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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
C U R R E N T R E P O R T
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 14, 1998 (June 30, 1998)
Date of Report (Date Of Earliest Event Reported)
KAUFMAN AND BROAD HOME CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
Delaware
(State Or Other Jurisdiction Of Incorporation)
1-9195 95-3666267
(Commission File Number) (IRS Employer Identification No.)
10990 Wilshire Boulevard
Los Angeles, California 90024
(Address Of Principal Executive Offices) (Zip Code)
(310) 231-4000
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name Or Former Address, If Changed Since Last Report)
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ITEM 7(c). EXHIBITS.
Exhibit
Number Description
- ------- -----------
1.1 Underwriting Agreement dated June 30, 1998, among Kaufman and
Broad Home Corporation, KBHC Financing I, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation.
4.9 Amended & Restated Declaration of Trust of KBHC Financing I,
dated July 7, 1998.
4.11 Guarantee Agreement, dated as of July 7, 1998, in respect of
KBHC Financing I, in respect of the Capital Securities.
4.12 Indenture, dated as of July 7, between Kaufman and Broad Home
Corporation and The First National Bank of Chicago, as Trustee.
4.14 First Supplemental Indenture, dated as of July 7, 1998, between
Kaufman and Broad Home Corporation and The First National Bank
of Chicago, as Trustee.
4.15 Purchase Contract Agreement, dated as of July 7, 1998, between
Kaufman and Broad Home Corporation and The First National Bank
of Chicago, as Purchase Contract Agent.
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4.16 Pledge Agreement, dated as of July 7, 1998, between Kaufman and
Broad Home Corporation, The Chase Manhattan Bank, as Collateral
Agent, the Custodial Agent and the Securities Intermediary and
The First National Bank of Chicago, as Purchase Contract Agent.
4.17 Remarketing Agreement, dated as of July 7, 1998, among Kaufman
and Broad Home Corporation, The First National Bank of Chicago
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
Dated: August 14, 1998
KAUFMAN AND BROAD HOME CORPORA-
TION
By: /s/ Michael F. Henn
--------------------------
Name: Michael F. Henn
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
1.1 Underwriting Agreement dated June 30, 1998, among Kaufman and
Broad Home Corporation, KBHC Financing I, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation.
4.9 Amended & Restated Declaration of Trust of KBHC Financing I,
dated July 7, 1998.
4.11 Guarantee Agreement, dated as of July 7, 1998, in respect of
KBHC Financing I, in respect of the Capital Securities.
4.12 Indenture, dated as of July 7, between Kaufman and Broad Home
Corporation and The First National Bank of Chicago, as Trustee.
4.14 First Supplemental Indenture, dated as of July 7, 1998, between
Kaufman and Broad Home Corporation and The First National Bank
of Chicago, as Trustee.
4.15 Purchase Contract Agreement, dated as of July 7, 1998, between
Kaufman and Broad Home Corporation and The First National Bank
of Chicago, as Purchase Contract Agent.
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4.16 Pledge Agreement, dated as of July 7, 1998, between Kaufman and
Broad Home Corporation, The Chase Manhattan Bank, as Collateral
Agent, Custodial Agent and Securities Intermediary and The First
National Bank of Chicago, as Purchase Contract Agent.
4.17 Remarketing Agreement, dated as of July 7, 1998, among Kaufman
and Broad Home Corporation, The First National Bank of Chicago
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
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Exhibit 1.1
KAUFMAN AND BROAD HOME CORPORATION
(A DELAWARE CORPORATION)
KBHC FINANCING I
(A DELAWARE BUSINESS TRUST)
16,500,000 FELINE PRIDES*
AND
1,000,000 CAPITAL SECURITIES
UNDERWRITING AGREEMENT
DATED: JUNE 30, 1998
- ----------
* Service mark of Merrill Lynch & Co., Inc.
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KAUFMAN AND BROAD HOME CORPORATION
(A DELAWARE CORPORATION)
KBHC FINANCING I
(A DELAWARE BUSINESS TRUST)
16,500,000 FELINE PRIDES(SM)
(STATED AMOUNT OF $10 PER FELINE PRIDES)
CONSISTING OF
15,500,000 INCOME PRIDES(SM)
EACH CONSISTING OF
A PURCHASE CONTRACT OF KAUFMAN AND BROAD HOME CORPORATION REQUIRING THE
PURCHASE ON AUGUST 16, 2001 (OR EARLIER) OF CERTAIN SHARES
OF COMMON STOCK OF KAUFMAN AND BROAD HOME CORPORATION
AND
AN 8% CAPITAL SECURITY OF KBHC FINANCING I
AND
1,000,000 GROWTH PRIDES(SM)
EACH CONSISTING OF
A PURCHASE CONTRACT OF KAUFMAN AND BROAD HOME CORPORATION REQUIRING THE
PURCHASE ON AUGUST 16, 2001 (OR EARLIER) OF CERTAIN SHARES
OF COMMON STOCK OF KAUFMAN AND BROAD HOME CORPORATION
AND
A 1/100 UNDIVIDED BENEFICIAL INTEREST IN A ZERO-COUPON U.S.
TREASURY SECURITY HAVING A PRINCIPAL AMOUNT EQUAL
TO $1,000 AND MATURING ON AUGUST 15, 2001;
AND
1,000,000 8% CAPITAL SECURITIES OF
KBHC FINANCING I (LIQUIDATION AMOUNT $10 PER
CAPITAL SECURITY)
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June 30, 1998
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
As Representatives of the Several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
Kaufman and Broad Home Corporation, a Delaware corporation (the
"Company"), and KBHC Financing I, a Delaware statutory business trust (the
"Trust" and, together with the Company, the "Offerors"), confirm their agreement
with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch and Donaldson, Lufkin & Jenrette Securities Corporation are acting as
representatives (in such capacity, the "Representatives"), with respect to the
issue and sale by the Offerors and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of the FELINE PRIDES and 8%
Capital Securities of the Trust (the "Capital Securities") set forth in said
Schedule A (collectively, the "Initial Securities"). The FELINE PRIDES will
initially consist of (A) 15,500,000 units (referred to as "Income PRIDES") with
a stated amount, per Income PRIDES, of $10 (the "Stated Amount") and (B)
1,000,000 units (referred to as "Growth PRIDES") with a stated amount, per
Growth PRIDES, equal to the Stated Amount. Each Income PRIDES will initially
consist of a unit comprised of (a) a stock purchase contract (a "Purchase
Contract") under which (i) the holder will purchase from the Company on August
16, 2001 (the "Purchase Contract Settlement Date"), for an amount of cash equal
to the Stated Amount, a number of newly issued shares of common stock, $1.00 par
value per share ("Common Stock"), of the Company equal to the Settlement Rate
(as defined in the Purchase Contract Agreement referred to below), and (ii) the
Company will pay the holder unsecured contract adjustment payments ("Contract
Adjustment Payments") at the rate of 0.25% of the Stated Amount per annum and
(b) beneficial ownership of a Capital Security. Each Growth PRIDES will
initially consist of a unit comprised of (a) a Purchase Contract under which (i)
the holder will purchase from the Company on the Purchase Contract Settlement
Date, for an amount in cash equal to the Stated Amount, the number of shares of
Common Stock of the Company equal to the Settlement Rate, and (ii) the Company
will pay the holder Contract Adjustment Payments, at the rate of 0.75% of the
Stated Amount per annum, and (b) a 1/100 undivided beneficial interest in a
zero-
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coupon U.S. Treasury Security (CUSIP No. 912820BB2) in a principal amount at
maturity equal to $1,000 payable on August 15, 2001 (the "Treasury Securities").
