes or other evidences of senior indebtedness
(herein called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all holders of the Securities or of any series thereof,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. 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 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 Six, are defined in that
Article.
"Act," when used with respect to any Holder, has the meaning specified in
Section 104.
"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.
"Authenticating Agent" means any Person authorized by the Trustee to act on
behalf of the Trustee to authenticate and deliver Securities.
"Beneficial Owner" means, with respect to Global Securities, the Person who
is the beneficial owner of such Securities as effected on the books of the
Depositary for such Securities or on the books of a Person maintaining an
account with such Depositary (directly or as an indirect participant, in
accordance with the rules of such Depositary).
"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," when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment, and (i) with respect to
Securities denominated in a Foreign Currency, the capital city of the country of
the Foreign Currency, or (ii) with respect to Securities denominated in ECU,
Brussels, are authorized or obligated by it to close.
"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.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, an
Assistant Controller, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered. At the date of this Indenture, the Corporate Trust Office of the
Trustee is located at One First National Plaza, Suite 0126, Chicago, Illinois
60670-0126.
"Corporation" includes corporations, associations, companies and business
trusts.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means a clearing agency registered as such under the
Securities Exchange Act of 1934, as amended, or any successor thereto, which
shall in either case be designated by the Company pursuant to Section 301 until
a successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or include
each Person who is then a Depositary hereunder, and if at any time there is more
than one such Person, "Depositary" as used with respect to the Securities of any
series shall
mean the Depositary with respect to the Securities of that series.
"Dollar" means the coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private debts.
"ECU" means the European Currency Unit as defined from time to time by the
Council of European Communities.
"Event of Default" has the meaning specified in Section 501.
"Fixed Rate Security" means a Security which provides for the payment of
interest at a fixed rate.
"Floating Rate Security" means a Security which provides for the payment of
interest at a variable rate determined periodically by reference to an interest
rate index or other index specified pursuant to Section 301.
"Foreign Currency" means a currency issued by the government of a country
other than the United States.
"Global Security" means a Security evidencing all or part of a series of
Securities which is executed by the Company and authenticated and delivered to
the Depositary or pursuant to the Depositary's instructions, all in accordance
with this Indenture and pursuant to a Company Order, which shall be registered
in the name of the Depositary or its nominee and which shall represent the
amount of uncertificated securities as specified therein.
"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 and shall
include any Officers' Certificates setting forth the form and terms of
particular series of Securities as contemplated by Sections 201 and 301.
"Interest," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Market Exchange Rate" means on a given date, the noon buying rate in New
York City for cable transfers for the stated Foreign Currency as certified for
customs purposes by the Federal Reserve Bank of New York on such date; provided
that, in the case of the ECU, Market Exchange Rate shall mean the rate of
exchange determined by the Council of European Communities (or any successor
thereto) as published for such date in the Official Journal of the European
Communities or any successor publication.
"Maturity," when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, a Vice President or the Treasurer, and by an Assistant Treasurer, the
Controller, an Assistant Controller, 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 an
employee of or counsel for the Company or the Trustee, and who shall be
acceptable to the Trustee, which opinion is delivered to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"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 or portions thereof 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 or portions
thereof 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 306 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 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 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. In determining the requisite principal
amount of any Original Issue Discount Security, such principal amount that shall
be deemed to be Outstanding shall be equal to the amount of the principal
thereof that could be declared to be due and payable upon an Event of Default
pursuant to the terms of such Original Issue Discount Security at the time of
such determination.
"Paying Agent" means any person authorized by the Company to pay the
principal of (and premium, if any) or interest, if any, on any Security on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest, if any, on the Securities of that series are payable as specified as
contemplated in Section 301 or, if not so specified, as specified in Section
1002.
"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 306 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.
"Property" means any kind of property or asset, whether real, personal or
mixed, tangible or intangible.
"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
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Responsible Officer," when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any senior trust officer or trust officer, the controller or
any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means with respect to any Person, any corporation,
association, joint venture, partnership or other business entity of which at
least a majority of the voting stock or other ownership interests having voting
power for the election of directors (or the equivalent) is, at the time as of
which any determination is being made, owned or controlled by such Person or one
or more subsidiaries of such Person, or by such Person and one or more
subsidiaries of such Person.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each Person who is
then a Trustee hereunder, provided, however, that if at any time there is more
than one such person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, except as provided in Section
905.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 102. 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, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions 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 shall include:
(1) a statement that each individual signing such certificate or opinion
has read such condition or covenant 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 to whether or not such condition or covenant 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 103. 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 knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. 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 (or
Holders of any series) 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 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 601) conclusive in favor of
the Trustee and the Company and any agent of the Trustee or the Company, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a 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; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section.
(c) The ownership of Securities shall be proved by the Security Register.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date,
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provision of this Indenture not later than six months after the record
date.
(e) 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, the Security
Registrar, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Except as otherwise specifically provided herein, any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or 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 the
attention of its Treasurer at 11333 McCormick Road, Hunt Valley, Maryland 21031
or at any other address subsequently furnished in writing to the Trustee by the
Company.
SECTION 106. 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. Any notice mailed in the manner prescribed by this
Indenture shall be conclusively presumed to have been duly given whether or not
received by any particular Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon
such waiver.
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.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 108. 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 109. 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 110. Separability Clause.
In case any provision of this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any
Security Registrar, or any Authenticating Agent and their respective successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed and construed by and in
accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, the Stated
Maturity of any Security or any date upon which any Defaulted Interest is
proposed to be paid shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest, if any, or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date, Redemption Date, at the Stated Maturity, or on the
date for payment of Defaulted Interest, provided that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or date for the payment of Defaulted Interest, as the case may
be.
SECTION 114. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of (or premium, if any) or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any
Security, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
SECTION 115. Consent of Holders of Securities in a Foreign Currency or ECU.
Unless otherwise specified in a certificate delivered pursuant to Section
301 of this Indenture with respect to a particular series of Securities,
whenever for purposes of this Indenture any action may be taken by the Holders
of a specified percentage in aggregate principal amount of Securities of all
series or all series affected by a particular action at the time Outstanding
and, at such time, there are Outstanding Securities of any series which are
denominated in a coin, currency or currency unit other than Dollars, then the
principal amount of Securities of such series which shall be deemed to be
Outstanding for the purpose of taking such action shall be that amount of
Dollars that could be obtained for the stated Foreign Currency or ECU principal
amount of such Outstanding Securities at the Market Exchange Rate on the record
date for the purpose of taking such action. If the appropriate Market Exchange
Rate is not available for any reason with respect to the stated currency or
currency unit, the Trustee shall use, in its sole discretion and without
liability on its part, such quotation of the Federal Reserve Bank of New York
or, in the case of ECU, the rate of exchange as published in The Wall Street
Journal, as of the most recent available date, or quotations or, in the case of
ECUs, rates of exchange from one or more major banks in The City of New York or
in the country of issue of the currency in question which for purposes of the
ECU shall be Brussels, Belgium, or such other quotations or, in the case of ECU,
rates of exchange as the Trustee shall deem appropriate. All decisions and
determinations of the Trustee regarding the Market Exchange Rate or any
alternative determination provided for in the preceding paragraph shall be in
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and irrevocably binding upon the Company and all Holders.
SECTION 116. Payment Currency.
If the principal of and/or interest on (or premium, if any, on) any
Securities is payable in a Foreign Currency or ECU and such Foreign Currency or
ECU is not available for payment due to the imposition of exchange controls or
other circumstances beyond the control of the Company, then the Company shall be
entitled to satisfy its obligations to Holders under this Indenture by making
such payment in Dollars on the basis of the Market Exchange Rate for such
Foreign Currency or ECU on the latest date for which such rate was established
on or before the date on which payment is due. Any payment made under this
Section 116 in Dollars where the required payment is in a Foreign Currency or
ECU shall not constitute an Event of Default.
SECTION 117. Officers' Certificate Regarding Withholding Obligations.
At least 15 days prior to the first Interest Payment Date and at least 15
days prior to each date of payment of principal, premium, if any, or interest
thereafter if there has been any change with respect to the matters set forth in
the below-mentioned certificate, the Company will furnish the Trustee and each
Paying Agent with an Officers' Certificate instructing the Trustee and each
Paying Agent whether such payment of principal of and premium, if any, or
interest on the Securities shall be made without deduction or withholding for or
on account of any tax, assessment or other governmental charge imposed upon or
as a result of such payment. If any such deduction or withholding shall be
required, then such certificate shall specify, by country, the amount, if any,
required to be withheld on such payment to Holders of Securities and the Trustee
will cause such amounts to be withheld. The Company agrees to indemnify the
Trustee and each Paying Agent for, and to hold them harmless against, any loss,
liability or expense reasonably incurred without negligence or bad faith on
their part arising out of or in connection with actions taken or omitted by them
in reliance on any certificate furnished pursuant to this Section.
In furnishing this Officers' Certificate, the Company shall be entitled to
rely on advice of counsel reasonably acceptable to the Trustee and the Paying
Agent and on information furnished in writing to the Company and any agent or
underwriter concerning the residences of the Holders of the Securities, but such
reliance shall not impair the indemnification set forth in the foregoing
paragraph.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form as shall
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations 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. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, an appropriate
Officers' Certificate setting forth such form together with a copy of the Board
Resolution shall be delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication
and delivery of such Securities.
The definitive Securities shall be printed, typed, lithographed or engraved
or produced by any combination of these methods 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 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the
form set forth below:
This is one of the Securities of the series designated herein issued under
the within-mentioned Indenture.
The First National Bank of Chicago, as Trustee
By
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a procedure established in a Board Resolution, and
set forth in an Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series:
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from the Securities of all other series);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to Section
304, 305, 306, 906 or 1107);
(3) the date or dates on which the principal of (and premium, if any, on)
the Securities of the series is payable, or the manner in which such dates are
determined;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the manner in which such rates are determined, the date or
dates from which any such interest shall accrue, or the manner in which such
dates are determined, the Interest Payment Dates on which any such interest
shall be payable, the Regular Record Dates, if any, for the payment of interest
on any Interest Payment Date and the rate or rates of interest, if any, payable
on overdue installments of interest on or principal of (or premium, if any, on)
the Securities of the series, and whether the interest rate may be reset upon
certain designated events and, in the case of Floating Rate Securities, the
notice, if any, to Holders regarding the determination of interest and the
manner of giving such notice, and the extent to which, or the manner in which,
any interest payable on any Global Security on an Interest Payment Date will be
paid if other than in the manner provided in Section 307;
(5) if other than the Trustee, the identity of the Security Registrar and,
if other than as specified in Section 1002, the place or places where the
principal of (and premium, if any) and interest, if any, on Securities of the
series shall be payable, provided, however, that, at the option of the Company,
any interest on the Securities of any series may be paid by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security Register;
(6) if the Securities of such series are redeemable, the period or periods
within which, the price or prices at which and the terms and conditions upon
which Securities of the series may be redeemed, in whole or in part, at the
option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase Securities
of the series pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the price or
prices at which and the terms and conditions upon which Securities of the series
shall be redeemed or purchased, in whole or in part, pursuant to such
obligation;
(8) if other than denominations of $5,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(10) additional covenants of the Company, if any, for the benefit of the
Holders of Securities of such series and additional Events of Default, if any,
with respect to Securities of such series;
(11) if the provisions of Section 401(4) relating to satisfaction and
discharge of Securities more than one year prior to their Stated Maturity or
redemption shall apply to Securities of the series, a statement of such fact;
(12) if other than Dollars, the coin or currency in which the Securities of
that series are denominated (including, but not limited to any Foreign Currency
or ECU);
(13) if the amount of payments of principal (and premium, if any) or
interest, if any, on the Securities of the series may be determined with
reference to an index, the manner in which such amounts shall be determined;
(14) provisions, if any, for the defeasance of Securities of the series;
(15) the date as of which any Global Security representing any Outstanding
Debt Securities of the series shall be dated if other than the date of original
issuance of the first Security of the series to be issued;
(16) whether the Securities of the series shall be issued in whole or in
part in the form of one or more Global Securities and, in such case, the
Depositary for such Global Security or Securities; and
(17) any other terms, conditions, rights and preferences (or limitations on
such rights and preferences) relating to the Securities of such series.
All Securities of any one series shall be substantially identical except as
to denomination and the rate or rates of interest, if any, the date or dates
from which interest shall accrue and maturity and except as may otherwise be
provided in or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable in registered form without
coupons in such denominations as shall be specified as contemplated by Section
301. In the absence of any such provisions with respect to the Securities of any
series, the Securities of such series shall be issuable in denominations of
$5,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by any two of its
Chairman of the Board, its President, any Vice President, its Treasurer or its
Secretary, under its corporate seal reproduced thereon. 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 to the Trustee or an Authenticating Agent for
authentication Securities of any series executed by the Company, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee or such Authenticating Agent in accordance with the Company Order shall
authenticate and deliver such Securities. If all the Securities of any series
are not to be issued at one time, and if the Board Resolution, Officers'
Certificate or supplemental indenture establishing such series shall so permit,
such Company Order may set forth procedures acceptable to the Trustee for the
issuance of such Securities and the determination of the terms of particular
Securities of such series such as interest rate, maturity date, date of issuance
and date from which interest shall accrue. If the form or terms of the
Securities of the series have been established in or pursuant to one or more
Board Resolutions as permitted by Sections 201 and 301, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall receive, and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of Counsel
stating,
(a) if the form of such Securities has been established by or pursuant to
Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture; and
(b) if the terms of such Securities have been established by or pursuant to
Board Resolution as permitted by Section 301, that such terms have been
established in conformity with the provisions of this Indenture.
If all the Securities of any series are not to be issued at one time, it
shall not be necessary to deliver an Opinion of Counsel at the time of issuance
of each Security, but such Opinion of Counsel, with appropriate modifications,
may instead be delivered at or prior to the time of issuance of the first
Security of such series.
The Trustee or any Authenticating Agent shall have the right to
authenticate and deliver any of such Securities if it, being advised by counsel,
determines that such action may not lawfully be taken, or if it, its board of
directors, trustees, executive committee, or a trust committee of directors or
trustees and/or vice presidents shall determine in good faith that such action
would expose it to personal liability to existing Holders or if the issue of
such Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee.
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 or an Authenticating Agent by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee or an Authenticating Agent 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.
nominations. Until so exchanged the temporary Securities of any series
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of such series.
SECTION 305. Registration, Registration of Transfer and
Exchange.
With respect to each series of Securities, the Company shall cause to be
kept at one of the offices or agencies maintained pursuant to Section 1002 a
register (the register maintained in such office and in any other office or
agency established by the Company in a Place of Payment being herein sometimes
collectively 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 of that series and of transfers of Securities of that
series. Pursuant to Section 301, the Company shall appoint, with respect to
Securities of each series, a "Security Registrar" for the purpose of registering
such Securities and transfers and exchanges of such Securities as herein
provided. In the event the Trustee shall not be Security Registrar, it shall
have the right to examine the Security Register at all reasonable times.
Upon surrender for registration of transfer of any Security of any series
at the designated office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee or an Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series, of any authorized
denominations and of a like tenor, aggregate principal amount and Stated
Maturity.
At the option of the Holder, Securities of any series (except Global
Securities) may be exchanged for other Securities of the same series, of any
authorized denominations and of a like tenor, aggregate principal amount and
Stated Maturity, upon surrender of the Securities to be exchanged at such office
or agency and upon payment, if the Company shall so require, of the charges
hereinafter provided. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee or an Authenticating Agent 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 the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Trustee or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar (and, if
so required by the Trustee, to the Trustee) 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 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before the day of selection for redemption of Securities of
that series selected for redemption under Section 1103 and ending at the close
of business on the day of the mailing of notice of redemption, 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 306. Mutilated, Destroyed, Lost and Stolen Securities.
If there shall be delivered to the Company and the Trustee (i) a mutilated
Security or 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 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 or an Authenticating Agent shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new
Security of the same series and of like tenor, principal amount and Stated
Maturity and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, 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 of any series 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
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
persons in whose names the Securities of such series (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 of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. 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 of Securities of such series
at his address as it appears in the Security Register, not less than l0 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the persons in whose names the
Securities of such series (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 on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice 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.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee, any Paying Agent, any Authenticating Agent and any other
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
307) interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee,
any Paying Agent, any Authenticating Agent nor any other agent of the Company or
the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment 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 shall be destroyed by the Trustee
and the Trustee shall deliver a certificate of such destruction to the Company,
unless the Company by Company Order shall direct that such cancelled Securities
be returned to it.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 311. Global Securities.
If the Company shall establish pursuant to Section 301 that the Securities
of a series are to be issued in whole or in part in the form of one or more
Global Securities, then the Company shall execute and the Trustee shall, in
accordance with Section 303 and the Company Order with respect to such series,
authenticate and deliver one or more Global Securities in temporary or permanent
form that (i) shall represent and shall be denominated in an amount equal to the
aggregate principal amount of the outstanding Securities of such series to be
represented by one or more Global Securities, (ii) shall be registered in the
name of the Depositary for such Global Security or Securities or the nominee of
such depositary, (iii) shall be delivered by the Trustee to such depositary or
pursuant to such depositary's instruction, and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Securities in definitive form, this Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor depositary or
a nominee of such successor Depositary". The Trustee shall deal with the
Depositary and its participants as representatives of the Beneficial Owners of
the Global Securities for purposes of exercising the rights of the Holders
hereunder and the rights of the Beneficial Owners of the Global Securities shall
be limited to those established by law and agreements between such Beneficial
Owners and the Depositary and its participants. Beneficial Owners shall not be
entitled to certificates for Global Securities as to which they are the
Beneficial Owners. Requests and directions from, and votes of, such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Beneficial Owners.
Notwithstanding any other provision of this Section or Section 305, unless
and until it is exchanged in whole or in part for Securities in definitive form,
a Global Security representing all or a portion of the Securities of a series
may not be transferred except as a whole by the Depositary for such series to a
nominee of such depositary or by a nominee of such depositary to such depositary
or another nominee of such depositary or by such depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
depositary. The Beneficial Owner's ownership of Securities shall be recorded on
the records of a participant of the Depositary that maintains such Beneficial
Owner's account for such purpose and the participant's record ownership of such
Securities shall be recorded on the records of the Depositary.
If at any time the Depositary for the Securities of a series notifies the
Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for Securities of a
series shall no longer be registered or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, the
Company shall appoint a successor Depositary with respect to the Securities of
such series. If a successor Depositary for the Securities of such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, the Company will execute, and the Trustee,
upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver, Securities
of such series in definitive form in an aggregate principal amount equal to the
principal amount of the Global Security or Securities representing such series
in exchange for such Global Security or Securities.
The Company may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by such Global Security or Securities. In such
event, the Company will execute, and the Trustee, upon receipt of a Company
Order for the authentication and delivery of definitive Securities of such
series, will authenticate and deliver, Securities of such series in definitive
form and in an aggregate principal amount equal to the principal amount of the
Global Security or Securities representing such series in exchange for such
Global Security or Securities.
If specified by the Company pursuant to Section 301 with respect to
Securities of a series, the Depositary for such series of Securities may
surrender a Global Security for such series of Securities in exchange in whole
or in part for Securities of such series in definitive form on such terms as are
acceptable to the Company and such Depositary. Thereupon, the Company shall
execute and the Trustee shall authenticate and deliver, without charge,
(i) to each Person specified by the Depositary a new Security or Securities
of the same series, of any authorized denomination as requested by such Person
in aggregate principal amount equal to and in exchange for such Person's
beneficial interest in the Global Security; and
(ii) to the Depositary a new Global Security in a denomination equal to the
difference, if any, between the principal amount of the surrendered Global
Security and the aggregate principal amount of Securities delivered to Holders
thereof.
Upon the exchange of a Global Security for Securities in definitive form,
such Global Security shall be cancelled by the Trustee. Securities issued in
exchange for a Global Security pursuant to this Section 311 shall be registered
in such names and in such authorized denominations as the Depositary for such
Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Securities to the persons in whose names such Securities are so registered.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Securities of any
Series.
The Company shall be deemed to have satisfied and discharged the entire
indebtedness on all the Securities of any particular series and the Trustee,
upon Company request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of such indebtedness, when
(1) either
(A) all Securities of such series 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 306 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 the last paragraph of Section 1003) have been
delivered to the Trustee for cancellation; or
(B) with respect to all Outstanding Securities of such series described in
(A) above not theretofore delivered to the Trustee for cancellation,
(i) The Company has deposited or caused to be deposited with the Trustee as
trust funds in trust an amount sufficient to pay and discharge the entire
indebtedness on all such Outstanding Securities of such series for principal
(and premium, if any) and interest to the Stated Maturity or any Redemption Date
as contemplated by Section 403, as the case may be; or
(ii) The Company has deposited or caused to be deposited with the Trustee
as obligations in trust such amount of direct obligations of, or obligations the
principal of and interest on which are fully guaranteed by, the United States of
America (other than obligations subject to prepayment, redemption or call prior
to their stated maturity) as will, together with the predetermined and certain
income to accrue thereon (without consideration of any reinvestment thereof), be
sufficient to pay and discharge when due the entire indebtedness on all such
Outstanding Securities of such series for principal (and premium, if any) and
interest to the Stated Maturity or any Redemption Date as contemplated by
Section 403, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable with
respect to the Securities of such series;
(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 the entire
indebtedness on all Securities of such series have been complied with; and
(4) if the entire indebtedness on the Outstanding Securities of such series
is to be satisfied and discharged pursuant to Section 401(l)(B) above, then (i)
the Company shall have specified the applicability (as provided in Section 301)
of this Section 401(4) to the Securities of such series, (ii) the Company shall
have given, not later than the date of such deposit, notice of such deposit to
the Holders of Securities of such series and (iii) the Trustee shall have
received an Opinion of Counsel (which Counsel shall be recognized tax counsel)
stating that, (x) the Company has received from the Internal Revenue Service a
ruling or (y) since the date of the Indenture, there has been a change in the
applicable federal income tax law, including by means of a Revenue Ruling
published by the Internal Revenue Service, in either case to the effect that,
and based thereon such Opinion of Counsel will confirm that the deposit of funds
or obligations and the satisfaction and discharge of indebtedness on the
Securities of such series pursuant to this Section 401 will not result in
recognition by the Holders of income, gain or loss for federal income tax
purposes (other than income, gain or loss which would have been recognized in
like amount and at a like time absent such deposit, satisfaction and discharge),
provided that the Company will be discharged from the requirements of Article 8
if (i) it has satisfied all of the requirements for satisfaction and discharge
of the indebtedness on the Outstanding Securities pursuant to Section 401(1)(B)
except for the delivery of the Opinion of Counsel described above, and (ii) the
Trustee shall have received an Opinion of Counsel stating that the Holders will
not recognize income, gain or loss for federal income tax purposes as a result
of the deposit of such funds or obligations and will be subject to federal tax
in the same amounts, in the same manner and at the same times as would have been
the case if such deposit of funds or obligations had not occurred.