The Company and the Trust also confirm their agreement to grant to the
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 2,475,000 additional Income
PRIDES (the "Option Securities" and, together with the Initial Securities, the
"Securities") to cover over-allotments, if any. The Capital Securities which
will initially constitute a component of the Income PRIDES are hereinafter
sometimes called the "Underlying Capital Securities," and Capital Securities
which initially are not Underlying Capital Securities are hereinafter sometimes
called the "Separate Capital Securities." In accordance with the terms of the
Purchase Contract Agreement, to be dated as of July 7, 1998 (the "Purchase
Contract Agreement"), between the Company and The First National Bank of
Chicago, as Purchase Contract Agent (the "Purchase Contract Agent"), the Capital
Securities constituting a part of the Income PRIDES and the Treasury Securities
constituting a part of the Growth PRIDES will be pledged by the Purchase
Contract Agent, on behalf of the holders of the Securities that are Income
PRIDES and Growth PRIDES, respectively, to The Bank of New York, as Collateral
Agent (the "Collateral Agent"), pursuant to the Pledge Agreement, to be dated as
of July 7, 1998 (the "Pledge Agreement"), among the Company, the Purchase
Contract Agent and the Collateral Agent, to secure the holders' obligation to
purchase Common Stock under the Purchase Contracts. The shares of Common Stock
issuable pursuant to the Purchase Contracts are hereinafter called the "Shares".
The Capital Securities and Common Securities (as defined below) will
be guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise (the "Guarantee") pursuant to the
Guarantee Agreement, to be dated as of July 7, 1998 (the "Guarantee Agreement"),
between the Company and The First National Bank of Chicago, as trustee (the
"Guarantee Trustee"), for the benefit of the holders from time to time of the
Capital Securities and the Common Securities, and certain back-up undertakings
of the Company. All of the net proceeds from the sale of the Capital Securities
will be combined with the entire net proceeds from the sale by the Trust to the
Company of its common securities (the "Common Securities" and, together with the
Capital Securities, the "Trust Securities") and will be used by the Trust to
purchase the 8% Debentures due August 16, 2003 (the "Debentures") of the
Company. The Trust Securities will be issued pursuant to the amended and
restated declaration of trust of the Trust, to be dated as of July 7, 1998 (the
"Declaration"), among the Company, as Sponsor, Barton P. Pachino and Dennis
Welsch (the "Regular Trustees"), and The First National Bank of Chicago, as the
institutional trustee (the "Institutional Trustee"), and First Chicago Delaware,
Inc., as the Delaware trustee (the "Delaware Trustee" and, together with the
Institutional Trustee and the Regular Trustees, the "Trustees"), and the holders
from time to time of undivided beneficial interests in the assets of the Trust.
The Debentures will be issued pursuant to the Indenture, to be dated as of July
7, 1998 (the "Base Indenture"), between the Company and The First National Bank
of Chicago, as trustee (the "Debt Trustee"), as amended and supplemented by the
First Supplemental Indenture, to be dated as of July 7, 1998 (the "First
Supplemental Indenture"), between the Company and the Debt Trustee (the Base
Indenture, as supplemented and amended by such First Supplemental Indenture,
being referred to as the "Indenture").
The Company and the Trust have entered into a Common Securities
Purchase Agreement dated as of July 7, 1998 (the "Common Securities Purchase
Agreement") pursuant to which the
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Trust will sell to the Company, and the Company will purchase from the Trust,
the Common Securities, and a Debenture Purchase Agreement dated as of July 7,
1998 (the "Debenture Purchase Agreement") pursuant to which the Trust will
purchase from the Company, and the Company will sell to the Trust, the
Debentures.
Pursuant to a Remarketing Agreement (the "Remarketing Agreement") to
be dated as of July 7, 1998, among the Company, the Trust, the Purchase Contract
Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated, the Capital
Securities may be remarketed, subject to certain terms and conditions. The
Remarketing Agreement contemplates that, in connection with any such
remarketing, the Company, the Trust, and one or more remarketing agents (the
"Remarketing Agents") will enter into a Supplemental Remarketing Agreement (the
"Supplemental Remarketing Agreement") in substantially the form attached as
Exhibit A to the Remarketing Agreement.
As used in this Agreement, the term "Operative Documents" means this
Agreement, the Purchase Contract Agreement, the Securities, the Pledge
Agreement, the Remarketing Agreement, the Declaration, the Trust Securities, the
Guarantee, the Indenture, the Debentures, the Common Securities Purchase
Agreement and the Debenture Purchase Agreement; and all references to the
Operative Documents to which the Company is a party (and all references of like
import) shall include, without limitation, the Income PRIDES, the Growth PRIDES
and the Debentures, and all references to the Operative Documents to which the
Trust is a party shall include, without limitation, the Trust Securities.
As used herein, the terms "Applicable Ownership Interest",
"Investment Company Event" and "Treasury Portfolio" have the meanings set forth
in the Declaration; the terms "Collateral Account", "Pledged Capital
Securities", "Pledged Treasury Securities" and "Pledge" have the meanings set
forth in the Pledge Agreement; the term "Termination Event" has the meaning set
forth in the Purchase Contract Agreement; the term "Remarketing Closing Date"
means the Remarketing Closing Date specified on Schedule I to the Supplemental
Remarketing Agreement; and the term "Uniform Commercial Code" has the same
meaning as the term "Code" as defined in the Pledge Agreement.