Upon the satisfaction of the conditions set forth in this Section 401 with
respect to all the Securities of any series, the terms and conditions of such
series, including the terms and conditions with respect thereto set forth in
this Indenture, shall no longer be binding upon, or applicable to, the Company,
and the Holders of the Securities of such series shall look for payment only to
the funds or obligations deposited with the Trustee pursuant to Section
401(l)(B); provided, however, that, in no event shall the Company be discharged
(a) from any payment obligations in respect of Securities of such series which
are deemed not to be Outstanding under clause (iii) of the definition thereof if
such obligations continue to be valid obligations of the Company under
applicable law, (b) from any obligations under Section 607 or the last paragraph
of Section 1003, and (c) from any obligations under Section 305 and 306 (except
that Securities of such series issued upon registration of transfer or exchange
or in lieu of mutilated, lost, destroyed or stolen Securities shall not be
obligations of the Company), and Section 701.
SECTION 402. Satisfaction and Discharge of Indenture.
Upon compliance by the Company with the provisions of Section 401 as to the
satisfaction and discharge of each series of Securities issued hereunder, this
Indenture shall cease to be of any further effect (except as otherwise provided
herein). Upon Company Request (and at the expense of the Company), the Trustee
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture. In the event there are two or more Trustees hereunder, then the
effectiveness of any such instrument shall be conditioned upon receipt of such
instruments from all Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, any
obligations of the Company under Sections 305, 306, 607 and 701 and the last
paragraph of Section 1003, and of the Trustee under Sections 403 and 614 and the
last two paragraphs of Section 1003, shall survive.
SECTION 403. Application of Trust Money.
Subject to the provisions of the last two paragraphs of Section 1003, all
money and obligations deposited with the Trustee pursuant to Section 401 shall
be held irrevocably in trust and shall be made under the terms of an escrow
trust agreement in form and substance satisfactory to the Trustee. Such money
and obligations shall be applied by the Trustee, in accordance with the
provisions of the Securities, this Indenture and such escrow trust agreement, 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 of (and premium, if any) and interest, if
any, on the Securities for the payment of which such money and obligations have
been deposited with the Trustee (but such money need not be segregated from
other funds except to the extent required by law). If Securities of any series
are to be redeemed prior to their Stated Maturity, whether pursuant to any
optional redemption provisions or in accordance with any mandatory sinking fund
requirement, the Company shall make such arrangements as are satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series
when it becomes due and payable, and continuance of such default for a period of
30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or agreement of
the Company in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with or which has expressly been included in this Indenture solely for the
benefit of series of Securities other than that series), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors; or
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case;
(B) appoints a Custodian of the Company or for all or substantially all of
its property, or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
(7) any other Event of Default provided with respect to the Securities of
that series pursuant to Section 301 or in a supplemental indenture.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Securities
of that series may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all of the Securities
of that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified portion) shall become immediately due and
payable.
Upon payment of such amount, all obligations of the Company in respect of
the payment of principal of the Securities of such series shall terminate.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest, if any, on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates prescribed therefor in such
Securities,
(C) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate or rates, if any, prescribed therefor in such
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 with respect to Securities of that series, other
than the non-payment of the principal of Securities of that series which have
become due solely by such declaration of acceleration, have been cured, or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security of any
series when such interest becomes due and payable and such default continues for
a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any,
on) any Security of any series at the Maturity thereof, the Company will, upon
demand of the Trustee, pay to it, for the benefit of the Holders of Securities
of such series, the whole amount then due and payable on Securities of such
series for principal (and premium, if any) and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal (and premium, if any) and on any overdue interest, at the rate or
rates, if any, prescribed therefor in such 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 amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such 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 such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 504. 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 of
acceleration 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 (or with
respect to Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such Securities), 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 607. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. 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 506. Application of Money Collected.
Any money 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 607;
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest, if any, 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, if
any, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) An Event of Default shall have occurred and be continuing with respect
to the Securities of that series and such Holder shall have previously given
written notice thereof to the Trustee;
(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable 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 of that series; it being understood and
intended that no one or more of such Holders shall have any right in any manner
whatever by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holder or to obtain or to
seek to obtain priority or preference over any other Holder or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all Holders of Securities of such series.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest, if any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 509. 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 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 510. 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
306, 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 511. 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 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction,
(3) such direction is not unduly prejudicial to the rights of other
Holders, and
(4) such direction would not involve the Trustee in personal liability.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest, if
any (subject to the provisions of Section 502), on any Security of such series,
or
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series 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 the Securities of such series under this Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
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 at
trial and on appeal, 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 of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security on or after the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. 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
certificate or opinion which by any provision hereof is specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not it conforms 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 willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken,
suffered 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 of any series, as provided in Section 512, relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(4) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) Whether or not herein expressly so provided, every provision of this
Indenture relating to the conduct of or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that except in
the case of a default in the payment of the principal of (or premium, if any) or
interest, if any, on any Security of such series, in the payment of any sinking
fund installment with respect to Securities of such series or in the payment of
the Redemption Price of any Securities as to which notice of redemption has been
given, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 501(4) with respect to Securities of such series,
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default
with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(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;
(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, including any Authenticating
Agent, appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except certificates of
authentication, shall be taken as the statements of the Company, and neither the
Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, the Security
Registrar or any other agent of the Company or the Trustee, in their individual
or any other capacity, may become the owner or pledgee of Securities and,
subject to Sections 608 and 613, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee or any Paying Agent in trust hereunder need not
be segregated from other funds except to the extent required by law. Neither the
Trustee nor any paying Agent shall be subject to any liability for interest on
any money received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(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 provision 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 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 and its agents for, and to hold them harmless
against, any loss, liability or expense incurred without negligence or bad faith
on their part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their 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 payment of principal (or premium, if any) or interest, if any,
on Securities.
The provisions of this Section 607 shall survive the resignation of the
Trustee or the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a default specified in Section 501(5) or (6) the
expenses are intended to constitute expenses of administration under any
Bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it shall,
within 90 days after ascertaining that it has such conflicting interest, either
eliminate such conflicting interest or resign with respect to the Securities of
that series in the manner and with the effect hereinafter specified in this
Article.
(b) In the event that the Trustee shall fail to comply with the provisions
of Subsection (a) of this Section with respect to the Securities of any series,
the Trustee shall, within l0 days after the expiration of such 90-day period,
transmit by mail to all Holders of Securities of that series, as their names and
addresses appear in the Security Register, notice of such failure.
(c) For the purposes of this Section, the Trustee shall be deemed to have a
conflicting interest with respect to the Securities of any series if
(1) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any series other than that series or is trustee under
another indenture under which any other securities, or certificates of interest
or participation in any other securities, of the Company are outstanding, unless
such other indenture is a collateral trust indenture under which the only
collateral consists of Securities issued under this Indenture, provided that
there shall be excluded from the operation of this paragraph this Indenture with
respect to the Securities of any series other than that series or any indenture
or indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if
(i) this Indenture and such other indenture or indentures are wholly
unsecured and such other indenture or indentures are hereafter qualified under
the Trust Indenture Act, unless the Commission shall have found and declared by
order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act
that differences exist between the provisions of this Indenture with respect to
Securities of that series and one or more other series or the provisions of such
other indenture or indentures which are so likely to involve a material conflict
of interest as to make it necessary in the public interest or for the protection
of investors to disqualify the Trustee from acting as such under this Indenture
with respect to the Securities of that series and such other series or under
such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on application
to the Commission and after opportunity for hearing thereon, that trusteeship
under this Indenture with respect to the Securities of that series and such
other series or such other indenture or indentures is not so likely to involve a
material conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the Trustee from acting as such
under this Indenture with respect to the Securities of that series and such
other series or under such other indenture or indentures;
(2) the Trustee or any of its directors or executive officers is an obligor
upon any Securities of such series or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with the
Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of the
Company, or of an underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting, except that (i) one
individual may be a director or an executive officer, or both, of the Trustee
and a director or an executive officer, or both, of the Company but may not be
at the same time an executive officer of both the Trustee and the Company; (ii)
if and so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer, or
both, of the Trustee and a director of the Company; and (iii) the Trustee may be
designated by the Company or by any underwriter for the Company to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent or depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this Subsection, to act as trustee, whether under
an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is beneficially
owned either by the Company or by any director, partner or executive officer
thereof, or 20% or more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or 10% or more of the voting
securities of the Trustee is beneficially owned either by an underwriter for the
Company or by any director, partner or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), (i) 5% or more of the voting securities, or 10% or more of any other
class of security, of the Company not including the Securities issued under this
Indenture and securities issued under any other indenture under which the
Trustee is also trustee, or (ii) 10% or more of any class of security of an
underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), 5% or more of the voting securities of any person who, to the
knowledge of the Trustee, owns 10% or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect common control
with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), 10% or more of any class of security of any person who, to the
knowledge of the Trustee, owns 50% or more of the voting securities of the
Company; or
(9) the Trustee owns, on March 1 in any calendar year, in the capacity of
executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of 25%
or more of the voting securities, or of any class of security, of any person,
the beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7) or (8) of this
Subsection. As to any such securities of which the Trustee acquired ownership
through becoming executor, administrator or testamentary trustee of an estate
which included them, the provisions of the preceding sentence shall not apply,
for a period of two years from the date of such acquisition, to the extent that
such securities included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after March 1 in each
calendar year, the Trustee shall make a check of its holdings of such securities
in any of the above-mentioned capacities as of such March 1. If the Company
fails to make payment in full of the principal of (or premium, if any) or
interest, if any, on any of the Securities when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the Trustee shall
make a prompt check of its holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding the foregoing provisions of this
paragraph, all such securities so held by the Trustee, with sole or joint
control over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned by the
Trustee for the purposes of paragraphs (6), (7) and (8) of this Subsection with
respect to Securities of such series.
In determining whether the Trustee has a conflicting interest with respect
to any series of Securities under this Subsection, each other series of
Securities will be treated as having been issued under an indenture other than
this Indenture.
The specification of percentages in paragraphs (5) through (9), inclusive,
of this Subsection shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this Subsection
only, (i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed to be "in default"
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (iii) the Trustee shall not be deemed to be
the owner or holder of (A) any security which it holds as collateral security,
as trustee or otherwise, for an obligation which is not in default as defined in
clause (ii) above, or (B) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (C) any security
which it holds as agent for collection, or as custodian, escrow agent or
depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter," when used with reference to the Company, means
every person who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has participated or has had
a direct or indirect participation in any such undertaking, or has participated
or has had a participation in the direct or indirect underwriting of any such
undertaking, but such term shall not include a person whose interest was limited
to a commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
(2) The term "director" means any director of a corporation or any
individual performing similar functions with respect to any organization,
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an unincorporated organization or a
government or political subdivision thereof. As used in this paragraph, the term
"trust" shall include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" means any security presently entitling the
owner or holder thereof to vote in the direction or management of the affairs of
a person, or any security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the direction or
management of the affairs of a person.
(5) The term "Company" means any obligor upon the Securities.
(6) The term "executive officer" means the president, every vice president,
every trust officer, the cashier, the secretary and the treasurer of a
corporation, and any individual customarily performing similar functions with
respect to any organization whether incorporated or unincorporated, but shall
not include the chairman of the board of directors.
(e) The percentages of voting securities and other securities specified in
this Section shall be calculated in accordance with the following provisions:
(1) A specified percentage of the voting securities of the Trustee, the
Company or any other person referred to in this Section (each of whom is
referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate votes which the
holders of all the outstanding voting securities of such person are entitled to
cast in the direction or management of the affairs of such person.
(2) A specified percentage of a class of securities of a person means such
percentage of the aggregate amount of securities of the class outstanding.
(3) The term "amount," when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of shares
if relating to capital shares and the number of units if relating to any other
kind of security.
(4) The term "outstanding" means issued and not held by or for the account
of the issuer. The following securities shall not be deemed outstanding within
the meaning of this definition.
(i) securities of an issuer held in a sinking fund relating to securities
of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to another
class of securities of the issuer, if the obligation evidenced by such other
class of securities is not in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(5) A security shall be deemed to be of the same class as another security
if both securities confer upon the holder or holders thereof substantially the
same rights and privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a single indenture,
differences in the interest rates or maturity dates of various series thereof
shall not be deemed sufficient to constitute such series different classes; and
provided, further, that, in the case of unsecured evidences of indebtedness,
differences in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes, whether or not
they are issued under a single indenture
SECTION 609. 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,
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 $50,000,000 subject to supervision or examination by Federal, State or
District of Columbia authority. If such 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.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee or Trustees pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee or Trustees in
accordance with the applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time the Trustee shall fail to comply with Section 608(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, the Company by a Board
Resolution may remove the Trustee with respect to the Securities of such series
or, subject to Section 514, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee with respect to the Securities of such series and the
appointment of a successor
Trustee.
(e) If at any time:
(1) the Trustee shall cease to be eligible under Section 609 and shall fail
to resign 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 become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to all Securities, or (ii) subject to Section 514, any
holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company with respect to such series. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders of the Securities of such series and
accepted appointment in the manner required by Section 611, any Holder who has
been a bona fide holder of a Security of such series 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 with
respect to the Securities of such series.
(g) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all series of Securities, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges due pursuant to Section 607, 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 to the lien provided in Section 607.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all series of
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities or that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or these series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. 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 613. 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 month 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 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 month 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 Code 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 month 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 month 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 month 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, 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 Code 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 Code 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 Code 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 proceeding 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.
Any Trustee which has resigned or been removed after the beginning of such
three month 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 month 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 month 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 an indenture, transfer agent, registrar, custodian, escrow
agent, 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
(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 premium, if any) or interest, if any, on any of the Securities
or upon the other indenture securities when and as such principal (or premium,
if any) or interest, if any, 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 the special account
provided for in this Section;
(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 of 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 Code" means the United States Bankruptcy
Code or Title 11 of the United States Code.
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate and deliver Securities of such series with respect to which it has
been so designated, and Securities so authenticated and delivered shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a bank or trust company or corporation organized and doing business and
in good standing under the laws of the United States, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal, State or District of Columbia
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign with respect to one or more series of
Securities at any time by giving written notice thereof to the Trustee and to
the Company. The Trustee may at any time terminate the agency of an
Authenticating Agent with respect to one or more series of Securities by giving
written notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, in accordance with the
provisions of Section 607. The provisions of Sections 104, 111, 603, 604 and 605
shall be applicable to any Authenticating Agent.
Pursuant to each appointment made under this Section, the Securities of
each series covered by such appointment may have endorsed thereon, in lieu of
the Trustee's certificate of authentication, an alternate certificate of
authentication in substantially the following form:
This is one of the Securities, of the series designated herein, issued
under the within-mentioned Indenture.
The First National Bank of Chicago
By
as Authenticating Agent,
By
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee with
respect to the Securities of each series (a) semi-annually, either (i) not later
than June 30 and December 31 in each year in the case of Original Issue Discount
Securities which by their terms bear interest only after Maturity, or (ii) not
later than 15 days after each Regular Record Date in the case of Securities of
any other series, if and so long as Securities of such series are Outstanding,
and (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Company of such request, a list in such form as the
Trustee may reasonably require containing all the information in the possession
or control of the Company, or any of its Paying Agents other than the Trustee,
as to the names and addresses of the Holders obtained since the date as of which
the next previous list, if any, was furnished; provided, however, that any such
list may exclude names and addresses received by the Trustee in its capacity as
Security Registrar if it shall be so acting. Any such list may be dated as of a
date not more than 15 days prior to the time such information is furnished or
caused to be furnished and need not include information received after such
date.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar or Paying Agent, if so acting.
The Trustee may (i) destroy any list furnished to it as provided in Section
701 upon receipt of a new complete list so furnished, (ii) destroy any
information received by it as Paying Agent or Security Registrar (if so acting)
hereunder upon delivering to itself as Trustee, not earlier than 45 days after
June 30 and December 31 of each year, a list containing the names and addresses
of the Holders obtained from such information since the delivery of the next
previous list, if any, and (iii) destroy any list delivered to itself as Trustee
which was compiled from information received by it as Paying Agent or Security
Registrar (if so acting) hereunder upon the receipt of a new complete list so
delivered.
(b) If three or more Holders of Securities of any series (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 of such series
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 of Securities of such series or with Holders of all Securities with
respect to their rights under this Indenture or under such 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 702(a), or
(ii) inform such applicants as to the approximate number of Holders of
Securities of such series or all Securities as the case may be whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with Section 702(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 of Securities of such series or all Securities as the case may be
whose name and address appear in the information preserved at the time by the
Trustee in accordance with Section 702(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
mailing would be contrary to the best interest of the Holders of Securities of
such series or all Securities as the case may be 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 Paying Agent nor the Security Registrar nor any agent of any of them shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of holders in accordance with Section 702(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 702(b).
SECTION 703. Reports by Trustee.
(a) Within 60 days after March 1 of each year commencing with the March 1
following the date of this Indenture, if and so long as any Securities are
Outstanding hereunder, the Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Security Register, a brief report dated
as of such March 1 that complies with Trust Indenture Act Para. 313(a). The
Trustee shall also comply with Trust Indenture Act Para. 313(b).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any securities
exchange.
SECTION 704. 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 as may be required from time
to time by such rules and regulations; and
(3) 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 EIGHT
RESTRICTIVE COVENANTS; SUCCESSOR CORPORATION
SECTION 801. Certain Definitions.
"Consolidated Assets" means, at any date of determination, the total assets
of the Company and its Consolidated Subsidiaries determined in accordance with
generally accepted accounting principles in effect from time to time.
"Consolidated Net Worth" means, at any date of determination, all amounts
which would be included on a balance sheet of the Company and its Consolidated
Subsidiaries under stockholders equity determined in accordance with generally
accepted accounting principles in effect from time to time.
"Consolidated Subsidiaries" means all Subsidiaries of the Company that are
required to be consolidated with the Company for financial reporting purposes in
accordance with generally accepted accounting principles in effect from time to
time.
"Debt" means (i) all debt, obligations and other liabilities of the Company
and its Subsidiaries which are, at the date as of which Debt is to be
determined, includable as liabilities in a consolidated balance sheet of the
Company and its Subsidiaries, other than (x) accounts payable and accrued
expenses, (y) advances from clients obtained in the ordinary course of the
relocation management services business of the Company and its Subsidiaries and
(z) current and deferred income taxes and other similar liabilities, plus (ii)
without duplicating any items included in Debt pursuant to the foregoing clause
(i), the maximum aggregate amount of all liabilities of the Company or any of
its Subsidiaries under any guaranty, indemnity or similar undertaking given or
assumed of, or in respect of, the indebtedness, obligations or other
liabilities, assets, revenues, income or dividends of any Person other than the
Company or one of its Subsidiaries and (iii) all other obligations or
liabilities of the Company or any of its Subsidiaries in relation to the
discharge of the obligations of any Person other than the Company or one of its
Subsidiaries.
"Lien" means any mortgage, pledge, lien, security interest or encumbrance.
"Material U.S. Subsidiary" means any Subsidiary of the Company which
together with its Subsidiaries at the time of determination had assets
constituting 10% or more of Consolidated Assets, accounts for 10% or more of
Consolidated Net Worth, or accounts for 10% or more of the revenues of the
Company and its Consolidated Subsidiaries for the Rolling Period immediately
preceding the date of determination.
"Rolling Period" means, with respect to any fiscal quarter, such fiscal
quarter and the three immediately preceding fiscal quarters considered as a
single accounting period.
"Special Purpose Vehicle Subsidiary" shall mean PHH Caribbean Leasing, Inc.
and any subsidiary engaged in the fleet-leasing management business which (i)
is, at any one time, a party to one or more lease agreements with only one
lessee and (ii) finances, at any one time, its investment in lease agreements on
vehicles with only one lender, which lender may be the Company.
SECTION 802. Limitation on Liens.
The Company shall not, and it shall not permit any Material U.S. Subsidiary
to, incur any Lien to secure Debt without equally and ratably securing the
Securities, except the following:
(a) deposits under worker's compensation, unemployment insurance and social
security laws or to secure statutory obligations or surety or appeal bonds or
performance or other similar bonds in the ordinary course of business, or
statutory liens of landlords, carriers, warehousemen, mechanics and materialmen
and other similar Liens, in respect of liabilities which are not yet due or
which are being contested in good faith by appropriate proceedings, Liens for
taxes not yet due and payable, and Liens for taxes due and payable, the validity
or amount of which is currently being contested in good faith by appropriate
proceedings and as to which foreclosure and other enforcement proceedings shall
not have been commenced (unless fully bonded or otherwise effectively stayed);
(b) purchase money Liens granted to the vendor or Person financing the
acquisition of property, plant or equipment if (i) limited to the specific
assets acquired and, in the case of tangible assets, other property which is an
improvement to or is acquired for specific use in connection with such acquired
property or which is real property being improved by such acquired property; and
(ii) the debt secured by such Lien is the unpaid balance of the acquisition cost
of the specific assets on which the Lien is granted.
(c) Liens upon real and/or personal property, each of which Liens existed
on such property before the time of its acquisition and was not created in
anticipation thereof; provided that no such Lien shall extend to or cover any
property of the Company or a Material U.S. Subsidiary other than the respective
property so acquired and improvements thereon;
(d) Liens arising out of attachments, judgments or awards as to which an
appeal or other appropriate proceedings for contest or review are promptly
commenced (and as to which foreclosure and other enforcement proceedings (i)
shall not have been commenced (unless fully bonded or otherwise effectively
stayed) or (ii) in any event shall be promptly fully bonded or otherwise
effectively stayed);
(e) Liens securing Debt of any Material U.S. Subsidiary to the Company;
(f) Liens covering only the property or other assets of any Special Purpose
Vehicle Subsidiary and securing only Debt of such Special Purpose Vehicle
Subsidiary;
(g) mortgage liens existing on homes acquired by the Company or any of its
Material U.S. Subsidiaries in the ordinary course of their relocation management
business;
(h) other Liens incidental to the conduct of the business of the Company or
its Subsidiaries or the ownership of their property and other assets, which do
not secure any Debt and did not otherwise arise in connection with the borrowing
of money or the obtaining of advances or credit and which do not, in the
aggregate, materially detract from the value of the property or other assets of
the Company or its Subsidiaries or materially impair the use thereof in the
operation of their businesses;
(i) Liens covering only the property or other assets of any Subsidiary
which principally transacts business outside of the United States;
(j) Liens existing prior to the date of this Indenture and any extensions
or renewals thereof;
(k) Liens incurred in the ordinary course of business to secure Debt
utilized to fund net investments in leases and leased vehicles, equity advances
on homes and other assets under management programs;
and
(l) Liens to secure Debt not otherwise permitted by any of the clauses (a)
through (k) if, at the time any such Liens are incurred, the aggregate amount of
Debt secured by such Liens plus the sum of all outstanding sale-leaseback
transactions permitted hereunder does not exceed $125,000,000.