The Company and the Trust have filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(Nos. 333-51825 and 333-51825-01) and pre-effective amendment nos. 1, 2, 3 and 4
thereto covering the registration of the Securities (including the Purchase
Contracts), the Capital Securities, the Guarantee, the Debentures and the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), including the
related preliminary prospectus or prospectuses. Promptly after execution and
delivery of this Agreement, the Company and the Trust will either (i) prepare
and file a prospectus in accordance with the provisions of Rule 430A ("Rule
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Company and the Trust have elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus or in such Term Sheet, as
the case may be, that was omitted from such registration statement at the time
it became effective but that is deemed to be part of such registration
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statement at the time it became effective (a) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information". Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, in each case including the documents incorporated or deemed
to be incorporated by reference therein, is herein called a "preliminary
prospectus". Such registration statement, including the exhibits thereto,
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement", and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of From S-3 under the 1933 Act, in the
form first furnished to the Underwriters for use in connection with the offering
of the Securities is herein called the "Prospectus". If Rule 434 is relied on,
the term "Prospectus" shall refer to the preliminary prospectus dated June 12,
1998 together with the Term Sheet, and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Registration Statement, any preliminary prospectus or the Prospectus (or
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in the Registration Statement, any
preliminary prospectus or the Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement,
any preliminary prospectus or the Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is incorporated or deemed to be incorporated by
reference in the Registration Statement, such preliminary prospectus or the
Prospectus, as the case may be.
The Offerors understand that the Underwriters propose to make a
public offering of the Securities as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered and the Declaration, the
Indenture and the Guarantee Agreement have been qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act").
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SECTION 1. Representations and Warranties.
(a) The Offerors jointly and severally represent and warrant to each
Underwriter as of the date hereof, as of the Closing Time referred to in Section
2(d) hereof and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof (the Closing Time and each Date of Delivery (if any) are hereinafter
called, individually, a "Representation Date"), and jointly and severally agree
with each Underwriter, as follows:
(i) The Company and the Trust meet the requirements for the
use of Form S-3 under the 1933 Act. Each of the Registration Statement and any
Rule 462(b) Registration Statement has become effective under the 1933 Act. At
the respective times the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendments thereto became or become effective,
at the date of this Agreement, and at each Representation Date, the Registration
Statement, any Rule 462(b) Registration Statement and any amendments or
supplements thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and
the rules and regulations of the Commission under the 1939 Act (the "1939 Act
Regulations") and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. At the date of the Prospectus and
at each Representation Date, the Prospectus and any amendments and supplements
thereto did not and will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. If
the Offerors elect to rely upon Rule 434 of the 1933 Act Regulations, the
Offerors will comply with the requirements of Rule 434. Notwithstanding the
foregoing, the representations and warranties in this subsection (i) shall not
apply to (A) statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished to
the Offerors in writing by any Underwriter through Merrill Lynch expressly for
use in the Registration Statement or the Prospectus or (B) the part of the
Registration Statement which shall constitute a Statement of Eligibility (Form
T-1) under the 1939 Act of any trustee (each, a "Form T-1").
Each preliminary prospectus and prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the 1933 Act, complied when filed in all
material respects with the 1933 Act and the 1933 Act Regulations and each
preliminary prospectus delivered to the Underwriters for use in connection with
the offering of the Securities was and will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(ii) Ernst & Young LLP, whose reports are incorporated by
reference into the Registration Statement, are independent public accountants
with respect to the Company and its subsidiaries as required by the 1933 Act and
the 1933 Act Regulations.
(iii) The financial statements included or incorporated by
reference in the Registration Statement and the Prospectus present fairly the
financial position of the Company
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and its consolidated subsidiaries as at the dates indicated and the results of
operations of the Company and its consolidated subsidiaries for the periods
specified; except as otherwise stated in the Registration Statement, said
financial statements have been prepared in conformity with generally accepted
accounting principles in the United States applied on a consistent basis; the
supporting schedules included or incorporated by reference in the Registration
Statement present fairly the information required to be stated therein; the
Company's ratios of earnings to fixed charges and of earnings to combined fixed
charges and preferred stock dividends (including the amounts the ratios would
have been were interest on the outstanding collateralized mortgage obligations
of the Company's wholly owned limited purpose financing subsidiaries included in
such ratios' calculation) included in the Prospectus under the caption
"Consolidated Ratios of Earnings to Fixed Charges and of Earnings to Combined
Fixed Charges and Preferred Stock Dividends" and in Exhibit 12 to the
Registration Statement have been calculated in compliance with Item 503(d) of
Regulation S-K of the Commission; and the pro forma financial statements, if
any, and related notes thereto included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements and have been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of (1) the Company and its subsidiaries (which term, as used in this
Agreement, includes without limitation consolidated joint ventures in which the
Company or any of its other subsidiaries is a participant and limited and
general partnerships in which the Company or any of its other subsidiaries owns
partnership interests (such joint ventures and limited and general partnerships
being hereinafter called, collectively, the "Partnerships")) considered as one
enterprise, whether or not arising in the ordinary course of business, or (2)
the Trust, (B) there have been no transactions entered into by the Company or
any of its subsidiaries, other than those in the ordinary course of business,
which are material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) except for regular quarterly dividends in customary
amounts per share on the Common Stock, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.
(v) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under, and as contemplated under, the
Operative Documents to which it is a party; and the Company is duly qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure to so qualify would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise.
(vi) Each Significant Subsidiary (as defined below) is either a
corporation or a
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limited partnership. Each Significant Subsidiary has been duly organized and is
validly existing as a corporation or limited partnership, as the case may be, in
good standing under the laws of the jurisdiction of its organization, has power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise; all of the issued and
outstanding capital stock of each Significant Subsidiary which is a corporation
has been duly authorized and validly issued, is fully paid and non-assessable
and is owned (except for directors qualifying shares and a nominal number of
shares held by affiliated parties) by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and all of the outstanding equity interests in
each Significant Subsidiary which is a Partnership have been duly authorized (if
applicable) and validly issued, are fully paid and non-assessable and are owned
by the Company (except to the extent that a minority interest in the Partnership
is reflected in the Company's consolidated financial statements included or
incorporated by reference in the Prospectus), directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity. For purposes of this Agreement, "Significant Subsidiary" means
any subsidiary of the Company (including, without limitation, any Partnership
but excluding the Trust) that is a "significant subsidiary" as defined in Rule
1-02 of Regulation S-X (as in effect on January 1, 1996), but substituting "5%"
for "10%" wherever "10%" appears in such definition.
(vii) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Business Trust Act (the
"Delaware Act") with the power and authority to own its property and to conduct
its business as described in the Registration Statement and Prospectus and to
enter into and perform its obligations under the Operative Documents to which it
is a party and the Declaration; the Trust is qualified to transact business as a
foreign trust and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the Trust;
the Trust is not a party to or otherwise bound by any agreement other than the
Operative Documents to which it is a party and the Declaration; and the Trust is
and will, under current law, be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corpo-
ration.
(viii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to reservations, agreements or employee
benefit plans referred to or incorporated by reference in the Prospectus); and
the shares of issued and outstanding Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; the Common Stock, the
Company's authorized but unissued special common stock, par value $1.00 per
share (the "Special Common Stock"), and the Company's authorized and unissued
preferred stock, par value $1.00 per share (the "Preferred Stock"), conform to
the respective statements relating thereto included in the Prospectus.
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(ix) Neither the Company nor any of its Significant Subsidiaries
is in violation of its charter or by-laws, limited partnership agreement or
other organizational documents (collectively, "Organizational Documents"); the
Trust is not in violation of the Declaration or its certificate of trust filed
with the State of Delaware (the "Certificate of Trust"); neither the Company nor
any of its Significant Subsidiaries nor the Trust is in default in the
performance or observance of (A) any obligation, agreement, covenant or
condition contained in the Company's 1997 Revolving Loan Agreement dated as of
April 21, 1997 with Bank of America National Trust and Savings Association, as
administrative agent, and the other parties thereto, as the same may have
heretofore been or may hereafter be amended or supplemented from time to time
(the "Loan Agreement"), the Company's 7-3/4% Senior Notes due October 15, 2004
(the "7-3/4% Senior Notes") or the Indenture dated as of October 14, 1997
between the Company and Suntrust Bank, Atlanta pursuant to which the 7- 3/4%
Senior Notes were issued, including the officers certificate establishing the
form and terms of the 7-3/4% Senior Notes (the "7-3/4% Senior Indenture"), the
Company's 9-3/8% Senior Subordinated Notes due 2003 (the "9-3/8% Senior
Subordinated Notes") or the Indenture dated as of May 1, 1993 between the
Company and The First National Bank of Boston pursuant to which the 9-3/8%
Senior Subordinated Notes were issued, including the officers certificate
establishing the form and terms of the 9-3/8% Senior Notes (the "9-3/8% Senior
Subordinated Indenture"), or the Company's 9-5/8% Senior Subordinated Notes due
2007 (the "9-5/8% Senior Subordinated Notes") or the Indenture dated as of
November 19, 1996 between the Company and Suntrust Bank, Atlanta pursuant to
which the 9-5/8% Senior Subordinated Notes were issued, including the officers
certificate establishing the form and terms of the 9-5/8% Senior Subordinated
Notes (the "9-5/8% Senior Subordinated Indenture") (the Loan Agreement, the
7-3/4% Senior Notes, the 7-3/4% Senior Indenture, the 9-3/8% Senior Subordinated
Notes, the 9-3/8% Senior Subordinated Indenture, the 9-5/8% Senior Subordinated
Notes and the 9-5/8% Senior Subordinated Indenture are hereinafter called,
collectively, the "Subject Instruments" and, individually, a "Subject
Instrument") or (B) any obligation, agreement, covenant or condition contained
in any other contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company or any of the Significant Subsidiaries or the
Trust is a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any of the Significant Subsidiaries or
the Trust is subject, which default or violation would have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise or of the Trust; and the entry by the Company into the Purchase
Contracts underlying the Income PRIDES and the Growth PRIDES, the offer,
issuance and sale of the Securities as contemplated herein and in the
Prospectus, the issuance and sale of the Common Securities and the Debentures as
contemplated in the Common Securities Purchase Agreement and the Debenture
Purchase Agreement, respectively, and in the Prospectus, the offering of the
Shares and the issuance and sale of the Shares by the Company pursuant to the
Purchase Contracts, and the execution, delivery and performance of the Operative
Documents and the consummation of the transactions contemplated therein
(including, without limitation, the issuance and sale of the Securities, the
Trust Securities and the Debentures and the use of the proceeds therefrom as
described in the Prospectus under the caption "Use of Proceeds") and compliance
by the Company and the Trust with their respective obligations thereunder, have
been duly authorized by all necessary corporate and trust action and do not and
will not conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien,
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<PAGE> 11
charge or encumbrance upon any property or assets of the Company or any of the
Significant Subsidiaries or the Trust pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the Company
or any of the Significant Subsidiaries or the Trust is a party or by which it or
any of them may be bound (including, without limitation, the Subject
Instruments), or to which any of the property or assets of the Company or any of
the Significant Subsidiaries or the Trust is subject, except (other than in the
case of the Subject Instruments) for a conflict, breach, default, lien, charge
or encumbrance which would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise or of the
Trust, nor will such action result in any violation of the provisions of the
Organizational Documents of the Company or any of the Significant Subsidiaries,
the Declaration or Certificate of Trust, or any applicable law, administrative
regulation or administrative or court order or decree.
(x) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the Company or
any of its subsidiaries which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which is not so disclosed and
(net of reserves and insurance) the Company believes might result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of the Trust, or which might
materially and adversely affect the properties or assets thereof or which might
materially and adversely affect the consummation of the transactions
contemplated by the Operative Documents; all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which any of
their respective property or assets is the subject which are not described in or
incorporated by reference in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered in the aggregate
and net of reserves and insurance, not material to the Company and its
subsidiaries considered as one enterprise; there is no action, suit or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending or, to the knowledge of the Offerors, threatened, against
or affecting the Trust; and there are no contracts or documents of the Company
or any of its subsidiaries or the Trust which are required to be filed as
exhibits to, or incorporated by reference in, the Registration Statement by the
1933 Act or by the 1933 Act Regulations which have not been so filed or
incorporated by reference.
(xi) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency is
required in connection with the entry by the Company into the Purchase Contracts
underlying the Income PRIDES and the Growth PRIDES, the offer, issuance or sale
of the Securities as contemplated herein and in the Prospectus, the issuance or
sale of the Common Securities or the Debentures as contemplated in the Common
Securities Purchase Agreement and Debenture Purchase Agreement, respectively,
and in the Prospectus, the offering of the Shares or the issuance or sale of the
Shares by the Company pursuant to the Purchase Contracts, or the execution,
delivery or performance by the Company or the Trust of the Operative Documents
or the consummation of the transactions contemplated therein or compliance by
the Company or the Trust with their respective obligations thereunder, except
such as have been obtained and made under the 1933 Act, the
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<PAGE> 12
1933 Act Regulations, the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), the 1939 Act and the 1939
Act Regulations and such as may be required under state securities or Blue Sky
laws.