SECTION 803. Limitation on Sale-Leaseback Transactions.
The Company shall not, and it shall not permit any Material U.S. Subsidiary
to, enter into any arrangement whereby in contemporaneous transactions the
Company or any of its Material U.S. Subsidiaries sells essentially all of its
right, title and interest in a material asset and the Company or any of its
Subsidiaries acquires or leases back the right to use such property except that
the Company may enter into sale-leaseback transactions relating to assets not in
excess of $100,000,000 in the aggregate on a cumulative basis.
SECTION 804. Intentionally Omitted
SECTION 805. No Lien Created, etc.
This Indenture and the Securities do not create a Lien, charge or
encumbrance on any property of the Company or any Subsidiary.
A Debt or lease obligation shall be counted only once even if more than one
person is responsible for the obligation.
<PAGE>
SECTION 806. When Company May Merge, etc.
The Company shall not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless the resulting,
surviving or transferee corporation assumes by supplemental indenture all the
obligations of the Company under the Securities and this Indenture. Thereafter
all such obligations of the predecessor corporation shall terminate.
SECTION 807. When Securities Must Be Secured.
If upon any such consolidation, merger or transfer any property or assets
of the Company or a Restricted Subsidiary would become subject to an attaching
Lien that secures Debt, then before the consolidation, merger or transfer
occurs, the Company shall secure the Securities equally and ratably with or
prior to the Debt secured by the attaching Lien. However, the Company need not
comply with this Section if the Company or a Restricted Subsidiary could secure
such Debt by a Lien on the property of the Company or any Restricted Subsidiary
without equally and ratably securing the Securities.
SECTION 808
The Trustee, subject to the provisions of Sections 601 and 603, may receive
an Opinion of Counsel as conclusive evidence that any such consolidation,
merger, sale or conveyance, and any such assumption, complies with the
provisions of this Article VIII.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holder, 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 corporation 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
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; provided, however, that in
respect of any such additional covenant, such supplemental indenture may provide
for a particular period of grace after default in the performance of such
covenant (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default; or
(3) to add any additional Events of Default; or
(4) add to or change or eliminate any of the provisions of this Indenture
to extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal, and
with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(6) to secure the Securities pursuant to the requirements of Sections 802
or 807 or otherwise; or
(7) to establish the form or terms of Securities of any series as permitted
by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 611(b); or
(9) 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,
provided such action shall not adversely affect the interests of the Holders of
Securities of any series in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series (each such series voting as
a separate class) affected by such supplemental indenture, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment of
principal of or 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 modify the manner of determination of the rate of
interest thereon so as to affect adversely the interest of such Holder or reduce
the amount of the principal of an Original Issue Discount Security that would be
due and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, or change any 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,
on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding Securities
of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1006, 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, provided, however,
that this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to the "Trustee" and concomitant changes in
this Section and Section 1006, or the deletion of this proviso, in accordance
with the requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
The Trustee may in its discretion determine whether or not any Securities
would be affected by any supplemental indenture and any such determination shall
he conclusive upon the Holders of all Securities of any series. The Trustee
shall not be liable for any such determination made in good faith.
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 903. 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 601) 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 and that such supplemental indenture, when
executed and delivered by the Company, will constitute a valid and binding
obligation of the Company in accordance with its terms. 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 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. 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 906. Reference in Securities to Supplemental Indentures.
Securities of any series 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 of any series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee or any Authenticating Agent in exchange for Outstanding Securities of
such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay the
principal of (and premium, if any) and interest, if any, on the Securities of
each series in accordance with the terms of the Securities of such series and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will cause to be maintained in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. With respect to the Securities of any series such office or agency and
each place of Payment shall be as specified as contemplated in Section 301. In
the absence of any such provisions with respect to the Securities of any series
(i) the place of payment for such securities shall be the Borough of Manhattan,
City of New York, New York, and (ii) such office or agency in such Place of
Payment shall be the Corporate Trust Office of the Trustee therein. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the 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 the Borough of Manhattan, City of New York, New York)
where the Securities of one or more series 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 each
place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest, if any, on any of the Securities
of that series, segregate and hold in trust for the benefit of the persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest, if any, 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 for any series of
Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest, if any, on any Securities of that series, deposit
with a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest, if any, 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 for any
series of Securities 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, if any, on Securities of that series in trust for
the benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities of that series) in the making of any payment of
principal (and premium, if any) or interest, if any, on the Securities of that
series; 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. Upon the satisfaction and discharge of the indebtedness in respect of all
Outstanding Securities of any series all sums then held by any Paying Agent
(other than the Trustee) in respect thereof shall, upon demand of the Company,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such money.
The Trustee and any Paying Agent shall promptly pay to the Company upon
Company Request any money or securities held by them at any time in excess of
amounts necessary to satisfy amounts payable to the Holders, the Trustee and the
Paying Agent.
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, if any, on any Security of any series and remaining unclaimed for
two years after such principal (and premium, if any) or interest, if any, has
become due and payable shall, unless otherwise required by mandatory provisions
of applicable escheat or abandoned or unclaimed property law, 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, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, 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 each Place of Payment with respect to Securities of such series,
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, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
SECTION 1005. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, a certificate of
the principal executive officer, the principal financial officer or the
principal accounting officer (which need not comply with Section 102), stating
as to each signer thereof that
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and
(2) as of the end of such year and at the date of the certificate to the
best of his knowledge, based on such review, (a) the Company is not in default
in the fulfillment of any of its obligations under this Indenture, or specifying
each such default known to him and the nature and status thereof and (b) no
event has occurred and is continuing which is or after notice or lapse of time
or both would become an Event of Default, or, if such an event has occurred and
is continuing, specifying each such event known to him and the nature and status
thereof.
SECTION 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition set forth in Sections 802 through 804 and Sections 1002 to 1005,
each inclusive, with respect to the Securities of any series if before the time
for such compliance the Holders of at least a majority in principal amount of
the Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee with respect to any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of any series) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Company of
less than all the Securities of any series, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice, but
not less than 30 days, shall be satisfactory to the Trustee), notify the Trustee
in writing of such Redemption Date and of the principal amount of Securities of
such series to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected by the Trustee not more
than 60 days prior to the Redemption Date, from the Outstanding Securities of
such series 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 the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series. In any case where
Securities of such series are registered in the same name, the Trustee in its
discretion may treat the aggregate principal amount so registered as if it were
represented by one Security of such series. If the Securities of any series to
be redeemed consist of Securities having different Stated Maturities or
different rates of interest (or methods of computing interest), then the Company
may, by written notice to the Trustee, direct that the Securities of such series
to be redeemed shall be selected from among groups of such Securities having
specified Stated Maturities or rates of interest (or methods or computing
interest) and the Trustee shall thereafter select the particular Securities to
be redeemed in the manner set forth above from among the groups of such
Securities so specified.
The Trustee shall promptly notify the Company 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.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 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 of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice which
relates to such Security shall state that on and after the Redemption Date, upon
surrender of such Security, the Holder will receive, without charge, a new
Security or Securities of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that interest
thereon will cease to accrue on and after said date.
(6) the place or places where such Securities are to be surrendered for
payment of the Redemption Price, and
(7) that the redemption is for a sinking fund, if such is the case.
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. In the case of
redemptions by the Company of Global Securities, the Company shall, at least 30
days prior to the Redemption Date, notify the Depositary (with a copy to the
Trustee) of such redemption.
SECTION 1105. Deposit of Redemption Price.
On or 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 1003) an amount of
money sufficient to pay 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.
SECTION 1106. 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
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 Regular Record Date according to
their terms and the provisions of Section 307.
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 prescribed therefor in the
Security.
SECTION 1107. Securities Redeemed in Part.
Any security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (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 the same series, of 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; provided, however, that the Depositary need not surrender Global
Securities for a partial redemption and may be authorized to make a notation on
such Global Security of such partial redemption. In the case of a partial
redemption of the Global Securities, the Depositary, and in turn, the
participants in the Depositary, shall have the responsibility to select any
Securities to be redeemed by random lot.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of any series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series (1) deliver Outstanding Securities of such series (other than any
previously called for redemption) and (2) apply as a credit Securities of such
series which have been redeemed either at the election of the Company pursuant
to the terms of such series of Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case, provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202, and the amount of any optional sinking fund payment to
be added to the next ensuing sinking fund payment, and will also deliver to the
Trustee any Securities to be so delivered. If such Officers' Certificate shall
specify an optional amount to be added in cash to the next ensuing mandatory
sinking fund payment, the Company shall thereupon be obligated to pay the amount
therein specified. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
PHH CORPORATION
(SEAL)
By /s/ Terry E. Kridler
Name:
Title:
Attest:
By /s/ Gordon W. Priest, Jr.
Secretary
THE FIRST NATIONAL BANK OF CHICAGO
(SEAL)
By /s/ Steve M. Husbands
Name:
Title:
Attest:
By /s/ Mary R. Fonti
PHH CORPORATION
and
THE BANK OF NEW YORK
TRUSTEE
INDENTURE
DATED AS OF JUNE 5, 1997
SENIOR DEBT SECURITIES
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES.......................................................................1
RECITALS OF THE COMPANY.......................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:....................................................1
Act..................................................................2
Affiliate; control...................................................2
Authenticating Agent.................................................2
Beneficial Owner.....................................................2
Board of Directors...................................................2
Board Resolution.....................................................2
Business Day.........................................................2
Commission...........................................................2
Company..............................................................2
Company Request; Company Order.......................................3
Corporate Trust Office...............................................3
Corporation..........................................................3
Defaulted Interest...................................................3
Depositary...........................................................3
Dollar...............................................................3
ECU..................................................................3
Event of Default.....................................................3
Fixed Rate Security..................................................3
Floating Rate Security...............................................3
Foreign Currency.....................................................3
Global Security......................................................3
Holder...............................................................4
Indenture............................................................4
Interest.............................................................4
Interest Payment Date................................................4
Market Exchange Rate.................................................4
Maturity.............................................................4
Officers' Certificate................................................4
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
PAGE
Opinion of Counsel...................................................4
Original Issue Discount Security................................. ...4
Outstanding..........................................................4
Paying Agent.........................................................5
Person...............................................................5
Place of Payment.....................................................5
Predecessor Security.................................................5
Property.............................................................6
Redemption Date......................................................6
Redemption Price.....................................................6
Regular Record Date..................................................6
Responsible Officer..................................................6
Securities...........................................................6
Security Register and Security Registrar.............................6
Special Record Date..................................................6
Stated Maturity......................................................6
Subsidiary...........................................................6
Trustee..............................................................7
Trust Indenture Act..................................................7
Vice President.......................................................7
<PAGE>
SECTION 102. Compliance Certificates and Opinions............................7
SECTION 103. Form of Documents Delivered to Trustee..........................8
SECTION 104. Acts of Holders.................................................8
SECTION 105. Notices, Etc., to Trustee and Company.......................... 9
SECTION 106. Notices to Holders; Waiver.....................................10
SECTION 107. Conflict with Trust Indenture Act..............................10
SECTION 108. Effect of Headings and Table of Contents.......................10
SECTION 109. Successors and Assigns.........................................10
SECTION 110. Separability Clause............................................10
SECTION 111. Benefits of Indenture..........................................11
SECTION 112. Governing Law..................................................11
SECTION 113. Legal Holidays.................................................11
SECTION 114. Indenture and Securities Solely Corporate Obligations..........11
SECTION 115. Consent of Holders of Securities in a Foreign Currency or ECU..11
SECTION 116. Payment Currency...............................................12
SECTION 117. Officers' Certificate Regarding Withholding Obligations........12
<PAGE>
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally................................................13
SECTION 202. Form of Trustee's Certificate of Authentication................13
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series...........................14
SECTION 302. Denominations 16
SECTION 303. Execution, Authentication, Delivery and Dating.................16
SECTION 304. Temporary Securities...........................................17
SECTION 305. Registration, Registration of Transfer and Exchange............18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...............19
SECTION 307. Payment of Interest; Interest Rights Preserved................20
SECTION 308. Persons Deemed Owners..........................................21
SECTION 309. Cancellation 21
SECTION 310. Computation of Interest........................................21
SECTION 311. Global Securities..............................................21
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Securities of any Series.........23
SECTION 402. Satisfaction and Discharge of Indenture........................25
SECTION 403. Application of Trust Money.....................................25
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default..............................................26
SECTION 502. Acceleration of Maturity; Rescission and Annulment.............27
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.........................................28
SECTION 504. Trustee May File Proofs of Claim...............................29
SECTION 505. Trustee May Enforce Claims Without Possession of Securities....30
SECTION 506. Application of Money Collected.................................30
SECTION 507. Limitation on Suits............................................30
<PAGE>
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.................31
SECTION 509. Restoration of Rights and Remedies.............................31
SECTION 510. Rights and Remedies Cumulative.................................31
SECTION 511. Delay or Omission Not Waiver...................................32
SECTION 512. Control by Holders.............................................32
SECTION 513. Waiver of Past Defaults........................................32
SECTION 514. Undertaking for Costs..........................................33
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities............................33
SECTION 602. Notice of Defaults.............................................34
SECTION 603. Certain Rights of Trustee......................................35
SECTION 604. Not Responsible for Recitals or Issuance of Securities.........36
SECTION 605. May Hold Securities............................................36
SECTION 606. Money Held in Trust............................................36
SECTION 607. Compensation and Reimbursement.................................36
SECTION 608. Disqualification; Conflicting Interests........................37
SECTION 609. Corporate Trustee Required; Eligibility........................42
SECTION 610. Resignation and Removal; Appointment of Successor..............42
SECTION 611. Acceptance of Appointment by Successor.........................44
SECTION 612. Merger, Conversion, Consolidation or Succession to Business....45
SECTION 613. Preferential Collection of Claims Against Company..............45
SECTION 614. Appointment of Authenticating Agent............................49
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders......51
SECTION 702. Preservation of Information; Communications to Holders.........51
SECTION 703. Reports by Trustee.............................................53
SECTION 704. Reports by Company.............................................53
<PAGE>
ARTICLE EIGHT
RESTRICTIVE COVENANTS; SUCCESSOR CORPORATION
SECTION 801. Certain Definitions............................................54
SECTION 802. Limitation on Liens............................................55
SECTION 803. Limitation on Sale-Leaseback Transactions......................56
SECTION 804. (Intentionally Omitted)........................................56
SECTION 805. No Lien Created, etc...........................................56
SECTION 806. When Company May Merge, etc....................................57
SECTION 807. When Securities Must Be Secured................................57
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.............57
SECTION 902. Supplemental Indentures With Consent of Holders................58
SECTION 903. Execution of Supplemental Indentures...........................60
SECTION 904. Effect of Supplemental Indentures..............................60
SECTION 905. Conformity With Trust Indenture Act............................60
SECTION 906. Reference in Securities to Supplemental Indentures.............60
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest....................61
SECTION 1002. Maintenance of Office or Agency...............................61
SECTION 1003. Money for Securities Payments to Be Held in Trust.............61
SECTION 1004. Corporate Existence...........................................63
SECTION 1005. Statement as to Compliance....................................63
SECTION 1006. Waiver of Certain Covenants...................................64
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article......................................64
SECTION 1102. Election to Redeem; Notice to Trustee.........................64
SECTION 1103. Selection by Trustee of Securities to be Redeemed.............64
SECTION 1104. Notice of Redemption..........................................65
SECTION 1105. Deposit of Redemption Price...................................66
<PAGE>
PAGE
SECTION 1106. Securities Payable on Redemption Date.........................66
SECTION 1107. Securities Redeemed in Part...................................66
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article......................................67
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.........67
SECTION 1203. Redemption of Securities for Sinking .........................67
<PAGE>
INDENTURE, dated as of June 5, 1997, between PHH Corporation, a corporation
duly organized and existing under the laws of the State of Maryland (herein
called the "Company"), and The Bank of New York, a national banking association
duly incorporated and existing under the laws of the United States of America,
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured and
unsubordinated debentures, notes or other evidences of senior indebtedness
(herein called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all holders of the Securities or of any series thereof,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. 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 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 Six, are defined in that
Article.
"Act," when used with respect to any Holder, has the meaning specified in
Section 104.
"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.
"Authenticating Agent" means any Person authorized by the Trustee to act on
behalf of the Trustee to authenticate and deliver Securities.
"Beneficial Owner" means, with respect to Global Securities, the Person who
is the beneficial owner of such Securities as effected on the books of the
Depositary for such Securities or on the books of a Person maintaining an
account with such Depositary (directly or as an indirect participant, in
accordance with the rules of such Depositary).
"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," when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment, and (i) with respect to
Securities denominated in a Foreign Currency, the capital city of the country of
the Foreign Currency, or (ii) with respect to Securities denominated in ECU,
Brussels, are authorized or obligated by it to close.
"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.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, an
Assistant Controller, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered. At the date of this Indenture, the Corporate Trust Office of the
Trustee is located at 101 Barclay Street, New York, New York 10286.
"Corporation" includes corporations, associations, companies and business
trusts.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means a clearing agency registered as such under the
Securities Exchange Act of 1934, as amended, or any successor thereto, which
shall in either case be designated by the Company pursuant to Section 301 until
a successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or include
each Person who is then a Depositary hereunder, and if at any time there is more
than one such Person, "Depositary" as used with respect to the Securities of any
series shall mean the Depositary with respect to the Securities of that series.
"Dollar" means the coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private debts.
"ECU" means the European Currency Unit as defined from time to time by the
Council of European Communities.
"Event of Default" has the meaning specified in Section 501.
"Fixed Rate Security" means a Security which provides for the payment of
interest at a fixed rate.
"Floating Rate Security" means a Security which provides for the payment of
interest at a variable rate determined periodically by reference to an interest
rate index or other index specified pursuant to Section 301.
"Foreign Currency" means a currency issued by the government of a country
other than the United States.
"Global Security" means a Security evidencing all or part of a series of
Securities which is executed by the Company and authenticated and delivered to
the Depositary or pursuant to the Depositary's instructions, all in accordance
with this Indenture and pursuant to a Company Order, which shall be registered
in the name of the Depositary or its nominee and which shall represent the
amount of uncertificated securities as specified therein.
"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 and shall
include any Officers' Certificates setting forth the form and terms of
particular series of Securities as contemplated by Sections 201 and 301.
"Interest," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Market Exchange Rate" means on a given date, the noon buying rate in New
York City for cable transfers for the stated Foreign Currency as certified for
customs purposes by the Federal Reserve Bank of New York on such date; provided
that, in the case of the ECU, Market Exchange Rate shall mean the rate of
exchange determined by the Council of European Communities (or any successor
thereto) as published for such date in the Official Journal of the European
Communities or any successor publication.
"Maturity," when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, a Vice President or the Treasurer, and by an Assistant Treasurer, the
Controller, an Assistant Controller, 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 an
employee of or counsel for the Company or the Trustee, and who shall be
acceptable to the Trustee, which opinion is delivered to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"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 or portions thereof 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 or portions
thereof 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 306 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 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 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. In determining the requisite principal
amount of any Original Issue Discount Security, such principal amount that shall
be deemed to be Outstanding shall be equal to the amount of the principal
thereof that could be declared to be due and payable upon an Event of Default
pursuant to the terms of such Original Issue Discount Security at the time of
such determination.
"Paying Agent" means any person authorized by the Company to pay the
principal of (and premium, if any) or interest, if any, on any Security on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest, if any, on the Securities of that series are payable as specified as
contemplated in Section 301 or, if not so specified, as specified in Section
1002.
"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 306 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.
"Property" means any kind of property or asset, whether real, personal or
mixed, tangible or intangible.
"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
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Responsible Officer," when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any senior trust officer or trust officer, the controller or
any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means with respect to any Person, any corporation,
association, joint venture, partnership or other business entity of which at
least a majority of the voting stock or other ownership interests having voting
power for the election of directors (or the equivalent) is, at the time as of
which any determination is being made, owned or controlled by such Person or one
or more subsidiaries of such Person, or by such Person and one or more
subsidiaries of such Person.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each Person who is
then a Trustee hereunder, provided, however, that if at any time there is more
than one such person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, except as provided in Section
905.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 102. 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, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions 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 shall include:
(1) a statement that each individual signing such certificate or opinion
has read such condition or covenant 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 to whether or not such condition or covenant 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 103. 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 knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. 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 (or
Holders of any series) 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 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 601) conclusive in favor of
the Trustee and the Company and any agent of the Trustee or the Company, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a 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; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section.
(c) The ownership of Securities shall be proved by the Security Register.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date,
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than six months after the record
date.
(e) 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, the Security
Registrar, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Except as otherwise specifically provided herein, any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or 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 the
attention of its Treasurer at 11333 McCormick Road, Hunt Valley, Maryland 21031
or at any other address subsequently furnished in writing to the Trustee by the
Company.
SECTION 106. 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. Any notice mailed in the manner prescribed by this
Indenture shall be conclusively presumed to have been duly given whether or not
received by any particular Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
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.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 108. 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 109. 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 110. Separability Clause.
In case any provision of this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any
Security Registrar, or any Authenticating Agent and their respective successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed and construed by and in
accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, the Stated
Maturity of any Security or any date upon which any Defaulted Interest is
proposed to be paid shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest, if any, or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date, Redemption Date, at the Stated Maturity, or on the
date for payment of Defaulted Interest, provided that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or date for the payment of Defaulted Interest, as the case may
be.
SECTION 114. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of (or premium, if any) or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any
Security, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
SECTION 115. Consent of Holders of Securities in a Foreign Currency or ECU.
Unless otherwise specified in a certificate delivered pursuant to Section
301 of this Indenture with respect to a particular series of Securities,
whenever for purposes of this Indenture any action may be taken by the Holders
of a specified percentage in aggregate principal amount of Securities of all
series or all series affected by a particular action at the time Outstanding
and, at such time, there are Outstanding Securities of any series which are
denominated in a coin, currency or currency unit other than Dollars, then the
principal amount of Securities of such series which shall be deemed to be
Outstanding for the purpose of taking such action shall be that amount of
Dollars that could be obtained for the stated Foreign Currency or ECU principal
amount of such Outstanding Securities at the Market Exchange Rate on the record
date for the purpose of taking such action. If the appropriate Market Exchange
Rate is not available for any reason with respect to the stated currency or
currency unit, the Trustee shall use, in its sole discretion and without
liability on its part, such quotation of the Federal Reserve Bank of New York
or, in the case of ECU, the rate of exchange as published in The Wall Street
Journal, as of the most recent available date, or quotations or, in the case of
ECUs, rates of exchange from one or more major banks in The City of New York or
in the country of issue of the currency in question which for purposes of the
ECU shall be Brussels, Belgium, or such other quotations or, in the case of ECU,
rates of exchange as the Trustee shall deem appropriate. All decisions and
determinations of the Trustee regarding the Market Exchange Rate or any
alternative determination provided for in the preceding paragraph shall be in
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and irrevocably binding upon the Company and all Holders.