(xii) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations, and, when read
together with the other information in the Prospectus, at the respective times
the Registration Statement and any amendments thereto became or become
effective, at the date of this Agreement and at each Representation Date did
not, do not and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(xiii) The Offerors complied with, and are and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder (collectively, the
"Cuba Act") or are exempt therefrom.
(xiv) The Debentures rank and will rank pari passu in right of
payment with all other senior unsecured indebtedness of the Company, including,
without limitation, borrowings under the Loan Agreement.
(xv) There are no holders of securities of the Company with
currently exercisable registration rights to have any securities registered as
part of the Registration Statement or included in the offering contemplated by
this Agreement.
(xvi) The Company and each of the Significant Subsidiaries have
good and marketable title to all of their respective properties, in each case
free and clear of all liens, encumbrances and defects, except (i) customary
liens and encumbrances arising in the ordinary course of the Company's
construction and development business and the financing thereof, (ii) as stated
or incorporated by reference in the Prospectus or (iii) such as do not
materially affect the value of such properties in the aggregate to the Company
and its subsidiaries considered as one enterprise and do not materially
interfere with the use made and proposed to be made of such properties.
(xvii) The Company and its Significant Subsidiaries possess such
certificates, authorities and permits issued by the appropriate state, federal
and foreign regulatory agencies or bodies necessary to conduct all material
aspects of the business now operated by them, and neither the Company nor any of
its Significant Subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise.
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<PAGE> 13
(xviii) No default or event of default with respect to any
Indebtedness (as such term is defined in the Officers' Certificate dated October
14, 1997 establishing the form and terms of the 7-3/4% Senior Notes) of the
Company or any of its Significant Subsidiaries entitling, or which, with notice
or lapse of time or both, would entitle, the holders thereof to accelerate the
maturity thereof exists or will exist as a result of the execution and delivery
of the Operative Documents, the issuance and sale of the Securities, the Trust
Securities or the Debentures, or the consummation of the transactions
contemplated by the Operative Documents.
(xix) The Company and each of the Significant Subsidiaries
have filed all tax returns required to be filed, which returns, as amended, are
complete and correct in all material respects, and neither the Company nor any
Significant Subsidiary is in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect to said returns
which would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(xx) The Company and its Significant Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with management's
general or specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxi) The Purchase Contract Agreement has been duly authorized
by the Company and, at the Closing Time and at each Date of Delivery (if any),
will have been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Purchase Contract Agreement by the
Purchase Contract Agent, will constitute a legal, valid and binding agreement of
the Company, enforceable in accordance with its terms except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether enforcement
is considered in a proceeding at law or in equity).
(xxii) The Pledge Agreement has been duly authorized by the
Company and, at the Closing Time and at each Date of Delivery (if any), will
have been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Pledge Agreement by the Collateral
Agent and the Purchase Contract Agent, will constitute a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
(xxiii) (A) The Common Securities have been duly authorized by
the
11
<PAGE> 14
Declaration and, when delivered by the Trust to the Company against payment of
the consideration therefor set forth in the Common Securities Purchase
Agreement, will have been duly executed by the Trust and will be validly issued
and (except as provided in Section 4.4 of the Declaration) fully paid and
non-assessable undivided beneficial interests in the assets of the Trust; the
issuance of the Common Securities is not and will not be subject to preemptive
or other similar rights; and at each Representation Date all of the issued and
outstanding Common Securities will be directly owned by the Company free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equitable right. (B) The Capital Securities have been duly authorized by the
Declaration and, when issued and authenticated in accordance with the provisions
of the Declaration and delivered against payment of the consideration therefor
set forth in this Agreement, will have been duly executed by the Trust, will be
validly issued, fully paid and non-assessable undivided beneficial interests in
the assets in the Trust and will be entitled to the benefits of the Declaration;
the issuance of the Capital Securities is not and will not be subject to
preemptive or other similar rights; and holders of Capital Securities will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
(xxiv) The Declaration has been duly authorized by the Company
and, at the Closing Time and at each Date of Delivery (if any), will have been
executed and delivered by the Company and the Regular Trustees, and assuming due
authorization, execution and delivery of the Declaration by the Institutional
Trustee and the Delaware Trustee, the Declaration will, at the Closing Time and
at each Date of Delivery (if any), be a legal, valid and binding obligation of
the Company and the Regular Trustees, enforceable in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether enforcement is considered in a proceeding at law or in
equity), and except to the extent that rights to indemnification thereunder may
be limited by applicable law; and the Declaration has been duly qualified under
the 1939 Act.
(xxv) The Guarantee Agreement has been duly authorized by the
Company and, at the Closing Time and at each Date of Delivery (if any), will
have been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Guarantee Agreement by the
Guarantee Trustee, will constitute a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether enforcement
is considered in a proceeding at law or in equity); and the Guarantee Agreement
has been duly qualified under the 1939 Act.
(xxvi) The Indenture has been duly authorized by the Company
and, at the Closing Time and at each Date of Delivery (if any), will have been
executed and delivered by the Company and, assuming due authorization, execution
and delivery of the Indenture by the Debt Trustee, will constitute a legal,
valid and binding agreement of the Company, enforceable in accordance with its
terms except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether enforcement
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<PAGE> 15
is considered in a proceeding at law or in equity); and the Indenture has been
duly qualified under the 1939 Act.
(xxvii) The Debentures have been duly authorized by the Company
and, when authenticated in the manner provided for in the Indenture and
delivered to the Trust against payment of the consideration therefor set forth
in the Debenture Purchase Agreement, will have been duly executed and delivered
by the Company and will constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their terms except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether enforcement
is considered in a proceeding at law or in equity), and will be entitled to the
benefits of the Indenture.
(xxviii) This Agreement and the Remarketing Agreement have been
duly authorized, executed and delivered by each of the Company and the Trust.
The Supplemental Remarketing Agreement has been duly authorized by each of the
Company and the Trust and, at the date of the Supplemental Remarketing Agreement
and at the Remarketing Closing Date, will have been duly executed and delivered
by each of the Company and, if applicable, the Trust.
(xxix) The Common Securities Purchase Agreement and Debenture
Purchase Agreement have been duly authorized, executed and delivered by each of
the Company and the Trust.
(xxx) The Income PRIDES and the Growth PRIDES have been duly
authorized by the Company and, when delivered against payment therefor as
provided herein, will have been duly executed and delivered by the Company, will
be validly issued and outstanding, fully paid and non-assessable and will
constitute valid and binding obligations of the Company entitled to the benefits
of the Purchase Contract Agreement and enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether enforcement is considered in a
proceeding at law or in equity); the Income PRIDES, the Growth PRIDES and the
Shares have been duly registered under the 1934 Act and have been authorized for
listing on the NYSE, subject to official notice of issuance; and the issuance of
the Income PRIDES and the Growth PRIDES is not subject to preemptive or other
similar rights. The Purchase Contracts constituting a part of the Income PRIDES
and the Growth PRIDES have been duly authorized by the Company and, when such
Income PRIDES and Growth PRIDES are delivered against payment therefor as
provided herein, will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether enforcement is considered in a proceeding at law or in equity).