SECTION 116. Payment Currency.
If the principal of and/or interest on (or premium, if any, on) any
Securities is payable in a Foreign Currency or ECU and such Foreign Currency or
ECU is not available for payment due to the imposition of exchange controls or
other circumstances beyond the control of the Company, then the Company shall be
entitled to satisfy its obligations to Holders under this Indenture by making
such payment in Dollars on the basis of the Market Exchange Rate for such
Foreign Currency or ECU on the latest date for which such rate was established
on or before the date on which payment is due. Any payment made under this
Section 116 in Dollars where the required payment is in a Foreign Currency or
ECU shall not constitute an Event of Default.
SECTION 117. Officers' Certificate Regarding Withholding Obligations.
At least 15 days prior to the first Interest Payment Date and at least 15
days prior to each date of payment of principal, premium, if any, or interest
thereafter if there has been any change with respect to the matters set forth in
the below-mentioned certificate, the Company will furnish the Trustee and each
Paying Agent with an Officers' Certificate instructing the Trustee and each
Paying Agent whether such payment of principal of and premium, if any, or
interest on the Securities shall be made without deduction or withholding for or
on account of any tax, assessment or other governmental charge imposed upon or
as a result of such payment. If any such deduction or withholding shall be
required, then such certificate shall specify, by country, the amount, if any,
required to be withheld on such payment to Holders of Securities and the Trustee
will cause such amounts to be withheld. The Company agrees to indemnify the
Trustee and each Paying Agent for, and to hold them harmless against, any loss,
liability or expense reasonably incurred without negligence or bad faith on
their part arising out of or in connection with actions taken or omitted by them
in reliance on any certificate furnished pursuant to this Section.
In furnishing this Officers' Certificate, the Company shall be entitled to
rely on advice of counsel reasonably acceptable to the Trustee and the Paying
Agent and on information furnished in writing to the Company and any agent or
underwriter concerning the residences of the Holders of the Securities, but such
reliance shall not impair the indemnification set forth in the foregoing
paragraph.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form as shall
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations 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. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, an appropriate
Officers' Certificate setting forth such form together with a copy of the Board
Resolution shall be delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities.
The definitive Securities shall be printed, typed, lithographed or engraved
or produced by any combination of these methods 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 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the
form set forth below:
This is one of the Securities of the series designated herein issued under
the within-mentioned Indenture.
The Bank of New York, as Trustee
By
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a procedure established in a Board Resolution, and
set forth in an Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series:
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from the Securities of all other series);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to Section
304, 305, 306, 906 or 1107);
(3) the date or dates on which the principal of (and premium, if any, on)
the Securities of the series is payable, or the manner in which such dates are
determined;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the manner in which such rates are determined, the date or
dates from which any such interest shall accrue, or the manner in which such
dates are determined, the Interest Payment Dates on which any such interest
shall be payable, the Regular Record Dates, if any, for the payment of interest
on any Interest Payment Date and the rate or rates of interest, if any, payable
on overdue installments of interest on or principal of (or premium, if any, on)
the Securities of the series, and whether the interest rate may be reset upon
certain designated events and, in the case of Floating Rate Securities, the
notice, if any, to Holders regarding the determination of interest and the
manner of giving such notice, and the extent to which, or the manner in which,
any interest payable on any Global Security on an Interest Payment Date will be
paid if other than in the manner provided in Section 307;
(5) if other than the Trustee, the identity of the Security Registrar and,
if other than as specified in Section 1002, the place or places where the
principal of (and premium, if any) and interest, if any, on Securities of the
series shall be payable, provided, however, that, at the option of the Company,
any interest on the Securities of any series may be paid by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security Register;
(6) if the Securities of such series are redeemable, the period or periods
within which, the price or prices at which and the terms and conditions upon
which Securities of the series may be redeemed, in whole or in part, at the
option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase Securities
of the series pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the price or
prices at which and the terms and conditions upon which Securities of the series
shall be redeemed or purchased, in whole or in part, pursuant to such
obligation;
(8) if other than denominations of $5,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(10) additional covenants of the Company, if any, for the benefit of the
Holders of Securities of such series and additional Events of Default, if any,
with respect to Securities of such series;
(11) if the provisions of Section 401(4) relating to satisfaction and
discharge of Securities more than one year prior to their Stated Maturity or
redemption shall apply to Securities of the series, a statement of such fact;
(12) if other than Dollars, the coin or currency in which the Securities of
that series are denominated (including, but not limited to any Foreign Currency
or ECU);
(13) if the amount of payments of principal (and premium, if any) or
interest, if any, on the Securities of the series may be determined with
reference to an index, the manner in which such amounts shall be determined;
(14) provisions, if any, for the defeasance of Securities of the series;
(15) the date as of which any Global Security representing any Outstanding
Debt Securities of the series shall be dated if other than the date of original
issuance of the first Security of the series to be issued;
(16) whether the Securities of the series shall be issued in whole or in
part in the form of one or more Global Securities and, in such case, the
Depositary for such Global Security or Securities; and
(17) any other terms, conditions, rights and preferences (or limitations on
such rights and preferences) relating to the Securities of such series.
All Securities of any one series shall be substantially identical except as
to denomination and the rate or rates of interest, if any, the date or dates
from which interest shall accrue and maturity and except as may otherwise be
provided in or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable in registered form without
coupons in such denominations as shall be specified as contemplated by Section
301. In the absence of any such provisions with respect to the Securities of any
series, the Securities of such series shall be issuable in denominations of
$5,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by any two of its
Chairman of the Board, its President, any Vice President, its Treasurer or its
Secretary, under its corporate seal reproduced thereon. 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 to the Trustee or an Authenticating Agent for
authentication Securities of any series executed by the Company, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee or such Authenticating Agent in accordance with the Company Order shall
authenticate and deliver such Securities. If all the Securities of any series
are not to be issued at one time, and if the Board Resolution, Officers'
Certificate or supplemental indenture establishing such series shall so permit,
such Company Order may set forth procedures acceptable to the Trustee for the
issuance of such Securities and the determination of the terms of particular
Securities of such series such as interest rate, maturity date, date of issuance
and date from which interest shall accrue. If the form or terms of the
Securities of the series have been established in or pursuant to one or more
Board Resolutions as permitted by Sections 201 and 301, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall receive, and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of Counsel
stating,
(a) if the form of such Securities has been established by or pursuant to
Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture; and
(b) if the terms of such Securities have been established by or pursuant to
Board Resolution as permitted by Section 301, that such terms have been
established in conformity with the provisions of this Indenture.
If all the Securities of any series are not to be issued at one time, it
shall not be necessary to deliver an Opinion of Counsel at the time of issuance
of each Security, but such Opinion of Counsel, with appropriate modifications,
may instead be delivered at or prior to the time of issuance of the first
Security of such series.
The Trustee or any Authenticating Agent shall have the right to
authenticate and deliver any of such Securities if it, being advised by counsel,
determines that such action may not lawfully be taken, or if it, its board of
directors, trustees, executive committee, or a trust committee of directors or
trustees and/or vice presidents shall determine in good faith that such action
would expose it to personal liability to existing Holders or if the issue of
such Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee.
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 or an Authenticating Agent by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee or an Authenticating Agent 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 of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency established by the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of the same series of authorized denominations.
Until so exchanged the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
SECTION 305. Registration, Registration of Transfer and
Exchange.
With respect to each series of Securities, the Company shall cause to be
kept at one of the offices or agencies maintained pursuant to Section 1002 a
register (the register maintained in such office and in any other office or
agency established by the Company in a Place of Payment being herein sometimes
collectively 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 of that series and of transfers of Securities of that
series. Pursuant to Section 301, the Company shall appoint, with respect to
Securities of each series, a "Security Registrar" for the purpose of registering
such Securities and transfers and exchanges of such Securities as herein
provided. In the event the Trustee shall not be Security Registrar, it shall
have the right to examine the Security Register at all reasonable times.
Upon surrender for registration of transfer of any Security of any series
at the designated office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee or an Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series, of any authorized
denominations and of a like tenor, aggregate principal amount and Stated
Maturity.
At the option of the Holder, Securities of any series (except Global
Securities) may be exchanged for other Securities of the same series, of any
authorized denominations and of a like tenor, aggregate principal amount and
Stated Maturity, upon surrender of the Securities to be exchanged at such office
or agency and upon payment, if the Company shall so require, of the charges
hereinafter provided. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee or an Authenticating Agent 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 the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Trustee or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar (and, if
so required by the Trustee, to the Trustee) 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 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before the day of selection for redemption of Securities of
that series selected for redemption under Section 1103 and ending at the close
of business on the day of the mailing of notice of redemption, 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 306. Mutilated, Destroyed, Lost and Stolen Securities.
If there shall be delivered to the Company and the Trustee (i) a mutilated
Security or 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 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 or an Authenticating Agent shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new
Security of the same series and of like tenor, principal amount and Stated
Maturity and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, 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 of any series 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
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
persons in whose names the Securities of such series (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 of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. 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 of Securities of such series
at his address as it appears in the Security Register, not less than l0 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the persons in whose names the
Securities of such series (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 on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice 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.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee, any Paying Agent, any Authenticating Agent and any other
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
307) interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee,
any Paying Agent, any Authenticating Agent nor any other agent of the Company or
the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment 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 shall be destroyed by the Trustee
and the Trustee shall deliver a certificate of such destruction to the Company,
unless the Company by Company Order shall direct that such cancelled Securities
be returned to it.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 311. Global Securities.
If the Company shall establish pursuant to Section 301 that the Securities
of a series are to be issued in whole or in part in the form of one or more
Global Securities, then the Company shall execute and the Trustee shall, in
accordance with Section 303 and the Company Order with respect to such series,
authenticate and deliver one or more Global Securities in temporary or permanent
form that (i) shall represent and shall be denominated in an amount equal to the
aggregate principal amount of the outstanding Securities of such series to be
represented by one or more Global Securities, (ii) shall be registered in the
name of the Depositary for such Global Security or Securities or the nominee of
such depositary, (iii) shall be delivered by the Trustee to such depositary or
pursuant to such depositary's instruction, and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Securities in definitive form, this Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor depositary or
a nominee of such successor Depositary". The Trustee shall deal with the
Depositary and its participants as representatives of the Beneficial Owners of
the Global Securities for purposes of exercising the rights of the Holders
hereunder and the rights of the Beneficial Owners of the Global Securities shall
be limited to those established by law and agreements between such Beneficial
Owners and the Depositary and its participants. Beneficial Owners shall not be
entitled to certificates for Global Securities as to which they are the
Beneficial Owners. Requests and directions from, and votes of, such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Beneficial Owners.
Notwithstanding any other provision of this Section or Section 305, unless
and until it is exchanged in whole or in part for Securities in definitive form,
a Global Security representing all or a portion of the Securities of a series
may not be transferred except as a whole by the Depositary for such series to a
nominee of such depositary or by a nominee of such depositary to such depositary
or another nominee of such depositary or by such depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
depositary. The Beneficial Owner's ownership of Securities shall be recorded on
the records of a participant of the Depositary that maintains such Beneficial
Owner's account for such purpose and the participant's record ownership of such
Securities shall be recorded on the records of the Depositary.
If at any time the Depositary for the Securities of a series notifies the
Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for Securities of a
series shall no longer be registered or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, the
Company shall appoint a successor Depositary with respect to the Securities of
such series. If a successor Depositary for the Securities of such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, the Company will execute, and the Trustee,
upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver, Securities
of such series in definitive form in an aggregate principal amount equal to the
principal amount of the Global Security or Securities representing such series
in exchange for such Global Security or Securities.
The Company may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by such Global Security or Securities. In such
event, the Company will execute, and the Trustee, upon receipt of a Company
Order for the authentication and delivery of definitive Securities of such
series, will authenticate and deliver, Securities of such series in definitive
form and in an aggregate principal amount equal to the principal amount of the
Global Security or Securities representing such series in exchange for such
Global Security or Securities.
If specified by the Company pursuant to Section 301 with respect to
Securities of a series, the Depositary for such series of Securities may
surrender a Global Security for such series of Securities in exchange in whole
or in part for Securities of such series in definitive form on such terms as are
acceptable to the Company and such Depositary. Thereupon, the Company shall
execute and the Trustee shall authenticate and deliver, without charge,
(i) to each Person specified by the Depositary a new Security or Securities
of the same series, of any authorized denomination as requested by such Person
in aggregate principal amount equal to and in exchange for such Person's
beneficial interest in the Global Security; and
(ii) to the Depositary a new Global Security in a denomination equal to the
difference, if any, between the principal amount of the surrendered Global
Security and the aggregate principal amount of Securities delivered to Holders
thereof.
Upon the exchange of a Global Security for Securities in definitive form,
such Global Security shall be cancelled by the Trustee. Securities issued in
exchange for a Global Security pursuant to this Section 311 shall be registered
in such names and in such authorized denominations as the Depositary for such
Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Securities to the persons in whose names such Securities are so registered.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Securities of any
Series.
The Company shall be deemed to have satisfied and discharged the entire
indebtedness on all the Securities of any particular series and the Trustee,
upon Company request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of such indebtedness, when
(1) either
(A) all Securities of such series 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 306 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 the last paragraph of Section 1003) have been
delivered to the Trustee for cancellation; or
(B) with respect to all Outstanding Securities of such series described in
(A) above not theretofore delivered to the Trustee for cancellation,
(i) The Company has deposited or caused to be deposited with the Trustee as
trust funds in trust an amount sufficient to pay and discharge the entire
indebtedness on all such Outstanding Securities of such series for principal
(and premium, if any) and interest to the Stated Maturity or any Redemption Date
as contemplated by Section 403, as the case may be; or
(ii) The Company has deposited or caused to be deposited with the Trustee
as obligations in trust such amount of direct obligations of, or obligations the
principal of and interest on which are fully guaranteed by, the United States of
America (other than obligations subject to prepayment, redemption or call prior
to their stated maturity) as will, together with the predetermined and certain
income to accrue thereon (without consideration of any reinvestment thereof), be
sufficient to pay and discharge when due the entire indebtedness on all such
Outstanding Securities of such series for principal (and premium, if any) and
interest to the Stated Maturity or any Redemption Date as contemplated by
Section 403, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable with
respect to the Securities of such series;
(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 the entire
indebtedness on all Securities of such series have been complied with; and
(4) if the entire indebtedness on the Outstanding Securities of such series
is to be satisfied and discharged pursuant to Section 401(l)(B) above, then (i)
the Company shall have specified the applicability (as provided in Section 301)
of this Section 401(4) to the Securities of such series, (ii) the Company shall
have given, not later than the date of such deposit, notice of such deposit to
the Holders of Securities of such series and (iii) the Trustee shall have
received an Opinion of Counsel (which Counsel shall be recognized tax counsel)
stating that, (x) the Company has received from the Internal Revenue Service a
ruling or (y) since the date of the Indenture, there has been a change in the
applicable federal income tax law, including by means of a Revenue Ruling
published by the Internal Revenue Service, in either case to the effect that,
and based thereon such Opinion of Counsel will confirm that the deposit of funds
or obligations and the satisfaction and discharge of indebtedness on the
Securities of such series pursuant to this Section 401 will not result in
recognition by the Holders of income, gain or loss for federal income tax
purposes (other than income, gain or loss which would have been recognized in
like amount and at a like time absent such deposit, satisfaction and discharge),
provided that the Company will be discharged from the requirements of Article 8
if (i) it has satisfied all of the requirements for satisfaction and discharge
of the indebtedness on the Outstanding Securities pursuant to Section 401(1)(B)
except for the delivery of the Opinion of Counsel described above, and (ii) the
Trustee shall have received an Opinion of Counsel stating that the Holders will
not recognize income, gain or loss for federal income tax purposes as a result
of the deposit of such funds or obligations and will be subject to federal tax
in the same amounts, in the same manner and at the same times as would have been
the case if such deposit of funds or obligations had not occurred.
Upon the satisfaction of the conditions set forth in this Section 401 with
respect to all the Securities of any series, the terms and conditions of such
series, including the terms and conditions with respect thereto set forth in
this Indenture, shall no longer be binding upon, or applicable to, the Company,
and the Holders of the Securities of such series shall look for payment only to
the funds or obligations deposited with the Trustee pursuant to Section
401(l)(B); provided, however, that, in no event shall the Company be discharged
(a) from any payment obligations in respect of Securities of such series which
are deemed not to be Outstanding under clause (iii) of the definition thereof if
such obligations continue to be valid obligations of the Company under
applicable law, (b) from any obligations under Section 607 or the last paragraph
of Section 1003, and (c) from any obligations under Section 305 and 306 (except
that Securities of such series issued upon registration of transfer or exchange
or in lieu of mutilated, lost, destroyed or stolen Securities shall not be
obligations of the Company), and Section 701.
SECTION 402. Satisfaction and Discharge of Indenture.
Upon compliance by the Company with the provisions of Section 401 as to the
satisfaction and discharge of each series of Securities issued hereunder, this
Indenture shall cease to be of any further effect (except as otherwise provided
herein). Upon Company Request (and at the expense of the Company), the Trustee
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture. In the event there are two or more Trustees hereunder, then the
effectiveness of any such instrument shall be conditioned upon receipt of such
instruments from all Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, any
obligations of the Company under Sections 305, 306, 607 and 701 and the last
paragraph of Section 1003, and of the Trustee under Sections 403 and 614 and the
last two paragraphs of Section 1003, shall survive.
SECTION 403. Application of Trust Money.
Subject to the provisions of the last two paragraphs of Section 1003, all
money and obligations deposited with the Trustee pursuant to Section 401 shall
be held irrevocably in trust and shall be made under the terms of an escrow
trust agreement in form and substance satisfactory to the Trustee. Such money
and obligations shall be applied by the Trustee, in accordance with the
provisions of the Securities, this Indenture and such escrow trust agreement, 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 of (and premium, if any) and interest, if
any, on the Securities for the payment of which such money and obligations have
been deposited with the Trustee (but such money need not be segregated from
other funds except to the extent required by law). If Securities of any series
are to be redeemed prior to their Stated Maturity, whether pursuant to any
optional redemption provisions or in accordance with any mandatory sinking fund
requirement, the Company shall make such arrangements as are satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series
when it becomes due and payable, and continuance of such default for a period of
30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or agreement of
the Company in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with or which has expressly been included in this Indenture solely for the
benefit of series of Securities other than that series), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors; or
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case;
(B) appoints a Custodian of the Company or for all or substantially all of
its property, or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
(7) any other Event of Default provided with respect to the Securities of
that series pursuant to Section 301 or in a supplemental indenture.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Securities
of that series may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all of the Securities
of that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified portion) shall become immediately due and
payable.
Upon payment of such amount, all obligations of the Company in respect of
the payment of principal of the Securities of such series shall terminate.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest, if any, on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates prescribed therefor in such
Securities,
(C) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate or rates, if any, prescribed therefor in such
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 with respect to Securities of that series, other
than the non-payment of the principal of Securities of that series which have
become due solely by such declaration of acceleration, have been cured, or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security of any
series when such interest becomes due and payable and such default continues for
a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any,
on) any Security of any series at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of Securities of such series, the whole amount then due and payable
on Securities of such series for principal (and premium, if any) and interest
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate or rates, if any, prescribed therefor in such 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 amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such 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 such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 504. 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 of
acceleration 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 (or with
respect to Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such Securities), 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 607. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. 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 506. Application of Money Collected.
Any money 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 607;
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest, if any, 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, if
any, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) An Event of Default shall have occurred and be continuing with respect
to the Securities of that series and such Holder shall have previously given
written notice thereof to the Trustee;
(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable 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 of that series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holder or to obtain or to seek to obtain priority or preference over any
other Holder or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all Holders of
Securities of such series.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest, if any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 509. 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 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 510. 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
306, 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 511. 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 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction,
(3) such direction is not unduly prejudicial to the rights of other
Holders, and
(4) such direction would not involve the Trustee in personal liability.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest, if
any (subject to the provisions of Section 502), on any Security of such series,
or
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series 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 the Securities of such series under this Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
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 at
trial and on appeal, 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 of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security on or after the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. 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
certificate or opinion which by any provision hereof is specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not it conforms 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 willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken,
suffered 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 of any series, as provided in Section 512, relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(4) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) Whether or not herein expressly so provided, every provision of this
Indenture relating to the conduct of or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that except in
the case of a default in the payment of the principal of (or premium, if any) or
interest, if any, on any Security of such series, in the payment of any sinking
fund installment with respect to Securities of such series or in the payment of
the Redemption Price of any Securities as to which notice of redemption has been
given, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 501(4) with respect to Securities of such series,
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(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;
(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, including any Authenticating
Agent, appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except certificates of
authentication, shall be taken as the statements of the Company, and neither the
Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, the Security
Registrar or any other agent of the Company or the Trustee, in their individual
or any other capacity, may become the owner or pledgee of Securities and,
subject to Sections 608 and 613, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee or any Paying Agent in trust hereunder need not
be segregated from other funds except to the extent required by law. Neither the
Trustee nor any paying Agent shall be subject to any liability for interest on
any money received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(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 provision 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 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 and its agents for, and to hold them harmless
against, any loss, liability or expense incurred without negligence or bad faith
on their part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their 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 payment of principal (or premium, if any) or interest, if any,
on Securities.
The provisions of this Section 607 shall survive the resignation of the
Trustee or the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a default specified in Section 501(5) or (6) the
expenses are intended to constitute expenses of administration under any
Bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it shall,
within 90 days after ascertaining that it has such conflicting interest, either
eliminate such conflicting interest or resign with respect to the Securities of
that series in the manner and with the effect hereinafter specified in this
Article.
(b) In the event that the Trustee shall fail to comply with the provisions
of Subsection (a) of this Section with respect to the Securities of any series,
the Trustee shall, within l0 days after the expiration of such 90-day period,
transmit by mail to all Holders of Securities of that series, as their names and
addresses appear in the Security Register, notice of such failure.
(c) For the purposes of this Section, the Trustee shall be deemed to have a
conflicting interest with respect to the Securities of any series if
(1) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any series other than that series or is trustee under
another indenture under which any other securities, or certificates of interest
or participation in any other securities, of the Company are outstanding, unless
such other indenture is a collateral trust indenture under which the only
collateral consists of Securities issued under this Indenture, provided that
there shall be excluded from the operation of this paragraph this Indenture with
respect to the Securities of any series other than that series or any indenture
or indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if
(i) this Indenture and such other indenture or indentures are wholly
unsecured and such other indenture or indentures are hereafter qualified under
the Trust Indenture Act, unless the Commission shall have found and declared by
order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act
that differences exist between the provisions of this Indenture with respect to
Securities of that series and one or more other series or the provisions of such
other indenture or indentures which are so likely to involve a material conflict
of interest as to make it necessary in the public interest or for the protection
of investors to disqualify the Trustee from acting as such under this Indenture
with respect to the Securities of that series and such other series or under
such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on application
to the Commission and after opportunity for hearing thereon, that trusteeship
under this Indenture with respect to the Securities of that series and such
other series or such other indenture or indentures is not so likely to involve a
material conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the Trustee from acting as such
under this Indenture with respect to the Securities of that series and such
other series or under such other indenture or indentures;
(2) the Trustee or any of its directors or executive officers is an obligor
upon any Securities of such series or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with the
Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of the
Company, or of an underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting, except that (i) one
individual may be a director or an executive officer, or both, of the Trustee
and a director or an executive officer, or both, of the Company but may not be
at the same time an executive officer of both the Trustee and the Company; (ii)
if and so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer, or
both, of the Trustee and a director of the Company; and (iii) the Trustee may be
designated by the Company or by any underwriter for the Company to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent or depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this Subsection, to act as trustee, whether under
an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is beneficially
owned either by the Company or by any director, partner or executive officer
thereof, or 20% or more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or 10% or more of the voting
securities of the Trustee is beneficially owned either by an underwriter for the
Company or by any director, partner or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), (i) 5% or more of the voting securities, or 10% or more of any other
class of security, of the Company not including the Securities issued under this
Indenture and securities issued under any other indenture under which the
Trustee is also trustee, or (ii) 10% or more of any class of security of an
underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), 5% or more of the voting securities of any person who, to the
knowledge of the Trustee, owns 10% or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect common control
with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this Subsection
defined), 10% or more of any class of security of any person who, to the
knowledge of the Trustee, owns 50% or more of the voting securities of the
Company; or
(9) the Trustee owns, on March 1 in any calendar year, in the capacity of
executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of 25%
or more of the voting securities, or of any class of security, of any person,
the beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7) or (8) of this
Subsection. As to any such securities of which the Trustee acquired ownership
through becoming executor, administrator or testamentary trustee of an estate
which included them, the provisions of the preceding sentence shall not apply,
for a period of two years from the date of such acquisition, to the extent that
such securities included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after March 1 in each
calendar year, the Trustee shall make a check of its holdings of such securities
in any of the above-mentioned capacities as of such March 1. If the Company
fails to make payment in full of the principal of (or premium, if any) or
interest, if any, on any of the Securities when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the Trustee shall
make a prompt check of its holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding the foregoing provisions of this
paragraph, all such securities so held by the Trustee, with sole or joint
control over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned by the
Trustee for the purposes of paragraphs (6), (7) and (8) of this Subsection with
respect to Securities of such series.
In determining whether the Trustee has a conflicting interest with respect
to any series of Securities under this Subsection, each other series of
Securities will be treated as having been issued under an indenture other than
this Indenture.
The specification of percentages in paragraphs (5) through (9), inclusive,
of this Subsection shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this Subsection
only, (i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed to be "in default"
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (iii) the Trustee shall not be deemed to be
the owner or holder of (A) any security which it holds as collateral security,
as trustee or otherwise, for an obligation which is not in default as defined in
clause (ii) above, or (B) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (C) any security
which it holds as agent for collection, or as custodian, escrow agent or
depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter," when used with reference to the Company, means
every person who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has participated or has had
a direct or indirect participation in any such undertaking, or has participated
or has had a participation in the direct or indirect underwriting of any such
undertaking, but such term shall not include a person whose interest was limited
to a commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
(2) The term "director" means any director of a corporation or any
individual performing similar functions with respect to any organization,
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an unincorporated organization or a
government or political subdivision thereof. As used in this paragraph, the term
"trust" shall include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" means any security presently entitling the
owner or holder thereof to vote in the direction or management of the affairs of
a person, or any security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the direction or
management of the affairs of a person.
(5) The term "Company" means any obligor upon the Securities.
(6) The term "executive officer" means the president, every vice president,
every trust officer, the cashier, the secretary and the treasurer of a
corporation, and any individual customarily performing similar functions with
respect to any organization whether incorporated or unincorporated, but shall
not include the chairman of the board of directors.
(e) The percentages of voting securities and other securities specified in
this Section shall be calculated in accordance with the following provisions:
(1) A specified percentage of the voting securities of the Trustee, the
Company or any other person referred to in this Section (each of whom is
referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate votes which the
holders of all the outstanding voting securities of such person are entitled to
cast in the direction or management of the affairs of such person.
(2) A specified percentage of a class of securities of a person means such
percentage of the aggregate amount of securities of the class outstanding.
(3) The term "amount," when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of shares
if relating to capital shares and the number of units if relating to any other
kind of security.
(4) The term "outstanding" means issued and not held by or for the account
of the issuer. The following securities shall not be deemed outstanding within
the meaning of this definition.
(i) securities of an issuer held in a sinking fund relating to securities
of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to another
class of securities of the issuer, if the obligation evidenced by such other
class of securities is not in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(5) A security shall be deemed to be of the same class as another security
if both securities confer upon the holder or holders thereof substantially the
same rights and privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a single indenture,
differences in the interest rates or maturity dates of various series thereof
shall not be deemed sufficient to constitute such series different classes; and
provided, further, that, in the case of unsecured evidences of indebtedness,
differences in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes, whether or not
they are issued under a single indenture
SECTION 609. 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,
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 $50,000,000 subject to supervision or examination by Federal, State or
District of Columbia authority. If such 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.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee or Trustees pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee or Trustees in
accordance with the applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time the Trustee shall fail to comply with Section 608(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, the Company by a Board
Resolution may remove the Trustee with respect to the Securities of such series
or, subject to Section 514, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee with respect to the Securities of such series and the
appointment of a successor Trustee.
(e) If at any time:
(1) the Trustee shall cease to be eligible under Section 609 and shall fail
to resign 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 become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to all Securities, or (ii) subject to Section 514, any
holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company with respect to such series. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders of the Securities of such series and
accepted appointment in the manner required by Section 611, any Holder who has
been a bona fide holder of a Security of such series 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 with
respect to the Securities of such series.
(g) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all series of Securities, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges due pursuant to Section 607, 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 to the lien provided in Section 607.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all series of
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities or that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or these series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. 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 613. 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 month 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 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 month 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 Code 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 month 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 month 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 month 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, 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 Code 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 Code 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 Code 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 proceeding 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.
Any Trustee which has resigned or been removed after the beginning of such
three month 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 month 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 month 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 an indenture, transfer agent, registrar, custodian, escrow
agent, 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
(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 premium, if any) or interest, if any, on any of the Securities
or upon the other indenture securities when and as such principal (or premium,
if any) or interest, if any, 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 the special account
provided for in this Section;
(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 of 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 Code" means the United States Bankruptcy
Code or Title 11 of the United States Code.
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate and deliver Securities of such series with respect to which it has
been so designated, and Securities so authenticated and delivered shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a bank or trust company or corporation organized and doing business and
in good standing under the laws of the United States, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal, State or District of Columbia
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign with respect to one or more series of
Securities at any time by giving written notice thereof to the Trustee and to
the Company. The Trustee may at any time terminate the agency of an
Authenticating Agent with respect to one or more series of Securities by giving
written notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, in accordance with the
provisions of Section 607. The provisions of Sections 104, 111, 603, 604 and 605
shall be applicable to any Authenticating Agent.
Pursuant to each appointment made under this Section, the Securities of
each series covered by such appointment may have endorsed thereon, in lieu of
the Trustee's certificate of authentication, an alternate certificate of
authentication in substantially the following form:
This is one of the Securities, of the series designated herein, issued
under the within-mentioned Indenture.
The Bank of New York
By
as Authenticating Agent,
By
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee with
respect to the Securities of each series (a) semi-annually, either (i) not later
than June 30 and December 31 in each year in the case of Original Issue Discount
Securities which by their terms bear interest only after Maturity, or (ii) not
later than 15 days after each Regular Record Date in the case of Securities of
any other series, if and so long as Securities of such series are Outstanding,
and (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Company of such request, a list in such form as the
Trustee may reasonably require containing all the information in the possession
or control of the Company, or any of its Paying Agents other than the Trustee,
as to the names and addresses of the Holders obtained since the date as of which
the next previous list, if any, was furnished; provided, however, that any such
list may exclude names and addresses received by the Trustee in its capacity as
Security Registrar if it shall be so acting. Any such list may be dated as of a
date not more than 15 days prior to the time such information is furnished or
caused to be furnished and need not include information received after such
date.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar or Paying Agent, if so acting.
The Trustee may (i) destroy any list furnished to it as provided in Section
701 upon receipt of a new complete list so furnished, (ii) destroy any
information received by it as Paying Agent or Security Registrar (if so acting)
hereunder upon delivering to itself as Trustee, not earlier than 45 days after
June 30 and December 31 of each year, a list containing the names and addresses
of the Holders obtained from such information since the delivery of the next
previous list, if any, and (iii) destroy any list delivered to itself as Trustee
which was compiled from information received by it as Paying Agent or Security
Registrar (if so acting) hereunder upon the receipt of a new complete list so
delivered.
(b) If three or more Holders of Securities of any series (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 of such series
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 of Securities of such series or with Holders of all Securities with
respect to their rights under this Indenture or under such 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 702(a), or
(ii) inform such applicants as to the approximate number of Holders of
Securities of such series or all Securities as the case may be whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with Section 702(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 of Securities of such series or all Securities as the case may be
whose name and address appear in the information preserved at the time by the
Trustee in accordance with Section 702(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
mailing would be contrary to the best interest of the Holders of Securities of
such series or all Securities as the case may be 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 Paying Agent nor the Security Registrar nor any agent of any of them shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of holders in accordance with Section 702(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 702(b).
SECTION 703. Reports by Trustee.
(a) Within 60 days after March 1 of each year commencing with the March 1
following the date of this Indenture, if and so long as any Securities are
Outstanding hereunder, the Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Security Register, a brief report dated
as of such March 1 that complies with Trust Indenture Act Para 313(a). The
Trustee shall also comply with Trust Indenture Act Para. 313(b).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any securities
exchange.
SECTION 704. 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 as may be required from time
to time by such rules and regulations; and
(3) 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 EIGHT
RESTRICTIVE COVENANTS; SUCCESSOR CORPORATION
SECTION 801. Certain Definitions.
"Consolidated Assets" means, at any date of determination, the total assets
of the Company and its Consolidated Subsidiaries determined in accordance with
generally accepted accounting principles in effect from time to time.
"Consolidated Net Worth" means, at any date of determination, all amounts
which would be included on a balance sheet of the Company and its Consolidated
Subsidiaries under stockholders equity determined in accordance with generally
accepted accounting principles in effect from time to time.
"Consolidated Subsidiaries" means all Subsidiaries of the Company that are
required to be consolidated with the Company for financial reporting purposes in
accordance with generally accepted accounting principles in effect from time to
time.
"Debt" means (i) all debt, obligations and other liabilities of the Company
and its Subsidiaries which are, at the date as of which Debt is to be
determined, includable as liabilities in a consolidated balance sheet of the
Company and its Subsidiaries, other than (x) accounts payable and accrued
expenses, (y) advances from clients obtained in the ordinary course of the
relocation management services business of the Company and its Subsidiaries and
(z) current and deferred income taxes and other similar liabilities, plus (ii)
without duplicating any items included in Debt pursuant to the foregoing clause
(i), the maximum aggregate amount of all liabilities of the Company or any of
its Subsidiaries under any guaranty, indemnity or similar undertaking given or
assumed of, or in respect of, the indebtedness, obligations or other
liabilities, assets, revenues, income or dividends of any Person other than the
Company or one of its Subsidiaries and (iii) all other obligations or
liabilities of the Company or any of its Subsidiaries in relation to the
discharge of the obligations of any Person other than the Company or one of its
Subsidiaries.
"Lien" means any mortgage, pledge, lien, security interest or encumbrance.
"Material U.S. Subsidiary" means any Subsidiary of the Company which
together with its Subsidiaries at the time of determination had assets
constituting 10% or more of Consolidated Assets, accounts for 10% or more of
Consolidated Net Worth, or accounts for 10% or more of the revenues of the
Company and its Consolidated Subsidiaries for the Rolling Period immediately
preceding the date of determination.
"Rolling Period" means, with respect to any fiscal quarter, such fiscal
quarter and the three immediately preceding fiscal quarters considered as a
single accounting period.
"Special Purpose Vehicle Subsidiary" shall mean PHH Caribbean Leasing, Inc.
and any subsidiary engaged in the fleet-leasing management business which (i)
is, at any one time, a party to one or more lease agreements with only one
lessee and (ii) finances, at any one time, its investment in lease agreements on
vehicles with only one lender, which lender may be the Company.
SECTION 802. Limitation on Liens.
The Company shall not, and it shall not permit any Material U.S. Subsidiary
to, incur any Lien to secure Debt without equally and ratably securing the
Securities, except the following:
(a) deposits under worker's compensation, unemployment insurance and social
security laws or to secure statutory obligations or surety or appeal bonds or
performance or other similar bonds in the ordinary course of business, or
statutory liens of landlords, carriers, warehousemen, mechanics and materialmen
and other similar Liens, in respect of liabilities which are not yet due or
which are being contested in good faith by appropriate proceedings, Liens for
taxes not yet due and payable, and Liens for taxes due and payable, the validity
or amount of which is currently being contested in good faith by appropriate
proceedings and as to which foreclosure and other enforcement proceedings shall
not have been commenced (unless fully bonded or otherwise effectively stayed);
(b) purchase money Liens granted to the vendor or Person financing the
acquisition of property, plant or equipment if (i) limited to the specific
assets acquired and, in the case of tangible assets, other property which is an
improvement to or is acquired for specific use in connection with such acquired
property or which is real property being improved by such acquired property; and
(ii) the debt secured by such Lien is the unpaid balance of the acquisition cost
of the specific assets on which the Lien is granted.
(c) Liens upon real and/or personal property, each of which Liens existed
on such property before the time of its acquisition and was not created in
anticipation thereof; provided that no such Lien shall extend to or cover any
property of the Company or a Material U.S. Subsidiary other than the respective
property so acquired and improvements thereon;
(d) Liens arising out of attachments, judgments or awards as to which an
appeal or other appropriate proceedings for contest or review are promptly
commenced (and as to which foreclosure and other enforcement proceedings (i)
shall not have been commenced (unless fully bonded or otherwise effectively
stayed) or (ii) in any event shall be promptly fully bonded or otherwise
effectively stayed);
(e) Liens securing Debt of any Material U.S. Subsidiary to the Company;
(f) Liens covering only the property or other assets of any Special Purpose
Vehicle Subsidiary and securing only Debt of such Special Purpose Vehicle
Subsidiary;
(g) mortgage liens existing on homes acquired by the Company or any of its
Material U.S. Subsidiaries in the ordinary course of their relocation management
business;
(h) other Liens incidental to the conduct of the business of the Company or
its Subsidiaries or the ownership of their property and other assets, which do
not secure any Debt and did not otherwise arise in connection with the borrowing
of money or the obtaining of advances or credit and which do not, in the
aggregate, materially detract from the value of the property or other assets of
the Company or its Subsidiaries or materially impair the use thereof in the
operation of their businesses;
(i) Liens covering only the property or other assets of any Subsidiary
which principally transacts business outside of the United States;
(j) Liens existing prior to the date of this Indenture and any extensions
or renewals thereof;
(k) Liens incurred in the ordinary course of business to secure Debt
utilized to fund net investments in leases and leased vehicles, equity advances
on homes and other assets under management programs; and
(l) Liens to secure Debt not otherwise permitted by any of the clauses (a)
through (k) if, at the time any such Liens are incurred, the aggregate amount of
Debt secured by such Liens plus the sum of all outstanding sale-leaseback
transactions permitted hereunder does not exceed $125,000,000.
SECTION 803. Limitation on Sale-Leaseback Transactions.
The Company shall not, and it shall not permit any Material U.S. Subsidiary
to, enter into any arrangement whereby in contemporaneous transactions the
Company or any of its Material U.S. Subsidiaries sells essentially all of its
right, title and interest in a material asset and the Company or any of its
Subsidiaries acquires or leases back the right to use such property except that
the Company may enter into sale-leaseback transactions relating to assets not in
excess of $100,000,000 in the aggregate on a cumulative basis.
SECTION 804. Intentionally Omitted
SECTION 805. No Lien Created, etc.
This Indenture and the Securities do not create a Lien, charge or
encumbrance on any property of the Company or any Subsidiary.
A Debt or lease obligation shall be counted only once even if more than one
person is responsible for the obligation.
<PAGE>
SECTION 806. When Company May Merge, etc.
The Company shall not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless the resulting,
surviving or transferee corporation assumes by supplemental indenture all the
obligations of the Company under the Securities and this Indenture. Thereafter
all such obligations of the predecessor corporation shall terminate.
SECTION 807. When Securities Must Be Secured.
If upon any such consolidation, merger or transfer any property or assets
of the Company or a Restricted Subsidiary would become subject to an attaching
Lien that secures Debt, then before the consolidation, merger or transfer
occurs, the Company shall secure the Securities equally and ratably with or
prior to the Debt secured by the attaching Lien. However, the Company need not
comply with this Section if the Company or a Restricted Subsidiary could secure
such Debt by a Lien on the property of the Company or any Restricted Subsidiary
without equally and ratably securing the Securities.
SECTION 808
The Trustee, subject to the provisions of Sections 601 and 603, may receive
an Opinion of Counsel as conclusive evidence that any such consolidation,
merger, sale or conveyance, and any such assumption, complies with the
provisions of this Article VIII.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holder, 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 corporation 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
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; provided, however, that in
respect of any such additional covenant, such supplemental indenture may provide
for a particular period of grace after default in the performance of such
covenant (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default; or
\
(3) to add any additional Events of Default; or
(4) add to or change or eliminate any of the provisions of this Indenture
to extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal, and
with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(6) to secure the Securities pursuant to the requirements of Sections 802
or 807 or otherwise; or
(7) to establish the form or terms of Securities of any series as permitted
by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 611(b); or
(9) 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,
provided such action shall not adversely affect the interests of the Holders of
Securities of any series in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series (each such series voting as
a separate class) affected by such supplemental indenture, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment of
principal of or 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 modify the manner of determination of the rate of
interest thereon so as to affect adversely the interest of such Holder or reduce
the amount of the principal of an Original Issue Discount Security that would be
due and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, or change any 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,
on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding Securities
of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1006, 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, provided, however,
that this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to the "Trustee" and concomitant changes in
this Section and Section 1006, or the deletion of this proviso, in accordance
with the requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
The Trustee may in its discretion determine whether or not any Securities
would be affected by any supplemental indenture and any such determination shall
he conclusive upon the Holders of all Securities of any series. The Trustee
shall not be liable for any such determination made in good faith.
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 903. 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 601) 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 and that such supplemental indenture, when
executed and delivered by the Company, will constitute a valid and binding
obligation of the Company in accordance with its terms. 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 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. 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 906. Reference in Securities to Supplemental Indentures.
Securities of any series 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 of any series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee or any Authenticating Agent in exchange for Outstanding Securities of
such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay the
principal of (and premium, if any) and interest, if any, on the Securities of
each series in accordance with the terms of the Securities of such series and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will cause to be maintained in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. With respect to the Securities of any series such office or agency and
each place of Payment shall be as specified as contemplated in Section 301. In
the absence of any such provisions with respect to the Securities of any series
(i) the place of payment for such securities shall be the Borough of Manhattan,
City of New York, New York, and (ii) such office or agency in such Place of
Payment shall be the Corporate Trust Office of the Trustee therein. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the 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 the Borough of Manhattan, City of New York, New York)
where the Securities of one or more series 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 each
place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest, if any, on any of the Securities
of that series, segregate and hold in trust for the benefit of the persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest, if any, 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 for any series of
Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest, if any, on any Securities of that series, deposit
with a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest, if any, 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 for any
series of Securities 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, if any, on Securities of that series in trust for
the benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities of that series) in the making of any payment of
principal (and premium, if any) or interest, if any, on the Securities of that
series; 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. Upon the satisfaction and discharge of the indebtedness in respect of all
Outstanding Securities of any series all sums then held by any Paying Agent
(other than the Trustee) in respect thereof shall, upon demand of the Company,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such money.
The Trustee and any Paying Agent shall promptly pay to the Company upon
Company Request any money or securities held by them at any time in excess of
amounts necessary to satisfy amounts payable to the Holders, the Trustee and the
Paying Agent.
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, if any, on any Security of any series and remaining unclaimed for
two years after such principal (and premium, if any) or interest, if any, has
become due and payable shall, unless otherwise required by mandatory provisions
of applicable escheat or abandoned or unclaimed property law, 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, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, 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 each Place of Payment with respect to Securities of such series,
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, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
SECTION 1005. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, a certificate of
the principal executive officer, the principal financial officer or the
principal accounting officer (which need not comply with Section 102), stating
as to each signer thereof that
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and
(2) as of the end of such year and at the date of the certificate to the
best of his knowledge, based on such review, (a) the Company is not in default
in the fulfillment of any of its obligations under this Indenture, or specifying
each such default known to him and the nature and status thereof and (b) no
event has occurred and is continuing which is or after notice or lapse of time
or both would become an Event of Default, or, if such an event has occurred and
is continuing, specifying each such event known to him and the nature and status
thereof.
SECTION 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition set forth in Sections 802 through 804 and Sections 1002 to 1005,
each inclusive, with respect to the Securities of any series if before the time
for such compliance the Holders of at least a majority in principal amount of
the Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee with respect to any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of any series) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Company of
less than all the Securities of any series, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice, but
not less than 30 days, shall be satisfactory to the Trustee), notify the Trustee
in writing of such Redemption Date and of the principal amount of Securities of
such series to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected by the Trustee not more
than 60 days prior to the Redemption Date, from the Outstanding Securities of
such series 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 the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series. In any case where
Securities of such series are registered in the same name, the Trustee in its
discretion may treat the aggregate principal amount so registered as if it were
represented by one Security of such series. If the Securities of any series to
be redeemed consist of Securities having different Stated Maturities or
different rates of interest (or methods of computing interest), then the Company
may, by written notice to the Trustee, direct that the Securities of such series
to be redeemed shall be selected from among groups of such Securities having
specified Stated Maturities or rates of interest (or methods or computing
interest) and the Trustee shall thereafter select the particular Securities to
be redeemed in the manner set forth above from among the groups of such
Securities so specified.
The Trustee shall promptly notify the Company 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.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 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 of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice which
relates to such Security shall state that on and after the Redemption Date, upon
surrender of such Security, the Holder will receive, without charge, a new
Security or Securities of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that interest
thereon will cease to accrue on and after said date.