(xxxi) The Shares issuable pursuant to the Purchase Contract
Agreement have been duly authorized and reserved for issuance by the Company
and, when issued and delivered in accordance with the provisions of the Purchase
Contract Agreement, will be validly issued and
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<PAGE> 16
fully paid and non-assessable; and the issuance of such Shares is not and will
not be subject to preemptive or other similar rights.
(xxxii) Each of the Regular Trustees is an employee of the
Company and has been authorized by the Company to execute and deliver the
Declaration.
(xxxiii) None of the Trust nor the Company or any of its
subsidiaries is, and upon the issuance and sale of the Securities, the Trust
Securities and the Debentures as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus, will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(xxxiv) The Operative Documents conform and will conform to the
respective descriptions thereof in the Prospectus.
(xxxv) The issuance and sale of the Securities, the Debentures
and the Shares has been expressly approved by resolutions adopted by at least a
two-thirds vote of the Continuing Directors (as defined in Article Eighth of the
Company's charter) of the Company.
(b) Any certificate signed by any officer of the Company or a
Trustee of the Trust and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company and
the Trust to the Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Offerors
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Offerors, at
the respective prices set forth in Schedule B, the number of each type of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Offerors hereby grant an option to the Underwriters, severally and not jointly,
to purchase up to an additional 2,475,000 Income PRIDES at the price set forth
in Schedule B. The option hereby granted will expire 30 days after the date
hereof and may be exercised in whole or in part from time to time only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Securities upon notice by the
Representatives to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any such time and
date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time. If the
option is exercised as to all or any portion of the Option Securities, each
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<PAGE> 17
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities of such type set forth in Schedule A opposite
the name of such Underwriter bears to the total number of Initial Securities of
such type, subject in each case to such adjustments as the Representatives in
their discretion shall make to eliminate any sales or purchases of fractional
securities.
(c) The Capital Securities and Treasury Securities underlying the
Securities will be pledged with the Collateral Agent to secure the holders'
obligations to purchase Shares under the Purchase Contracts. Such pledge shall
be effected by the transfer to the Collateral Agent of the Capital Securities
and Treasury Securities to be pledged at the Closing Time and each Date of
Delivery, if any, in accordance with the Pledge Agreement.
(d) Delivery of certificates for the Initial Securities shall be
made at the offices of the Representatives in New York, against the delivery to
the Collateral Agent of the Capital Securities and Treasury Securities relating
to the Initial Securities by the Representatives or on their behalf, and payment
of the purchase price for the Initial Securities shall be made at the offices of
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
10022, or at such other place as shall be agreed upon by the Representatives and
the Offerors, at 6:00 a.m. (California time) on the third (or fourth, if the
pricing occurs after 4:30 p.m. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives and the Offerors (such time and
date of payment and delivery being referred to herein as the "Closing Time").
In addition, in the event that any or all of the Option Securities
are purchased by the Underwriters, delivery of certificates for such Option
Securities, delivery to the Collateral Agent of the Capital Securities relating
to such Option Securities, and payment for such Option Securities, shall be made
at the respective offices mentioned above, or at such other place as shall be
agreed upon by the Representatives and the Offerors, on each Date of Delivery as
specified in the notice from the Representatives to the Company.
Payment for the Securities purchased by the Underwriters shall be
made by wire transfer of immediately available funds to a bank account
designated by the Offerors, against delivery to the Representatives for the
respective accounts of the Underwriters of certificates for the Securities to be
purchased by them and delivery to the Collateral Agent of the Capital Securities
and Treasury Securities relating to such Securities. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, and receipt for, and make payments of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as a representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
Certificates for the Initial Securities and the Option Securities,
if any, shall be in such denominations and registered in such names as the
Representatives may request in writing at
15
<PAGE> 18
least one full business day before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination by the
Representatives no later than 10:00 a.m. (New York City time) on the last
business day prior to the Closing Time or the relevant Date of Delivery, as the
case may be.
In view of the fact that the proceeds from the sale of the Income
PRIDES and the Separate Capital Securities will be invested by the Trust in the
Debentures, and in view of the fact that the proceeds from the sale of the
Growth PRIDES will be used to purchase the underlying Treasury Securities and
that the proceeds from the Treasury Securities will be applied, subject to
certain possible exceptions, to purchase Shares from the Company, the Company
hereby agrees to pay the several Underwriters, as compensation (the
"Underwriters' Compensation") for their arranging for the investment therein of
such proceeds, the amounts set forth in Schedule B hereto. Such Underwriters'
Compensation shall be payable to the Underwriters by wire transfer of
immediately available funds to Merrill Lynch at the Closing Time and at each
Date of Delivery (if any).
(e) If settlement for any Option Securities occurs after the Closing
Time, the Offerors will deliver to the Underwriters on the relevant Date of
Delivery, and the several obligations of the Underwriters to purchase such
Option Securities shall be conditioned upon the receipt of, the documents
specified in Section 5(h) hereof.
SECTION 3. Covenants of the Offerors. The Offerors jointly and
severally consent and agree with each Underwriter as follows:
(a) The Offerors will notify the Representatives immediately, and
confirm the notice in writing, (i) of the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement or any post-effective
amendment to any Registration Statement, (ii) of the transmission to the
Commission for filing of the Prospectus, any Rule 462(b) Registration Statement
or any amendment to any Registration Statement or amendment or supplement to the
Prospectus or any document to be filed pursuant to the 1934 Act during any
period when the Prospectus is required to be delivered under the 1933 Act, (iii)
of the receipt of any comments or inquiries from the Commission relating to any
Registration Statement or Prospectus, (iv) of any request by the Commission for
any amendment to any Registration Statement or any amendment or supplement to
the Prospectus or for additional information and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose. The Offerors
will make every reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) The Offerors will give the Representatives notice of their
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment and any filing under Rule 462(b) of the
1933 Act Regulations), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the time it
became effective or to the Prospectus, whether pursuant to the 1933 Act, the
1934 Act or otherwise; will furnish the Representatives with copies of any such
amendment
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<PAGE> 19
to the Registration Statement (including any post-effective amendment and any
filing under Rule 462(b)), Term Sheet, amendment, supplement or revision a
reasonable amount of time prior to such proposed filing or use, as the case may
be; and will not file or use any such amendment to the Registration Statement
(including any post-effective amendment and any filing under Rule 462(b)), Term
Sheet, amendment, supplement or revision to which the Representatives or counsel
for the Underwriters shall reasonably object.
(c) The Offerors have delivered to the Representatives one signed
copy of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference therein)
and will also deliver to the Representatives as many conformed copies of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) as the Representatives may reasonably request. The copies of
the Registration Statement and each amendment thereto furnished to the
Representatives will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the 1933
Act or the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for the purposes
contemplated by the 1933 Act or the 1934 Act or the respective applicable rules
and regulations of the Commission thereunder. The Prospectus and any amendments
or supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(e) If any event shall occur as a result of which it is necessary,
in the opinion of counsel for the Underwriters, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the Offerors
will forthwith amend or supplement the Prospectus (in form and substance
satisfactory to the Representatives and counsel for the Underwriters) so that,
as so amended or supplemented, the Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to a purchaser, not misleading, and the Offerors will
furnish to the Underwriters a reasonable number of copies of such amendment or
supplement.
(f) The Offerors will endeavor, in cooperation with the
Underwriters, to qualify the Securities, the Capital Securities, the Guarantee,
the Debentures and the Shares for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States as
the Representatives may designate; provided, however, that neither Offeror shall
be obligated to qualify as a foreign corporation or trust in any jurisdiction in
which it is not so qualified. In each jurisdiction in which the foregoing
securities have been so qualified, the Offerors will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for so long as may be required by applicable law. The
Offerors will promptly advise the Representatives of the receipt by either of
the Offerors of any notification with respect to the suspension of qualification
of any of the foregoing securities for sale in any
17
<PAGE> 20
state or jurisdiction or the initiating or threatening of any proceeding for
such purpose.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby (or 120 days in the case of the close of the
Company's fiscal year), an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) covering a twelve month
period beginning not later than the first day of the Company's fiscal quarter
next following the date of this Agreement.
(h) The Company and the Trust will use the net proceeds received by
them from the sale of the Securities and the Debentures, respectively, in the
manner to be specified in the Prospectus under "Use of Proceeds".
(i) The Company, during the period when the Prospectus is required
to be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to Sections 13, 14 or 15 of
the 1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(j) In accordance with the Cuba Act, if applicable, and without
limitation to the provisions of Sections 6 and 7 hereof, the Offerors agree to
indemnify and hold harmless the Underwriters from and against any and all loss,
liability, claim, damage and expense whatsoever (including fees and
disbursements of counsel), as incurred, arising out of any violation by the
Offerors of the Cuba Act, if applicable.
(k) If, at the time that the Registration Statement became (or in
the case of a post-effective amendment becomes) effective, any information shall
have been omitted therefrom in reliance upon Rule 430A or Rule 434 of the 1933
Act Regulations, then immediately following the execution of this Agreement, the
Offerors will prepare, and file with the Commission in accordance with such Rule
430A or Rule 434 and Rule 424(b) of the 1933 Act Regulations, copies of an
amended Prospectus or Term Sheet, as the case may be, or, if required by such
Rule 430A, a post-effective amendment to the Registration Statement (including
an amended Prospectus), containing all information so omitted.
(l) If the Offerors elect to rely upon Rule 462(b), the Offerors
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with Rule
111 of the 1933 Act Regulations by the earlier of (i) 10:00 p.m. Eastern time on
the date of this Agreement and (ii) the time confirmations are sent or given, as
specified by Rule 462(b)(2).
(m) The Offerors will use their best efforts to effect the listing
of the Income PRIDES, the Growth PRIDES and the Shares on the New York Stock
Exchange (the "NYSE"). The Offerors will register the Income PRIDES, the Growth
PRIDES and the Shares under the 1934 Act.
(n) During a period of 90 days after the date of this Agreement,
neither the Trust nor the Company will, without the prior written consent of
Merrill Lynch, directly or indirectly, sell,
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offer to sell, grant any option for the sale of, or otherwise dispose of, or
enter into any agreement to sell, any Income PRIDES, Growth PRIDES, Purchase
Contracts, Debentures, Capital Securities or Common Stock, or any securities of
the Company or any affiliate of the Company similar to the Income PRIDES, Growth
PRIDES, Purchase Contracts, Debentures, Capital Securities or Common Stock
(collectively, "Similar Securities") or any securities convertible into or
exchangeable or exercisable for Income PRIDES, Growth PRIDES, Purchase
Contracts, Debentures, Capital Securities or Common Stock or any such Similar
Securities, other than (i) to the Underwriters pursuant to this Agreement, to
the Trust pursuant to the Debenture Purchase Agreement and to the Company
pursuant to the Common Securities Purchase Agreement, (ii) shares of Common
Stock or options for shares of Common Stock issued pursuant to or sold in
connection with any employee benefit plan, dividend reinvestment plan and stock
option and stock purchase plan of the Company and its subsidiaries described in
the Registration Statement, (iii) any securities issued pursuant to a merger or
acquisition and (iv) the Growth PRIDES or Income PRIDES to be created or
recreated upon substitution of Capital Securities or Treasury Securities pledged
pursuant to the Pledge Agreement, or shares of Common Stock issuable upon early
settlement of the Income PRIDES or Growth PRIDES, or (B) enter into any swap or
any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of any Income
PRIDES, Growth PRIDES, Purchase Contracts, Debentures, Capital Securities or
Common Stock or any Similar Securities or any securities convertible into or
exchangeable into or exercisable for Income PRIDES, Growth PRIDES, Purchase
Contracts, Debentures, Capital Securities, Common Stock or any such Similar
Securities, whether any such swap or transaction is to be settled by delivery of
Income PRIDES, Growth PRIDES, Purchase Contracts, Debentures, Capital
Securities, Common Stock, Similar Securities, other securities, in cash or
otherwise.
(o) The Company will reserve and keep available at all times, free
of preemptive or other similar rights and liens and adverse claims, sufficient
shares of Common Stock to satisfy its obligations to issue Shares upon
settlement of the Purchase Contracts and shall take all actions necessary to
keep effective the Registration Statement with respect to the Shares.