(6) the place or places where such Securities are to be surrendered for
payment of the Redemption Price, and
(7) that the redemption is for a sinking fund, if such is the case.
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. In the case of
redemptions by the Company of Global Securities, the Company shall, at least 30
days prior to the Redemption Date, notify the Depositary (with a copy to the
Trustee) of such redemption.
SECTION 1105. Deposit of Redemption Price.
On or 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 1003) an amount of
money sufficient to pay 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.
SECTION 1106. 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
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 Regular Record Date according to
their terms and the provisions of Section 307.
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 prescribed therefor in the
Security.
SECTION 1107. Securities Redeemed in Part.
Any security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (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 the same series, of 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; provided, however, that the Depositary need not surrender Global
Securities for a partial redemption and may be authorized to make a notation on
such Global Security of such partial redemption. In the case of a partial
redemption of the Global Securities, the Depositary, and in turn, the
participants in the Depositary, shall have the responsibility to select any
Securities to be redeemed by random lot.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of any series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series (1) deliver Outstanding Securities of such series (other than any
previously called for redemption) and (2) apply as a credit Securities of such
series which have been redeemed either at the election of the Company pursuant
to the terms of such series of Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case, provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202, and the amount of any optional sinking fund payment to
be added to the next ensuing sinking fund payment, and will also deliver to the
Trustee any Securities to be so delivered. If such Officers' Certificate shall
specify an optional amount to be added in cash to the next ensuing mandatory
sinking fund payment, the Company shall thereupon be obligated to pay the amount
therein specified. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
PHH CORPORATION
By /s/ Terry E. Kridler
Name:
Title:
THE BANK OF NEW YORK
By /s/ Mary Beth Lewicki
Name:
Title:
PHH CORPORATION
U.S. $3,000,000,000
Medium-Term Notes
DISTRIBUTION AGREEMENT
June 5, 1997
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
North Tower
World Financial Center
New York, New York 10281
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Sirs:
Section 1. Introductory. PHH Corporation, a Maryland corporation (the
"Company"), has filed with the Securities and Exchange Commission (the
"Commission"), and the Commission declared effective on June 5, 1997, a
registration statement on Form S-3 (Registration No. 333-27715, hereinafter
called the "Registration Statement"), covering up to U.S. $3,000,000,000
aggregate principal amount of the Company's debt securities (the "Securities").
Any reference herein to the term "Registration Statement" shall be deemed to
refer, unless the context otherwise indicates, to the Registration Statement,
including the form of final prospectus, financial statements and other documents
included or incorporated by reference therein and all exhibits included therein,
as from time to time amended, and the term "Prospectus" shall be deemed to refer
collectively, unless the context otherwise indicates, to the final prospectus in
the form filed with the Commission pursuant to Rule 424(b) under the Securities
Act of 1933 (the "Act") and each prospectus as supplemented mailed to the
Commission pursuant to Rule 424(c) under the Act, including documents
incorporated by reference therein, as from time to time amended or supplemented
(exclusive of any supplements relating solely to Securities that are not Offered
Securities as hereinafter defined). The Securities will be issued under one or
more indentures (the "Indentures") identified and described in the Registration
Statement between the Company and one or more commercial banks, as trustees (the
"Trustees"). One class of Securities that the Company is authorized to issue
under the Indentures is Medium-Term Notes (the "Offered Securities"). Without
limitation on the Company's right to sell all other classes of Securities
through underwriters (which may include any or all of you) or dealers, or
directly to one or more institutional investors, or through agents (which may
include any or all of you), and without limitation on the Company's right to
sell Offered Securities through other agents as provided in Section 3(a) hereof,
the Company confirms its agreement with you with respect to the issue and sale
by the Company of up to U.S. $3,000,000,000 (or the equivalent in foreign
currency or currency units) principal amount of the Offered Securities issued
under the Indentures, subject to reduction as a result of the concurrent sale of
other Securities of the Company.
Section 2. Representations and Warranties of the Company. The Company
represents and warrants to each of you, as of the date hereof, as of the Closing
Time hereinafter referred to and as of the times referred to in Sections 4(k)
and 4(l) (in each case the "Representation Date"), as follows:
(a) The Registration Statement and the Prospectus, on their respective
dates of effectiveness and filing did, and as of the applicable Representation
Date will, conform in all material respects to the requirements of the Act, the
Trust Indenture Act of 1939 (the "Trust Indenture Act") and the rules and
regulations (the "Rules and Regulations") of the Commission; as of the
respective dates of their effectiveness and filing, neither the Registration
Statement nor the Prospectus did, nor as of the applicable Representation Date
will, include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph do not apply to (i)
statements or omissions in the Registration Statement or the Prospectus based
upon written information furnished to the Company by any of you or any of the
Trustees expressly for use therein or (ii) that part of the Registration
Statement that constitutes the Statement of Eligibility under the Trust
Indenture Act on Form T-1 of any Trustee, except statements or omissions in such
Statement made in reliance upon information furnished in writing to such Trustee
by or on behalf of the Company for use therein.
(b) The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Maryland and has full power and
authority to conduct the businesses presently being conducted by it.
(c) Neither the execution or delivery of this Agreement, the Offered
Securities or the Indentures, the consummation of the transactions herein or
therein contemplated, nor compliance with the terms, conditions or provisions of
any such instruments, will result in a breach or violation of any of the terms
and provisions of, or constitute (with due notice or lapse of time, or both) a
default under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any material subsidiary of the Company is a
party or by which it or any of its assets is bound, any statute, the charter or
by-laws of the Company or any material subsidiary or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any material subsidiary or over its assets (except, no
representation, warranty or agreement is being made in this paragraph as to the
Blue Sky or securities laws of any State of the United States or the District of
Columbia, the Commonwealth of Puerto Rico or foreign jurisdictions).
(d) This Agreement has been duly authorized, executed and delivered on
behalf of the Company and is a valid and legally binding agreement of the
Company enforceable in accordance with its terms (except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting creditors' rights generally); the Offered Securities have been duly
authorized and, when authenticated as contemplated by the applicable Indenture
or Indentures and delivered and paid for in accordance with this Agreement, will
have been duly executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms (except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights
generally) and will be entitled to the benefits provided by the applicable
Indenture or Indentures.
(e) There is no consent, approval, authorization, order, registration or
qualification of or with any court or any regulatory authority or other
governmental body having jurisdiction over the Company or any material
subsidiary which is required for, or the absence of which would materially
affect, the issue and sale of the Offered Securities as contemplated by this
Agreement or the execution, delivery or performance of the Indentures, except
the registration under the Act of the Offered Securities, the qualification of
the Indentures under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under the
securities or "Blue Sky" laws of any jurisdiction in connection with the
offering of the Offered Securities by the Company and the Agent in the manner
contemplated hereby.
(f) All financial statements of the Company provided to the Agent(s) by the
Company (including those contained in the Registration Statement) fairly present
the financial condition of the Company in all material respects and have been
prepared in conformity with U.S. generally accepted accounting principles.
(g) The Company has complied with all provisions of section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
Section 3. Solicitations as Agent; Purchases as Principal or Underwriter.
(a) Solicitations as Agent. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, each
of you will use your best efforts to solicit offers to purchase the Offered
Securities upon the terms and conditions set forth in the Prospectus as then
amended or supplemented. You are hereinafter sometimes referred to in your
capacity as agents, individually as an "Agent" and collectively as the "Agents".
The Company reserves the right, and may submit offers, to purchase and sell
Offered Securities directly to the public on its own behalf in jurisdictions in
which it is authorized to do so. In addition, after notice to each of the
Agents, the Company may appoint any additional agent to solicit and receive
offers to purchase Offered Securities from the Company upon the terms and
conditions set forth in the Prospectus, provided that any such additional agent
is made a party to this Agreement or executes a distribution agreement
substantially identical to this Agreement.
Each Agent further undertakes that in connection with the distribution of
Offered Securities denominated in any foreign currency or currency unit, it will
comply with the further restrictions in respect of offers and sales of Offered
Securities so denominated set forth in Exhibit C hereto.
The Company agrees to pay each Agent a commission for each Offered Security
sold, the purchase of which is solicited by such Agent, as follows:
Commission as a Percentage
Maturity of Principal Amount
- -------- --------------------------
9 months to less than 1 year .125%
1 year to less than 18 months .150
18 months to less than 2 years .200
2 years to less than 3 years .250
3 years to less than 4 years .350
4 years to less than 5 years .450
5 years to less than 6 years .500
6 years to less than 7 years .550
7 years to less than 10 years .600
10 years to less than 15 years .625
15 years to less than 20 years .700
20 years to 30 years .750
More than 30 years to 40 years To be negotiated
The authorized denominations of Offered Securities denominated in a
currency or currency unit other than United States dollars shall be the
equivalent, as determined by the Market Exchange Rate (as defined herein) for
such currency or currency unit on the business day immediately preceding the
trade date for such Offered Securities, of U.S. $1,000 (rounded down to an
integral multiple of 1,000 units of such currency or currency unit), and any
larger amount that is an integral multiple of 1,000 units of such currency or
currency unit. The authorized denominations of Offered Securities denominated in
United States dollars shall be U.S. $1,000 and any larger amount that is an
integral multiple of U.S. $1,000. The Agents shall communicate to the Company,
orally or in writing, each offer to purchase Offered Securities other than those
rejected by the Agents. The Company shall have the sole right to accept offers
to purchase the Offered Securities and may reject any such offer in whole or in
part. The Agents shall have the right to reject any offer to purchase the
Offered Securities in whole or in part, and any such rejection shall not be
deemed a breach of their agreements contained herein.
The "Market Exchange Rate" on a given date for a given foreign currency
means the noon buying rate in New York City for cable transfers in such currency
as certified for customs purposes by the Federal Reserve Bank of New York on
such date; provided, however, that in the case of European Currency Units,
Market Exchange Rate means the rate of exchange determined by the Council of
European Communities (or any successor thereto) as published on such date or the
most recently available date in the Official Journal of the European Communities
(or any successor publication).
(b) Purchases as Principal or Underwriter. Each sale of Offered Securities
to any or all of you as principal or underwriter for resale to others shall be
made in accordance with the terms of this Agreement and a separate agreement to
be entered into between us which will provide for the sale of such Offered
Securities to, and the purchase and reoffering thereof by, any or all of you.
Each such separate agreement is herein referred to as a "Terms Agreement". Your
commitment to purchase Offered Securities pursuant to any Terms Agreement shall
be deemed to have been made on the basis of the representations and warranties
of the Company herein contained and shall be subject to the terms and conditions
herein set forth. Each Terms Agreement shall specify the currency denomination,
principal amount and maturity of Offered Securities to be purchased by you
pursuant thereto, the price to be paid to the Company for such Offered
Securities (which, if not so specified in a Terms Agreement, shall be at a
discount equivalent to the applicable commission set forth in Section 3(a)
hereof), the initial public offering price, if any, at which the Offered
Securities are proposed to be reoffered, the time and place of delivery of and
payment for such Offered Securities, and any provisions relating to rights of,
and default by, any purchasers acting together with you in the reoffering of the
Offered Securities. To the extent required, such Terms Agreement shall also
specify any requirements for opinions of counsel, officer's certificates and
letters from KPMG Peat Marwick or other independent certified public accountant
of national standing pursuant to Section 5 hereof. Terms Agreements, each of
which shall be substantially in the form of Exhibit A hereto, may take the form
of an exchange of any standard form of written communication (including a
written confirmation of an oral agreement) between the Company and each of you
participating in the sale referred to therein, including by telecopy or telex.
If agreed to by the Company and any one or more Agents, such Agents may purchase
Offered Securities as principal pursuant to the procedures for documentation and
settlement applicable to agency sales. The Agents may utilize a selling or
dealer group in connection with the resale of the Offered Securities.
(c) Procedures. Certain administrative functions are set forth in the
Medium-Term Note Administrative Procedures (the "Procedure"), attached hereto as
Exhibit B. You and the Company agree to perform the respective duties and
obligations specifically provided to be performed by each of them herein and in
the Procedure, as amended from time to time. The Procedure may only be amended
by written agreement of all the parties hereto.
(d) Delivery. The documents required to be delivered by Section 5 hereof
(subject to paragraph (b) above) shall be delivered at the office of Milbank,
Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York, on the date
hereof, and at the delivery time specified in each Terms Agreement (each called
a "Closing Time").
Section 4. Covenants of the Company. The Company covenants with you that:
(a) The Company will make no amendment or supplement (other than by an
amendment or supplement in the form previously agreed to by the parties
providing solely for a change in the interest rates or maturities offered in the
Offered Securities, or for a change in the currency in which the Offered
Securities are denominated, chosen from among currencies that have previously
been described in the Prospectus (a "Pricing Supplement")) to the Registration
Statement or the Prospectus, whether by the filing of documents incorporated by
reference in whole or in part into the Registration Statement or the Prospectus
or otherwise, or make any change in the form of final prospectus prior to the
time it is first filed with the Commission pursuant to Rule 424(b) under the
Act, prior to having furnished each of you a reasonable opportunity to review
the same and which shall not have been disapproved by you; the Company will
advise each of you promptly of the filing and effectiveness of any amendment to
the Registration Statement or the filing of any amendment or supplement (other
than a Pricing Supplement) to the Prospectus (including the filing and
effectiveness of any document incorporated by reference in whole or in part into
the Registration Statement or the Prospectus), and of the institution by the
Commission of any stop-order proceedings in respect of the Registration
Statement, and will use its best efforts to prevent the issuance of any such
stop-order and to obtain as soon as possible its lifting, if issued.
(b) If at any time when a prospectus relating to the Offered Securities is
required to be delivered under the Act any event occurs as a result of which the
Registration Statement or Prospectus would include an untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if, in your reasonable opinion or in the reasonable
opinion of the Company, it is necessary at any time to amend or supplement the
Registration Statement or Prospectus (including any document incorporated by
reference in whole or part therein) to comply with the Act, the Company promptly
will notify you, or you shall, as the case may be, suspend solicitation of
offers to purchase Offered Securities and, if so notified by the Company, you
shall forthwith suspend such solicitation and cease using the Prospectus; the
Company will promptly prepare and file with the Commission an amendment or
supplement to such Registration Statement or Prospectus (or to such document
incorporated by reference therein) which will correct such statement or omission
or effect such compliance and will supply such amended or supplemented
Prospectus or document to each of you in such quantities as you may reasonably
request; and if such amendment or supplement or document, and any documents,
certificates and opinions furnished to each of you pursuant to paragraph (i)
below in connection with the preparation or filing of such amendment or
supplement, are satisfactory in all respects to you, you will, upon the filing
of such amendment or supplement or document with the Commission or effectiveness
of an amendment to the Registration Statement, resume your respective obligation
to solicit offers to purchase Offered Securities hereunder.
(c) As soon as practicable, the Company will make generally available to
its securityholders an earnings statement or statements that will satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
(d) The Company will furnish to each of you copies of all amendments of and
supplements (other than Pricing Supplements, copies of which need only be
furnished to the Agents involved in the sale of the Offered Securities to which
such Pricing Supplements relates) to the Registration Statement and the
Prospectus, as soon as available and in such quantities as you reasonably
request.
(e) The Company will take such action as you may request in order to
qualify the Offered Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions as you may request; provided, however, that in no
event shall the Company be obligated to subject itself to taxation or to qualify
to do business in any jurisdiction where it is not now so subject or qualified
or to take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Offered Securities,
in any jurisdiction where it is not now so subject.
(f) So long as any Offered Security is outstanding, the Company will
furnish to each of you, as soon as practicable after the end of each fiscal
year, a balance sheet and statement of income of the Company as at the end of
and for such fiscal year in reasonable detail and reported on by independent
public accountants. The Company will furnish to each of you as soon as
practicable after the end of each quarterly fiscal period (except for the last
quarterly fiscal period of each fiscal year), a balance sheet and statement of
income of each of the Company as at the end of such period and for the fiscal
year to date, certified by either the Chief Financial Officer or Chief
Accounting Officer of the Company. So long as the Company has active
subsidiaries, such financial statements will be furnished on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated.
(g) The Company shall furnish to each of you as soon as practicable
following the filing of any amendment or supplement (other than a Pricing
Supplement) to the Registration Statement or Prospectus (including the filing of
any document incorporated by reference in whole or in part into the Registration
Statement or Prospectus), a certificate of (i) the Chairman of the Board, the
President, any Executive Vice President or any Vice President and (ii) the Vice
President and Treasurer, the Vice President and Controller or any other Vice
President of the Company to the effect that, at the date of such certificate,
neither the Registration Statement nor the Prospectus includes any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, except that the foregoing does not apply to (i)
statements or omissions in the Registration Statement or Prospectus based upon
written information furnished to the Company by any of you or any of the
Trustees expressly for use therein or (ii) that part of the Registration
Statement that constitutes the Statement of Eligibility under the Trust
Indenture Act on Form T-1 of any Trustee, except statements or omissions in such
Statement made in reliance upon information furnished in writing to such Trustee
by or on behalf of the Company for use therein.
(h) The Company shall furnish to each of you (i) forthwith after the
Company is required to file the same with the Commission, copies of its annual
reports and quarterly reports on Forms 10-K and 10-Q, respectively, its proxy
statements and of any other information, documents and reports that the Company
is required to file with the Commission pursuant to Section 13, 14 or Section
15(d) of the Securities Exchange Act of 1934 or with the New York Stock
Exchange, Inc., or any other national securities exchange on which any security
of the Company is listed and (ii) at the earliest time the Company makes the
same available to others, copies of annual reports and other financial reports
of the Company furnished or made available to the public generally.
(i) The Company shall furnish to each of you such documents, certificates
of officers of the Company and opinions of counsel for the Company relating to
the business, operations and affairs of the Company, the Registration Statement,
the Prospectus (including any amendments or supplements thereto), the Indenture,
the Offered Securities, this Agreement, the Procedure and the performance by the
Company and you of our respective obligations hereunder and thereunder as you
may from time to time and at any time prior to the termination of this Agreement
reasonably request.
(j) The Company shall pay all expenses incident to the performance of its
obligations under this Agreement, including the fees and disbursements of its
accountants, the cost of printing and delivery of the Registration Statement,
the Prospectus (including all amendments and supplements thereto) and the
Indentures, the costs of preparing, printing, packaging and delivering the
Offered Securities, the fees and disbursements of the Trustees and the fees of
any agency that rates the Offered Securities, the reasonable fees of your
counsel, and will reimburse you from time to time for all reasonable
out-of-pocket expenses incurred by you, including in connection with the
offering and sale of the Offered Securities and the qualification of the Offered
Securities for sale and determination of eligibility for investment of the
Offered Securities under the securities or Blue Sky laws of such jurisdictions
as you designate and any advertising expenses connected with the offering and
sale of Offered Securities.
(k) Each acceptance by the Company of an offer to purchase Offered
Securities and each delivery of Offered Securities in any sale made to, or
pursuant to an offer solicited by, you will be deemed to be an affirmation to
any Agent that solicited such offer or purchased such Offered Securities that
the representations and warranties of the Company contained in Sections 2(a)
through 2(e) are true and correct at the time of such acceptance or delivery, as
though made at and as of such time, and a representation and warranty to any
Agent that solicited such offer or purchased such Offered Securities that
neither the Registration Statement nor the Prospectus includes any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that the foregoing does not apply to (i) statements
or omissions in the Registration Statement or the Prospectus based upon written
information furnished to the Company by any of you or any of the Trustees
expressly for use therein or (ii) that part of the Registration Statement that
constitutes the Statement of Eligibility under the Trust Indenture Act on Form
T-1 of any Trustee, except statements or omissions in such Statement made in
reliance upon information furnished in writing to such Trustee by or on behalf
of the Company for use therein.
(l) Each time that the Registration Statement or the Prospectus (including
any portion of any document incorporated by reference in whole or part into
either), is amended or supplemented (other than by a Pricing Supplement), the
Company will deliver or cause to be delivered forthwith to each of you a
certificate of the officers of the Company as specified in Section 4(g), dated
the date of the effectiveness of such amendment or the date of filing of such
supplement, in form reasonably satisfactory to you, to the effect that the
statements contained in the certificate referred to in Section 5(c)(ii) that was
last furnished to you (either pursuant to Section 5(c)(ii) or this Section 4(l))
are true and correct at the time of the effectiveness of such amendment or the
filing of such supplement as though made at and as of such time or, in lieu of
such certificate, a certificate of the same tenor as the certificate referred to
in Section 5(c)(ii) dated the effective date of such amendment or the date of
filing of such supplement.
(m) Each time that the Registration Statement or the Prospectus, including
any portion of any document incorporated by reference in whole or part into
either, is amended or supplemented (other than by a Pricing Supplement), and
except for an amendment or supplement occasioned by the incorporation by
reference of proxy materials of the Company or reports of the Company on Form
10-K, Form 10-Q or Form 8-K, in which case the written opinion furnished by the
Company referred to hereafter shall be that of the General Counsel or Assistant
General Counsel of the Company), the Company shall furnish or cause to be
furnished forthwith to each of you a written opinion of Piper & Marbury L.L.P.,
or other counsel for the Company acceptable to the Agents, dated the date of the
effectiveness of such amendment or the date of filing of such supplement or the
filing of such document incorporated by reference into the Registration
Statement or the Prospectus, in form satisfactory to you, relating to the
Registration Statement and the Prospectus.
(n) Each time that the Registration Statement or the Prospectus is amended
or supplemented to set forth amended or supplemental financial information,
whether by incorporation by reference in whole or in part or otherwise, the
Company shall cause KPMG Peat Marwick L.L.P., or other independent certified
public accountants of national standing, forthwith to furnish to each of you a
letter, dated the date of the effectiveness of such amendment or the date of
filing of such supplement, in form satisfactory to you, of the same tenor as the
letter referred to in Section 5(d) with such changes as may be necessary to
reflect the amended or supplemental financial information included in the
Registration Statement and the Prospectus and the other financial information of
the Company available within five days of the date of such letter; provided,
however, that such accountants need only furnish you a letter in compliance with
SAS 71, as appropriately modified, where such amendment or supplement or
document incorporated by reference only sets forth unaudited quarterly financial
information contained in the Company's Quarterly Report on Form 10-Q.
(o) Between the date of any Terms Agreement and the settlement date with
respect to the Offered Securities covered thereby, the Company will not, without
the prior consent of each of you that is a party to such Terms Agreement, offer
or sell, or enter into any agreement to sell, any debt securities of the
Company, other than (i) borrowings under the Company's revolving credit
agreements and lines of credit and (ii) issuances of the Company's commercial
paper.
(p) The Company shall offer to any person who has agreed to purchase
Offered Securities as a result of an offer to purchase solicited by any of you
the right to refuse to purchase and pay for such Offered Securities if, on the
related settlement date fixed pursuant to the Procedure, (i) the condition set
forth in Section 5(a) hereof shall not be satisfied, (ii) the rating assigned by
any nationally recognized securities rating agency to any debt securities of the
Company as of the date of the applicable Terms Agreement shall not have been
lowered since that date nor shall any such organization have publicly announced
that it has under surveillance or review, with possible negative implications,
its ratings of any debt securities of the Company or (iii) if any of the events
set forth in clause (ii) or clause (iii) of the second sentence of Section 9
hereof shall have occurred (it being understood that, for purposes of this
paragraph (p), the judgment of such person shall be substituted for the judgment
of the Agent with respect to the matters referred to in clause (ii) of the
second sentence of Section 9 hereof, and that the Agent shall have no duty or
obligation to exercise its judgment on behalf of such person). This paragraph
(p) shall not affect any other right of any person who has agreed to purchase
Offered Securities to refuse to purchase and pay for such Offered Securities
that arises under any other provision of this Agreement.
Section 5. Conditions of Obligations. Your several obligations to solicit
offers to purchase the Offered Securities as Agent(s) and your obligations to
purchase Offered Securities pursuant to any Terms Agreement or otherwise will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of the Company's officers made
in each certificate furnished pursuant to the provisions hereof, to the
performance and observance by the Company of all covenants and agreements herein
contained on its part to be performed and observed and to the following
additional conditions precedent:
(a) At and subsequent to the date hereof and at each Closing Time no
stop-order suspending the effectiveness of the Registration Statement shall have
been issued and remain outstanding and no proceedings for that purpose shall
have been instituted or, to your knowledge or the knowledge of the Company,
threatened or contemplated by the Commission.
(b) At the date hereof and at each Closing Time if called for by the
applicable Terms Agreement, each of you (or, with respect to a Closing Time
called for by any Terms Agreement, each of you that is a party to such Terms
Agreement) shall have received an opinion, dated, as applicable, either the date
hereof or such Closing Time, of Piper & Marbury L.L.P., or other counsel for the
Company acceptable to the Agents (or in the case of any Closing Time other than
the date hereof, the opinion of the General Counsel or Assistant General Counsel
of the Company), substantially identical to the proposed form of their opinion
heretofore delivered to each of you.
(c) (i) At the date hereof and at each Closing Time, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus (except as set forth in or contemplated by the Registration
Statement and the Prospectus), the Company shall not have incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business, nor shall there have been
any material decrease in the stockholders' equity or any material increase in
the long-term debt of the Company or any material adverse change in the
condition, financial or otherwise, or in the earnings, affairs or business
prospects of the Company, whether or not arising in the ordinary course of
business.
(ii) At the date hereof and at each Closing Time if called for by the
applicable Terms Agreement, each of you (or, with respect to a Closing Time
called for by any Terms Agreement, each of you that is a party to such Terms
Agreement) shall have received a certificate, dated, as applicable, the date
hereof or such Closing Time, signed by the officers of the Company specified in
Section 4(g), certifying that, to the best of their knowledge after reasonable
investigation, the statements made in the immediately preceding paragraph (i)
are accurate and to the effect that (A) no stop- order suspending the
effectiveness of the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or, to the knowledge of such officers, are
threatened or contemplated by the Commission, (B) the Registration Statement and
the Prospectus conform in all material respects to the requirements of the Act,
the Trust Indenture Act and the Rules and Regulations, (C) neither the
Registration Statement nor the Prospectus contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the foregoing does not apply to (i) statements
or omissions in the Registration Statement or the Prospectus made in reliance
upon information furnished in writing to the Company by any of you or on your
behalf or on behalf of any of the Trustees expressly for use therein or (ii)
that part of the Registration Statement that constitutes the Statement of
Eligibility under the Trust Indenture Act on Form T-1 of any Trustee, except
statements or omissions in such Statement made in reliance upon information
furnished in writing to such Trustee by or on behalf of the Company for use
therein, and (D) the representations and warranties of the Company included in
Sections 2(a) through 2(e) are, as of the Closing Time, accurate in all material
respects and the Company has performed and observed all covenants and agreements
herein contained on its part to be performed and observed prior to the Closing
Time.
(d) At the date hereof, and at each Closing Time if called for by the
applicable Terms Agreement, each of you (or, with respect to a Closing Time
called for by any Terms Agreement, each of you that is a party to such Terms
Agreement) shall have received a letter, dated as of the Closing Time, signed by
KPMG Peat Marwick or other independent certified public accountant of national
standing, substantially identical to the proposed form of such letter heretofore
delivered to each of you.
(e) At the date hereof and at each Closing Time if called for by the
applicable Terms Agreement, each of you (or with respect to a Closing Time
called for by any Terms Agreement, each of you that is a party to such Terms
Agreement) shall have received an opinion, dated such date, of Milbank, Tweed,
Hadley & McCloy, or other counsel selected by the Agents, with respect to the
Company, the Offered Securities, the Registration Statement, including the form
of final prospectus included therein, this Agreement and the form and
sufficiency of all proceedings taken in connection with the authorization, sale
and delivery of the Offered Securities, all of which shall be satisfactory in
all respects to you, and the Company shall have furnished to your counsel such
documents as such counsel may reasonably request for the purpose of enabling
them to render such opinion.
(f) At the date hereof and at each Closing Time if called for by the
applicable Terms Agreement, the Company shall have furnished to each of you (or,
with respect to a Closing Time called for by any Terms Agreement, each of you
that is a party to such Terms Agreement) such further information and documents
as you may have reasonably requested.
(g) There shall not have occurred any change, or any development involving
a prospective change, involving currency exchange rates, exchange controls,
taxation or similar matters that in your respective judgments makes it
impracticable or inadvisable to proceed with your solicitation of offers to
purchase the Offered Securities denominated in the affected currency or
currencies, or your purchase of such Offered Securities from the Company as
principal; provided, however, that any such change or development shall not
affect your respective obligations with respect to Offered Securities
denominated in any currency not so affected.
Your respective obligations to purchase Offered Securities pursuant to any
Terms Agreement (or as contemplated by the last sentence of Section 3(b) hereof)
will be subject to the following further conditions: (a) the rating assigned by
any nationally recognized securities rating agency to any debt securities of the
Company as of the date of the applicable Terms Agreement shall not have been
lowered since that date nor shall any such organization have publicly announced
that it has under surveillance or review, with possible negative implications,
its ratings of any debt securities of the Company and (b) there shall not have
come to your attention any facts that would cause you to believe that the
Prospectus, at the time it was required to be delivered to a purchaser of the
Offered Securities, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein, in
light of the circumstances existing at such time, not misleading.
Section 6. Indemnification. (a) The Company shall indemnify and hold
harmless each of you, each of your partners, directors, officers and employees
and each person, if any, who controls you within the meaning of Section 15 of
the Act against any and all losses, claims, damages, and liabilities, joint or
several (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which you or they, or any of you
or them, may become subject under the Act, the Securities Exchange Act of 1934
or other Federal or state law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Registration Statement or the Prospectus, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except that the foregoing does not apply to (i) untrue statements or omissions
or alleged untrue statements or omissions in such preliminary prospectus, the
Registration Statement or the Prospectus, based upon written information
furnished to the Company by any of you expressly for use therein or (ii) that
part of the Registration Statement that constitutes the Statement of Eligibility
under the Trust Indenture Act on Form T-1 of any Trustee, except untrue
statements or omissions or alleged untrue statements or omissions in such
Statement made in reliance upon information furnished in writing to such Trustee
by or on behalf of the Company for use therein; provided, however, that the
aforesaid indemnity agreement with respect to the Registration Statement and the
Prospectus shall not inure to your or their benefit (if the person asserting any
such loss, claim, damage or liability purchased the Offered Securities which are
the subject thereof through you), or to the benefit of any person controlling
you, if the Company shall have furnished an amendment or supplement to the
Prospectus to you prior to the time a written confirmation of the sale of such
Offered Securities was sent or given to the person asserting such loss, claim,
damage, liability or action for which indemnification is sought, and the
Prospectus as so supplemented or amended (i) corrected the alleged misstatement
or omission on which the asserted loss, claim, damage or liability was based and
(ii) was not sent or given to such person at or prior to the written
confirmation of the sale of such Offered Securities to such person.
(b) Each Agent shall indemnify and hold harmless the Company, each person,
if any, who controls the Company within the meaning of Section 15 of the Act,
each director of the Company and each officer of the Company who signs the
Registration Statement or any amendment thereto to the same extent as the
foregoing indemnity from the Company to you but only insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which was made in
any preliminary prospectus, the Registration Statement or the Prospectus in
reliance upon and in conformity with information furnished in writing to the
Company by such Agent expressly for use therein.
(c) Any party which proposes to assert the right to be indemnified under
this Section 6 shall, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to
be made against an indemnifying party under paragraph (a) or (b) of this Section
6, notify each such indemnifying party of the commencement of such action, suit
or proceeding, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party of any such action, suit or proceeding shall not
relieve it from any liability which it may have to any indemnified party
otherwise than under paragraph (a) or (b) of this Section 6. In case any such
action, suit or proceeding is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that it wishes,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who shall
not except with the consent of the indemnified party be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses, other than reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in any such action,
but the fees and expenses of such counsel will be at the expense of such
indemnified party unless (i) the employment of counsel by such indemnified party
has been authorized by the indemnifying party, (ii) the indemnified party shall
have reasonably concluded that there may be a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense of
such action (in which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying party has not in fact employed counsel to assume the defense of
such action, in any of which events such fees and expenses shall be borne by the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its consent (which shall not be
unreasonably withheld). No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any action or claim
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 6 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and each of you on the other from the offering of
the Securities to which such loss, claim, damage or liability (or action in
respect thereof) relates. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and each of you on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and each of you on the
other shall be deemed to be in the same proportion as the total net proceeds
from the sale of Offered Securities (before deducting expenses) received by the
Company bear to the total commissions or discounts received by each of you in
respect thereof. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading relates to information supplied by the Company on the one hand or by
you on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Agent shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities purchased by or
through such Agent were sold exceeds the amount of any damages which such Agent
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Agents' obligations to contribute pursuant to this
Section 6(d) are several, in proportion to the respective principal amounts of
Offered Securities purchased or sold by each of such Agents, and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls you
within the meaning of the Act; and your obligations under this Section 6 shall
be in addition to any liability which you may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
and to each person, if any, who controls the Company within the meaning of the
Act.
Section 7. Position of the Agent(s). In soliciting purchases of the Offered
Securities, each Agent is acting solely as agent for the Company, and not as
principal. Each Agent shall make reasonable efforts to assist the Company in
obtaining performance by each purchaser whose offer to purchase Offered
Securities has been solicited by such Agent and accepted by the Company, but
such Agent shall not have any liability to the Company in the event any such
purchase is not consummated for any reason.
Section 8. Representations and Indemnities to Survive Delivery. Your
respective indemnities, agreements, representations, warranties and other
statements and those of the Company or its officers set forth in or made
pursuant to this Agreement shall remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any of you or on behalf of the Company or any of its officers or directors or
any controlling person, and will survive each delivery of and payment for any of
the Offered Securities.
Section 9. Termination. This Agreement may be terminated at any time (i) by
the Company with respect to any Agent by giving written notice of such
termination to such Agent or (ii) by any Agent, as to the rights and obligations
of such Agent only, by giving written notice to the Company. Any Agent that is a
party to any Terms Agreement may also terminate such Terms Agreement (or other
obligation to purchase Offered Securities as principal as contemplated by the
penultimate sentence of Section 3(b) hereof), immediately upon notice to the
Company, at any time prior to the Closing Time relating thereto (i) if there has
been, since the respective dates as of which information is given in the
Registration Statement and Prospectus, any material adverse change in the
condition, financial or otherwise, of the Company and its subsidiaries
considered as one enterprise, or in the earnings, affairs or business prospects
of the Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
outbreak or escalation of hostilities or other calamity or crisis the effect of
which on the financial markets of the United States, or of any other country in
the currency of which the Offered Securities are denominated, is such as to make
it, in the judgment of such Agent, impracticable to market the Offered
Securities or enforce contracts for the sale of the Offered Securities, or (iii)
if trading in any securities of the Company has been suspended by the Commission
or a national securities exchange, or if trading generally on either the
American Stock Exchange or the New York Stock Exchange has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by either Federal or New York State authorities or
by authorities in any other country in the currency of which the Offered
Securities are denominated. In the event of such termination by the Company, the
Company and any Agent as to which this Agreement has been terminated shall have
no liability or other obligation to each other, and in the event of such
termination by an Agent, such Agent and the Company shall have no further
liability or obligation to each other, in each case except as provided in the
first sentence of the third paragraph of Section 3(a), Section 4(c), Section
4(j), Section 6 and Section 8 and except that, if at the time of termination (i)
an offer to purchase any of the Offered Securities has been accepted by the
Company but the time of delivery to the purchaser or its agent of the Offered
Security or Offered Securities relating thereto has not occurred or (ii) any
Agent shall own any of the Offered Securities which were bought by such Agent as
principal with the intention of reselling them, the Company's obligations
provided in Sections 4(k) through 4(n) and, in the circumstances described in
clause (ii), all obligations of the Company relating to such Agent's ability to
resell such Offered Securities, shall not be terminated.
Section 10. Notices. All communications hereunder will be in writing and,
if sent to you, will be mailed, delivered or telegraphed and confirmed in
duplicate originals to:
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attention: Short and Medium Term Finance
Telephone: (212) 325-7198
Telecopy: (212) 325-8183
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Credit Control--Medium Term Notes
Telecopy: (212) 363-7609
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
North Tower
World Financial Center
New York, New York, 10281
Attention: MTN Product Management
Telecopy: (212) 449-2234
J.P. Morgan Securities Inc.
60 Wall Street - 3rd Floor
New York, New York 10260
Attention: Medium-Term Note Desk
Telecopy: (212) 648-5909
or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 11333 McCormick Road, Hunt Valley, Maryland 21031, Attention
of Vice President and Treasurer.
Section 11. Parties. This Agreement will inure to the benefit of and be
binding upon each of the parties hereto and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or is to be construed to
give any person, firm or corporation, other than the parties hereto and their
respective successors and the controlling persons, directors, officers and
employees referred to in Section 6, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained;
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole exclusive benefit of the parties hereto and their respective
successors and said controlling persons and said directors, officers and
employees, and for the benefit of no other person, firm or corporation. No
purchaser of any Offered Securities through any Agent will be deemed to be a
successor by reason merely of such purchase.
Section 12. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between the Company
and you in accordance with its terms.
Very truly yours,
PHH CORPORATION
By /s/ Terry E. Kridler
Vice President and Treasurer
Confirmed and Accepted,
as of the date first
above-written:
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Helena Willner
GOLDMAN, SACHS & CO.
By /s/ Goldman, Sachs & Co.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By /s/ Signature
J.P. MORGAN SECURITIES INC.
By /s/ Maria Stamek
<PAGE>
EXHIBIT A
PHH CORPORATION
(A Maryland corporation)
Medium-Term Notes
TERMS AGREEMENT
[Date]
PHH Corporation
11333 McCormick Road
Hunt Valley, Maryland 21037
Attention: __________________
Re: Distribution Agreement for Above-Mentioned Securities
Pursuant to the Distribution Agreement dated June 5, 1995 between PHH
Corporation (the "Company") and [Agent(s)], the undersigned agrees to purchase
the Company's Medium-Term Notes having the principal amounts (denominated in the
respective currencies), maturities, interest rates and other terms set forth in
Schedule I hereto.
[The opinions referred to in Sections 5(b) and 5(e) of the Distribution
Agreement, the accountants' letter referred to in Section 5(d) of the
Distribution Agreement [and the officer's certificate referred to in Section
5(c)(ii) of the Distribution Agreement] will be required.]
[Agent(s)]
Accepted: By __________________________
PHH CORPORATION
By __________________________
<PAGE>
Schedule I
Principal Discount Initial
Amount (as % of Public
Maturity Settlement and Interest Principal Offering
Date Date Currency Rate Amount) Price Trustee
-------- ---------- --------- -------- ---------- -------- -------
A.
B.
C.
D.
E.
F.
G.
H.
Time of delivery
Place of delivery
[Other terms]
[Closing date]
<PAGE>
EXHIBIT B
PHH CORPORATION
Administrative Procedures
These Administrative Procedures relate to the Offered Securities defined in
the Distribution Agreement, dated June 5, 1997 (the "Distribution Agreement"),
between PHH Corporation (the "Company") and Credit Suisse First Boston
Corporation, Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P. Morgan Securities Inc. (together, the
"Agents"), to which this Administrative Procedure is attached as Exhibit B.
Defined terms used herein and not defined herein shall have the meanings given
such terms in the Distribution Agreement, the Prospectus as amended or
supplemented, or the applicable Indenture. As used in these Administrative
Procedures, the "Indenture" refers to the Indenture pursuant to which the
subject Offered Securities are issued and the "Trustee" refers to the Trustee
under such Indenture.
The procedures to be followed with respect to the settlement of sales of
Offered Securities directly by the Company to purchasers solicited by an Agent,
as agent, are set forth below. The terms and settlement details related to a
purchase of Offered Securities by an Agent, as principal, from the Company will
be set forth in a Terms Agreement pursuant to the Distribution Agreement, unless
the Company and such Agent otherwise agree as provided in Section 3(b) of the
Distribution Agreement, in which case the procedures to be followed in respect
of the settlement of such sale will be as set forth below. An Agent, in relation
to a purchase of an Offered Security by a purchaser solicited by such Agent, is
referred to herein as the "Selling Agent" and, in relation to a purchase of an
Offered Security by such Agent as principal other than pursuant to a Terms
Agreement, as the "Purchasing Agent."
The Company will advise each Agent in writing of those persons with whom
such Agent is to communicate regarding offers to purchase Offered Securities and
the related settlement details.
Each Offered Security will be issued only in fully registered form and will
be represented by either a global security (a "Global Security") delivered to
the Trustee, as agent for The Depository Trust Company (the "Depositary") and
recorded in the book-entry system maintained by the Depositary (a "Book-Entry
Security") or a certificate issued in definitive form (a "Certificated
Security") delivered to a person designated by an Agent, as set forth in the
applicable Pricing Supplement. An owner of a Book-Entry Security will not be
entitled to receive a certificate representing such a Security, except as
provided in the Indenture.
Certificated Securities will be issued in accordance with the
Administrative Procedure set forth in Part I hereof, and Book-Entry Securities
will be issued in accordance with the Administrative Procedure set forth in Part
II hereof.
PART I: ADMINISTRATIVE PROCEDURE FOR CERTIFICATED SECURITIES
Posting Rates by Company:
The Company and the Agents will discuss from time to time the rates of
interest per annum to be borne by and the maturity of Certificated Securities
that may be sold as a result of the solicitation of offers by an Agent. The
Company may establish a fixed set of interest rates and maturities for an
offering period ("posting"). If the Company decides to change already posted
rates, it will promptly advise the Agents to suspend solicitation of offers
until the new posted rates have been established with the Agents.
Acceptance of Offers by Company:
Each Agent will promptly advise the Company by telephone or other
appropriate means of all reasonable offers to purchase Certificated Securities,
other than those rejected by such Agent. Each Agent may, in its discretion
reasonably exercised, reject any offer received by it in whole or in part. Each
Agent also may make offers to the Company to purchase Certificated Securities as
a Purchasing Agent. The Company will have the sole right to accept offers to
purchase Certificated Securities and may reject any such offer in whole or in
part.
The Company will promptly notify the Selling Agent or Purchasing Agent, as
the case may be, of its acceptance or rejection of an offer to purchase
Certificated Securities. If the Company accepts an offer to purchase
Certificated Securities, it will confirm such acceptance in writing to the
Selling Agent or Purchasing Agent, as the case may be, and the Trustee.
Communication of Sale Information to
Company by Selling Agent:
After the acceptance of an offer by the Company, the Selling Agent or
Purchasing Agent, as the case may be, will communicate the following details of
the terms of such offer (the "Sale Information") to the Company by telephone
(confirmed in writing) or by facsimile transmission or other acceptable written
means:
(1) Principal amount of Certificated Securities to be purchased;
(2) If a Fixed Rate Certificated Security, the interest rate and the
initial interest payment date;
(3) Maturity Date;
(4) Specified Currency and, if the Specified Currency is other than U.S.
dollars, the applicable Exchange Rate for such Specified Currency;
(5) Indexed Currency, the Base Rate and the Exchange Rate Determination
Date, if applicable;
(6) Issue Price;
(7) Selling Agent's commission or Purchasing Agent's discount, as the case
may be;
(8) Net proceeds to the Company;
(9) Settlement Date;
(10) If a redeemable Certificated Security, such of the following as are
applicable:
(i) Redemption Commencement Date,
(ii) Initial Redemption Price (% of par), and
(iii) Amount (% of par) that the Redemption Price shall decline (but not
below par) on each anniversary of the Redemption Commencement Date;
(11) If a Floating Rate Certificated Security, such of the following as are
applicable:
(i) Interest Rate Basis,
(ii) Index Maturity,
(iii) Spread or Spread Multiplier,
(iv) Maximum Rate,
(v) Minimum Rate,
(vi) Initial Interest Rate,
(vii) Interest Reset Dates,
(viii) Calculation Dates,
(ix) Interest Determination Dates,
(x) Interest Payment Dates, and
(xi) Calculation Agent;
(12) Name, address and taxpayer identification number of the registered
owner(s);
(13) Denomination of certificates to be delivered at settlement; and
(14) Name of the Trustee.
Preparation of Pricing Supplement by Company
If the Company accepts an offer to purchase a Certificated Security, it
will prepare a Pricing Supplement. The Company will supply at least ten copies
of such Pricing Supplement to the Selling Agent or Purchasing Agent, as the case
may be, not later 3:00 p.m., New York City time, on the second business day
following the date of acceptance of such offer, or if the Company and the
purchaser agree to settlement on the date of such acceptance, not later than
noon, New York City time, on such date. The Company will arrange to have ten
Pricing Supplements filed with the Commission not later than the close of
business of the Commission on the fifth business day following the date on which
such Pricing Supplement is first used.
Pricing Supplements will be delivered to the Selling Agent or Purchasing
Agent as follows:
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attn: Short and Medium Term Finance
Telephone: (212) 325-7198
Telecopy: (212) 325-8183
Goldman, Sachs & Co
85 Broad Street
New York, New York 10004
Attn: Karen Robinson
MTN Desk Assistant
Telephone: (212) 902-8401
Telecopy: (212) 902-0658
Merrill Lynch & Co. - Tritech Services
4 Corporate Place
Corporate Park 287
Piscataway, NJ 08854
Attn: Final Prospectus Unit/Nachman Kimerling
Telephone: (908) 878-6525/26/27
Telecopy: (908) 878-6530
with a copy to:
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center, North Tower
10th Floor
New York, NY 10281-1310
Attn: MTN Product Management
Telephone: (212) 449-7476
Telecopy: (212) 449-2234
J.P. Morgan Securities Inc.
60 Wall Street
3rd Floor
New York, New York 10260
Attn: Medium-Term Note Desk
Telecopy: (212) 648-5909
Delivery of Confirmation and Prospectus to
Purchaser by Selling Agent:
The Selling Agent will deliver to the purchaser of a Certificated Security
a written confirmation of the sale and delivery and payment instructions. In
addition, the Selling Agent will deliver to such Purchaser or its agent the
Prospectus as amended or supplemented (including the Pricing Supplement) in
relation to such Certificated Security prior to or together with the earlier of
the delivery to such purchaser or its agent of (a) the confirmation of sale or
(b) the Certificated Security.
Date of Settlement:
All offers solicited by a Selling Agent or made by a Purchasing Agent and
accepted by the Company will be settled on a date (the "Settlement Date") which
is the fifth business day after the date of acceptance of such offer, unless the
Company and the purchaser agree to settlement (a) on any other business day
after the acceptance of such offer or (b) with respect to an offer accepted by
the Company prior to 10:00 a.m., New York City time, on the date of such
acceptance.
Instruction from Company to Trustee for Preparation of Certificated Securities:
After receiving the Sale Information from the Selling Agent or Purchasing
Agent, as the case may be, the Company will communicate such Sale Information to
the Trustee by facsimile transmission or other acceptable written means.
The Company will instruct the Trustee by facsimile transmission or other
acceptable written means to authenticate and deliver the Certificated Securities
no later than 2:15 p.m., New York City time, on the Settlement Date. Such
instruction will be given by the Company prior to 3:00 p.m., New York City time,
on the business day prior to the Settlement Date unless the Settlement Date is
the date of acceptance by the Company of the offer to purchase Certificated
Securities in which case such instruction will be given by the Company by 11:00
a.m., New York City time.
Preparation and Delivery of Certificated Securities by
Trustee and Receipt of Payment Therefor:
The Trustee will prepare each Certificated Security and appropriate
receipts that will serve as the documentary control of the transaction.
In the case of a sale of Certificated Securities to a purchaser solicited
by an Agent, the Trustee will, by 2:15 p.m., New York City time, on the
Settlement Date, deliver the Certificated Securities to the Selling Agent for
the benefit of the purchaser or such Certificated Securities against delivery by
the Selling Agent of a receipt therefor. On the Settlement Date the Selling
Agent will deliver payment for such Certificated Securities in immediately
available funds to the Company in an amount equal to the issue price of the
Certificated Securities less the Selling Agent's commission; provided that the
Selling Agent reserves the right to withhold payment for which it has not
received funds from the purchaser. The Company shall not use any proceeds
advanced by a Selling Agent to acquire securities.
In the case of a sale of Certificated Securities to a Purchasing Agent, the
Trustee will, by 2:15 p.m., New York City time, on the Settlement Date, deliver
the Certificated Securities to the Purchasing Agent against delivery of payment
for such Certificated Securities in immediately available funds to the Company
in an amount equal to the issue price of the Certificated Securities less the
Purchasing Agent's discount.
Certified Securities will be delivered to the Agents as follows:
Credit Suisse First Boston Corporation
Five World Trade Center
New York, New York 10048
Attention: Joan Bryan
Telephone: (212) 322-5105
Telecopy: (212) 803-4096
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attention: Jean Fitzgerald
Telephone: (212) 325-0550
Telecopy: (212) 325-8183
Goldman, Sachs & Co.
85 Broad Street, Sixth Floor
New York, New York 10004
Attention: Corporate Bond Operations
Telephone: (212) 902-8095
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Money Market Clearance - MTNs
One Liberty Plaza
165 Broadway, 4th Floor
New York, NY 10080
Attention: David Alavarces
J.P. Morgan Securities Inc.
35 Wall Street
17th Floor
New York, New York 10015
Attention: Al Rios/Ron Reda
Failure of Purchaser to Pay Selling Agent:
If a purchaser (other than a Purchasing Agent) fails to make payment to the
Selling Agent for a Certificated Security, the Selling Agent will promptly
notify the Trustee and the Company thereof by telephone (confirmed in writing)
or by facsimile transmission or other acceptable written means. The Selling
Agent will immediately return the Certificated Security to the Trustee.
Immediately upon receipt of such Certificated Security by the Trustee, the
Company will return to the Selling Agent an amount equal to the amount
previously paid to the Company in respect of such Certificated Security. The
Company will reimburse the Selling Agent on an adequate basis for its loss of
the use of funds during the period when they were credited to the account of the
Company.
The Trustee will cancel the Certificated Security in respect of which the
failure occurred, make appropriate entries in its records and, unless otherwise
instructed by the Company, destroy the Certificated Security.
PART II: ADMINISTRATIVE PROCEDURE FOR BOOK-ENTRY SECURITIES
In connection with the qualification of the Book-Entry Securities for
eligibility in the book-entry system maintained by the Depositary, the Trustee
will perform the custodial, document control and administrative functions
described below, in accordance with its respective obligations under a Letter of
Representation from the Company and the Trustee to the Depositary, dated the
date hereof, and a Medium-Term Note Certificate Agreement between the Trustee
and the Depositary (the "Certificate Agreement"), and its obligations as a
participant in the Depositary, including the Depositary's Same Day Funds
Settlement System ("SDFS").
Posting Rates by the Company:
The Company and the Agents will discuss from time to time the rates of
interest per annum to be borne by the maturity of Book-Entry Securities that may
be sold as a result of the solicitation of offers by an Agent. The Company may
establish a fixed set of interest rates and maturities for an offering period
("posting"). If the Company decides to change already posted rates, it will
promptly advise the Agents to suspend solicitation of offers until the new
posted rates have been established with the Agents.
Acceptance of Offers by the Company:
Each Agent will promptly advise the Company by telephone or other
appropriate means of all reasonable offers to purchase Offered Securities, other
than those rejected by such Agent. Each Agent may, in its discretion reasonably
exercised, reject any offer received by it in whole or in part. Each Agent also
may make offers to the Company to purchase Book-Entry Securities as a Purchasing
Agent. The Company will have the sole right to accept offers to purchase
Book-Entry Securities and may reject any such offer in whole or in part.
The Company will promptly notify the Selling Agent or Purchasing Agent, as
the case may be, of its acceptance or rejection of an offer to purchase
Book-Entry Securities. If the Company accepts an offer to purchase Book-Entry
Securities, it will confirm such acceptance in writing to the Selling Agent or
Purchasing Agent, as the case may be, and the Trustee.
Communication of Sale Information to the Company by
Selling Agent and Settlement Procedures:
A. After the acceptance of an offer by the Company, the Selling Agent or
Purchasing Agent, as the case may be, will communicate promptly, but in no event
later than the time set forth under "Settlement Procedure Timetable" below, the
following details of the terms of such offer (the "Sale Information") to the
Company by telephone (confirmed in writing) or by facsimile transmission or
other acceptable written means:
(1) Principal amount of Book-Entry Securities to be purchased;
(2) If a Fixed Rate Book-Entry Security, the interest rate and the initial
interest payment date;
(3) Maturity Date;
(4) Specified Currency and, if the Specified Currency is other than U.S.
dollars, the applicable Exchange Rate for such Specified Currency (it being
understood that currently the Depositary accepts deposits of Global Securities
denominated in U.S. dollars only);
(5) Indexed Currency, the Base Rate and the Exchange Rate Determination
Date, if applicable;
(6) Issue Price;
(7) Selling Agent's commission or Purchasing Agent's discount, as the case
may be;
(8) Net Proceeds to the Company;
(9) Settlement Date;
(10) If a redeemable Book-Entry Security, such of the following as are
applicable:
(i) Redemption Commencement Date,
(ii) Initial Redemption Price (% of par), and
(iii) Amount (% of par) that the Redemption Price shall decline (but not
below par) on each anniversary of the Redemption Commencement Date;
(11) If a Floating Rate Book-Entry Security, such of the following as are
applicable:
(i) Interest Rate Basis,
(ii) Index Maturity,
(iii) Spread or Spread Multiplier,
(iv) Maximum Rate,
(v) Minimum Rate,
(vi) Initial Interest Rate,
(vii) Interest Reset Dates,
(viii) Calculation Dates,
(ix) Interest Determination Dates,
(x) Interest Payment Dates, and
(xi) Calculation Agent; and
(12) Name of the Trustee.
B. After receiving the Sale Information from the Selling Agent or
Purchasing Agent, the Company will communicate such Sale Information to the
Trustee by facsimile transmission or other acceptable written means. The Company
will assign a CUSIP number to the Global Security representing such Book-Entry
Security and then advise the Trustee and the Selling Agent or Purchasing Agent,
as the case may be, of such CUSIP number.
C. The Trustee will enter a pending deposit message through the
Depositary's Participant Terminal System, providing the following settlement
information to the Depositary, and the Depositary shall forward such information
to such Agent and Standard & Poor's Corporation:
(1) The applicable Sale Information;
(2) CUSIP number of the Global Security representing such Book-Entry
Security;
(3) Whether such Global Security will represent any other Book-Entry
Security (to the extent known at such time);
(4) Number of the Participant account maintained by the Depositary on
behalf of the Selling Agent or Purchasing Agent, as the case may be;
(5) The interest payment period;
(6) Initial Interest Payment Date for such Book-Entry Security, number of
days by which such date succeeds the record date for the Depositary's purposes
(which, in the case of Floating Rate Offered Securities which reset weekly shall
be the date five calendar days immediately preceding the applicable Interest
Payment Date and in the case of all other Book-Entry Securities shall be the
Regular Record Date, as defined in the Offered Security) and, if calculable at
that time, the amount of interest payable on such Interest Payment Date per
$1,000 principal amount.
D. The Trustee will complete and authenticate the Global Security
previously delivered by the Company representing such Book-Entry Security.
E. The Depositary will credit such Book-Entry Security to the Trustee's
participant account at the Depositary.
F. The Trustee will enter an SDFS deliver order through the Depositary's
Participant Terminal System instructing the Depositary to (i) debit such
Book-Entry Security to the Trustee's participant account and credit such
Book-Entry Security to such Agent's participant account and (ii) debit such
Agent's settlement account and credit the Trustee's settlement account for an
amount equal to the price of such Book-Entry Security less such Agent's
commission or discount, as applicable. The entry of such a deliver order shall
constitute a representation and warranty by the Trustee to the Depositary that
(a) the Global Security representing such Book-Entry Security has been issued
and authenticated and (b) the Trustee is holding such Global Security pursuant
to the Certificate Agreement.
G. Such Agent will enter an SDFS deliver order through the Depositary's
Participant Terminal System instructing the Depositary (i) to debit such
Book-Entry Security to such Agent's participant account and credit such
Book-Entry Security to the participant accounts of the Participants with respect
to such Book-Entry Security and (ii) to debit the settlement accounts of such
Participants and credit the settlement account of such Agent for an amount equal
to the price of such Book-Entry Security.
H. Transfers of funds in accordance with SDFS deliver orders described in
Settlement Procedures "F" and "G" will be settled in accordance with SDFS
operating procedures in effect on the settlement date.
I. Upon confirmation of receipt of funds, the Trustee will transfer to an
account of the Company previously specified by the Company to the Trustee funds
available for immediate use in the amount transferred to the Trustee in
accordance with Settlement Procedure "F".
J. Upon request, the Trustee will send to the Company a statement setting
forth the principal amount of Book-Entry Securities outstanding as of that date
under the Indenture.
K. Such Agent will confirm the purchase of such Book-Entry Security to the
purchaser either by transmitting to the Participants with respect to such
Book-Entry Security a confirmation order or orders through the Depositary's
institutional delivery system or by mailing a written confirmation to such
purchaser.
L. The Depositary will, at any time, upon request of the Company or the
Trustee, promptly furnish to the Company or the Trustee a list of the names and
addresses of the Participants for whom the Depositary has credited Book- Entry
Securities.
Preparation of Pricing Supplement:
If the Company accepts an offer to purchase a Book-Entry Security, it will
prepare a Pricing Supplement reflecting the terms of such Book-Entry Security
and arrange to have delivered to the Selling Agent or Purchasing Agent, as the
case may be, at least ten copies of such Pricing Supplement, not later than 3:00
p.m., New York City time, on the second Business Day following the receipt of
the Sale Information, or if the Company and the purchaser agree to settlement on
the Business Day following the date of acceptance, not later than noon, New York
City time, on such date. The Company will arrange to have ten Pricing
Supplements filed with the Commission not later than the close of business of
the Commission on the fifth Business Day following the date on which such
Pricing Supplement is first used.
Pricing Supplements will be delivered to the Selling Agent or Purchasing
Agent as follows:
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attn: Short and Medium Term Finance
Telephone: (212) 325-7198
Telecopy: (212) 325-8183
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Karen Robinson
MTN Desk Assistant
Telephone: (212) 902-8401
Telecopy: (212) 902-0658
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Patricia O'Connell,
MTN Desk Assistant
Telephone: (212) 902-1482
Telecopy: (212) 902-0658
Merrill Lynch & Co. - Tritech Services
4 Corporate Place
Corporate Park 287
Piscataway, NJ 08854
Attn: Final Prospectus Unit/Nachman Kimerling
Telephone: (908) 878-6525/26/27
Telecopy: (908) 878-6530
with a copy to:
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center, North Tower
23rd Floor
New York, NY 10281-1323
Attn: MTN Product Management
Telephone: (212) 449-7582
Telecopy: (212) 449-2234
J.P. Morgan Securities Inc.
60 Wall Street
3rd Floor
New York, New York 10260
Attn: Medium Term Note Desk
Telecopy: (212) 648-5909
Delivery of Confirmation and Prospectus
to Purchaser by Selling Agent:
The Selling Agent will deliver to the purchaser of a Book-Entry Security a
written confirmation of the sale and delivery and payment instructions. In
addition, the Selling Agent will deliver to such purchaser or its agent the
Prospectus as amended or supplemented (including the Pricing Supplement) in
relation to such Book-Entry Security prior to or together with the earlier of
the delivery to such purchaser or its agent of (a) the confirmation of sale or
(b) the Book-Entry Security.
Date of Settlement:
The receipt by the Company of immediately available funds in payment for a
Book-Entry Security and the authentication and issuance of the Global Security
representing such Book-Entry Security shall constitute "settlement" with respect
to such Book-Entry Security. All orders accepted by the Company will be settled
on the fifth Business Day pursuant to the timetable for settlement set forth
below unless the Company and the purchaser agree to settlement on another day
which shall be no earlier than the next Business Day.
Settlement Procedure Timetable:
For orders of Book-Entry Securities solicited by an Agent, as agent, and
accepted by the Company for settlement on the first Business Day after the sale
date, Settlement Procedures "A" through "I" set forth above shall be completed
as soon as possible but not later than the respective times (New York City time)
set forth below:
Settlement
Procedure Time
---------- ----
A 5:00 p.m. on the Business Day following the acceptance of an
offer by the Company or 10:00 a.m. on the Business
Day prior to the settlement date, whichever is
earlier
B 12:00 noon on the sale date
C 2:00 p.m. on the sale date
D 9:00 a.m. on settlement date
E 10:00 a.m. on settlement date
F-G 2:00 p.m. on settlement date
H 4:45 p.m. on settlement date
I 5:00 p.m. on settlement date
If a sale is to be settled more than one Business Day after the sale date,
Settlement Procedures "B" and "C" shall be completed as soon as practicable but
not later than 2:00 p.m. on the first Business Day after the sale date. If the
initial interest rate for a Floating Rate Book-Entry Security has not been
determined at the time that Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as such rate has been
determined but no later than 2:00 p.m. on the second Business Day before the
settlement date. Settlement Procedure "H" is subject to extension in accordance
with any extension of Fedwire closing deadlines and in the other events
specified in the SDFS operating procedures in effect on the settlement date.
If settlement of a Book-Entry Security is rescheduled or cancelled, the
Trustee, upon obtaining knowledge thereof, will deliver to the Depositary,
through the Depositary's Participation Terminal System, a cancellation message
to such effect by no later than 2:00 p.m. on the Business Day immediately
preceding the scheduled settlement date.
Failure to Settle:
If the Trustee fails to enter an SDFS deliver order with respect to a
Book-Entry Security pursuant to Settlement Procedure "F", the Trustee may
deliver to the Depositary, through the Depositary's Participant Terminal System,
as soon as practicable a withdrawal message instructing the Depositary to debit
such Book-Entry Security to the Trustee's participant account, provided that the
Trustee's participant account contains a principal amount of the Global Security
representing such Book-Entry Security that is at least equal to the principal
amount to be debited. If a withdrawal message is processed with respect to all
the Book-Entry Securities represented by a Global Security, the Trustee will
mark such Global Security "cancelled", make appropriate entries in the Trustee's
records and send such cancelled Global Security to the Company. The CUSIP number
assigned to such Global Security shall, in accordance with CUSIP Service Bureau
procedures, be cancelled and not immediately reassigned. If a withdrawal message
is processed with respect to one or more, but not all, of the Book-Entry
Securities represented by a Global Security, the Trustee will exchange such
Global Security for two Global Securities, one of which shall represent such
Book-Entry Security or Securities and shall be cancelled immediately after
issuance and the other of which shall represent the remaining Book-Entry
Securities previously represented by the surrendered Global Security and shall
bear the CUSIP number of the surrendered Global Security.
If the purchase price for any Book-Entry Security is not timely paid to the
Participants with respect to such Book-Entry Security by the beneficial
purchaser thereof (or a person, including an indirect participant in the
Depositary, acting on behalf of such purchaser), such participants and, in turn,
the Agent for such Book-Entry Security may enter deliver orders through the
Depositary's Participant Terminal System debiting such Book-Entry Security to
such participant's account and crediting such Book-Entry Security to such
Agent's account and then debiting such Book-Entry Security to such Agent's
participant account and crediting such Book-Entry Security "free" to the
Trustee's participant account and shall notify the Company and the Trustee
thereof. Thereafter, the Trustee will (i) immediately notify the Company of such
order and the Company shall transfer to such Agent funds available for immediate
use in an amount equal to the price of such Book-Entry Security which was
transferred to the Company in accordance with Settlement Procedure I, and (ii)
deliver the withdrawal message and take the related actions described in the
preceding paragraph. If such failure shall have occurred for any reason other
than default by the applicable Agent to perform its obligations hereunder or
under the Distribution Agreement, the Company will reimburse such Agent on an
equitable basis for the loss of its use of funds during the period when the
funds were credited to the account of the Company.
Notwithstanding the foregoing, upon any failure to settle with respect to a
Book-Entry Security, the Depositary may take any actions in accordance with its
SDFS operating procedures then in effect. In the event of a failure to settle
with respect to one or more, but not all, of the Book-Entry Securities to have
been represented by a Global Security, the Trustee will provide, in accordance
with Settlement Procedure "D" for the authentication and issuance of a Global
Security representing the other Book-Entry Securities to have been represented
by such Global Security and will make appropriate entries in its records. The
Company will, from time to time, furnish the Trustee with a sufficient quantity
of Offered Securities.
<PAGE>
EXHIBIT C
Restrictions on Sale of
Medium-Term Notes
No Offered Securities denominated in a currency other than United States
dollars will be sold or offered for sale in the country issuing such currency.
PHH Corporation and Subsidiaries
INFORMATION USED IN THE COMPUTATION OF PRIMARY AND
FULLY-DILUTED EARNINGS PER SHARE
FOR THE EIGHT-MONTH PERIOD ENDED DECEMBER 31, 1996
Eight-month period ended
December 31,
1996
------------------------
Net income - as reported $ 55,107,000
------------
Weighted average number of shares outstanding 34,828,539
Give effect to the exercise of dilutive options
determined under the treasury stock method 828,895
------------
Number of shares used in the computation of
primary earnings per share 35,657,434
Reflect the quarter-end market price when greater
than the average market price during the
respective quarter 424,309
-----------
Number of shares used in the computation of
fully diluted earnings per share 36,081,743
-----------
NET INCOME PER SHARE:
Primary $ 1.55
Fully diluted $ 1.53
PHH CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Eight-month period ended
December 31, Year Ended April 30
1996 1996 1995 1994 1993
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes $ 93,088 $ 139,148 $ 121,318 $ 109,796 $ 94,238
Add:
Interest expense 174,256 252,966 194,196 162,108 193,935
Interest portion of rentals* 5,469 7,840 8,065 9,088 8,456
--------- --------- --------- --------- ---------
Earnings available for fixed charges $ 272,813 $ 399,954 $ 323,579 $ 280,992 $ 296,629
--------- --------- --------- --------- ---------
Fixed charges:
Interest expense $ 174,256 $ 252,966 $ 194,196 $ 162,108 $ 193,935
Interest portion of rentals* 5,469 7,840 8,065 9,088 8,456
--------- --------- --------- --------- ----------
$ 179,725 $ 260,806 $ 202,261 $ 171,196 $ 202,391
--------- --------- --------- --------- ----------
Ratio of earnings to fixed charges 1.52 1.53 1.60 1.64 1.47
--------- --------- --------- --------- ----------
</TABLE>
*Amounts reflect a one-third portion of rentals, the portion deemed
representative of the interest factor.
Note: The interest included in fixed charges consists of the amounts identified
as interest expense in the Consolidated Statements of Income, the substantial
portion of which represents interest on debt incurred to finance leasing
activities and mortgage banking activities, as well as the interest costs
associated with home relocation services which are ordinarily recovered through
direct billings to clients and are included with "Costs, including interest, of
carrying and reselling homes" in the Consolidated Financial Statements.
To the Stockholders and Board of Directors
PHH Corporation:
We consent to incorporation by reference in the Registration Statements on
Form S-3 (No. 333-27715, No. 33-63627, and No. 33-48125), of PHH Corporation of
our report dated April 30, 1997, relating to the consolidated balance sheet of
PHH Corporation and subsidiaries as of December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
eight-month period ended December 31, 1996, and related schedule, which report
appears in the December 31, 1996 transition report on Form 10-K of PHH
Corporation.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Baltimore, Maryland
July 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PHH CORPORATION FILED ON FORM 10-K FOR THE
TRANSITION PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000077776
<NAME> PHH CORPORATION
<MULTIPLIER> 1000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-30-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> .001
<CASH> 103,628
<SECURITIES> 0
<RECEIVABLES> 546,888
<ALLOWANCES> 6,319
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 92,145
<DEPRECIATION> 93,588
<TOTAL-ASSETS> 6,574,646
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 101,155
<OTHER-SE> 569,405
<TOTAL-LIABILITY-AND-EQUITY> 6,574,646
<SALES> 0
<TOTAL-REVENUES> 1,283,993
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 101,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,256
<INCOME-PRETAX> 93,088
<INCOME-TAX> 37,981
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,107
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.53
</TABLE>