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the performance by the Offerors of their respective obligations
under the Operative Documents, including: (i) the printing and filing of the
Registration Statement as originally filed and of each amendment thereto, (ii)
the printing or reproduction of the Operative Documents, (iii) the preparation,
issuance and delivery of the certificates for the Securities and the Shares,
(iv) the fees and disbursements of the Company's counsel and accountants, (v)
the qualification of the Securities, the Shares and certain other securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey, (vi) the printing and delivery to the Underwriters of
copies of the Registration Statement as originally filed and of each amendment
thereto, of each preliminary prospectus, any Term Sheet, and the Prospectus and
any amendments or supplements thereto, (vii) the printing and delivery to the
Underwriters of copies of the Blue Sky Survey, (viii) the fees and expenses of
the Trustees, Purchase Contract Agent, Collateral Agent, the Debt Trustee, and
any other fiduciaries or agents, including the fees and disbursements of their
respective counsel, (ix) any fees payable in connection with the rating of the
Securities, the Capital
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<PAGE> 22
Securities or the Debentures; (x) any fees and expenses of a depositary in
connection with holding the Securities in book-entry form; (xi) any fees payable
or expenses incurred pursuant to any Uniform Commercial Code related filings;
(xii) the fees and expenses incurred in connection with the listing of the
Income PRIDES, the Growth PRIDES and the Shares on the NYSE; and (xiii) the
filing fees of the National Association of Securities Dealers, Inc. in
connection with their review of the offering of the Securities.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 5 or Section 9(a)(i) hereof with respect to the
Initial Securities or the Option Securities, as the case may be, the Company
shall reimburse the Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriter's Obligations. The obligations
of the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Offerors contained herein or in
certificates of any officer of the Company or any of its subsidiaries or any
trustee of the Trust delivered pursuant to the provisions hereof, to the
performance by the Offerors of their covenants and other obligations hereunder,
and to the following further conditions:
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, have become effective and at the Closing Time and any
Date of Delivery, no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of counsel to the Underwriters. A prospectus containing the Rule
430A Information shall have been filed with the Commission in accordance with
Rule 424(b) (or at post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements of
Rule 430A) or, if the Company has elected to rely upon Rule 434 of the 1933 Act
Regulations, a Term Sheet including the Rule 434 Information shall have been
filed with the Commission in accordance with Rule 424(b).
(b) At the Closing Time the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time, of Munger,
Tolles & Olson LLP, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The entry by the Company into the Purchase Contracts
underlying the Income PRIDES and the Growth PRIDES, the offer,
issuance and sale of the Securities as contemplated herein and
in the Prospectus, the issuance and sale of the Common
Securities and the Debentures as contemplated in the Common
Securities Purchase Agreement and the Debenture Purchase
Agreement,
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<PAGE> 23
respectively, and in the Prospectus, the offering of the Shares
and the issuance and sale of the Shares by the Company pursuant
to the Purchase Contracts, and the execution, delivery and
performance of the Operative Documents and the consummation of
the transactions contemplated therein (including, without
limitation, the issuance of the Securities, the Trust Securities
and the Debentures and the use of the proceeds therefrom as
described in the Prospectus under the caption "Use of Proceeds")
and compliance by the Company and the Trust with their
respective obligations thereunder, do not and will not conflict
with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its
Significant Subsidiaries or the Trust pursuant to, the 7-3/4%
Senior Notes, the 7-3/4% Senior Indenture, the 9-3/8% Senior
Subordinated Notes, the 9-3/8% Senior Subordinated Indenture,
the 9-5/8% Senior Subordinated Notes or the 9- 5/8% Senior
Subordinated Indenture.
(iii) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it
constitutes matters of law, summaries of legal matters, the
Company's charter or by-laws, the Company's shareholder rights
agreement or other documents or proceedings, or legal
conclusions, has been reviewed by such counsel and is correct in
all material respects.
In rendering such opinion, such counsel shall state that,
insofar as such opinion concerns the Declaration or the Trust
Securities (which are governed by the laws of the State of Delaware)
or any instrument or agreement which is governed by the laws of the
State of New York, such counsel has assumed without investigation
that the laws of the States of Delaware or New York, as the case may
be, are the same as the laws of the State of California.
(2) The favorable opinion, dated as of Closing Time, of Barton
P. Pachino, Esq., Senior Vice President and General Counsel of the
Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware and has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligation under, and as contemplated under, the Operative
Documents to which it is a party.
(ii) To the best of such counsel's knowledge and
information, the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, except
where the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company
and its subsidiaries (as such term is defined in this Agreement)
considered as one enterprise.
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<PAGE> 24
(iii) Each of the Company's Significant Domestic
Subsidiaries (as defined below) has been duly organized and is
validly existing as a corporation or limited partnership, as the
case may be, in good standing under the laws of the jurisdiction
of its incorporation or formation, as the case may be, has power
and authority as a corporation or limited partnership, as the
case may be to own, lease and operate its properties and to
conduct its business as described in the Prospectus and, to the
best of such counsel's knowledge and information, is duly
qualified to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not have
a material adverse effect on the Company and its subsidiaries
considered as one enterprise or on their consolidated financial
condition or earnings; the Trust is qualified to transact
business as a foreign trust and is in good standing in each
jurisdiction in which such qualification is necessary, except
where the failure to so qualify or be in good standing would not
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business
prospects of the Trust; to the best of such counsel's knowledge
and information, all of the issued and outstanding capital stock
of each such Significant Domestic Subsidiary which is a
corporation has been duly authorized and validly issued, is
fully paid and non-assessable and is owned (except for directors
qualifying shares and a nominal number of shares held by
affiliated parties) by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; and to the best of
such counsel's knowledge and information, all of the issued and
outstanding partnership interests in each such Significant
Domestic Subsidiary which is a limited partnership have been
duly authorized (if applicable) and validly issued, are fully
paid and non-assessable and are owned by the Company (except to
the extent that a minority interest in such limited partnership
is reflected in the Company's consolidated financial statements
included or incorporated by reference in the Prospectus),
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
As used in this Agreement, the term "Significant Domestic
Subsidiaries" means all Significant Subsidiaries, other than any
Significant Subsidiaries organized and existing under the laws
of any jurisdiction other than the United States of America, any
State thereof or the District of Columbia.
(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus under
"Capitalization" (except for subsequent issuances, if any,
pursuant to the exercise of options issued under employee
benefit plans referred to in the Prospectus or in the documents
incorporated by reference therein); and the shares of issued and
outstanding Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable.
(v) To the best of such counsel's knowledge and
information, there are
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<PAGE> 25
no statutes or regulations required to be described in the
Registration Statement or the Prospectus or in the documents
incorporated by reference therein which are not described as
required and there are no legal or governmental proceedings
pending or threatened which are required to be disclosed in the
Registration Statement or in the documents incorporated by
reference therein, other than those disclosed therein, and all
pending legal or governmental proceedings to which the Company
or any subsidiary is a party or to which any of their property
is subject which are not described in or incorporated by
reference in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered
in the aggregate and net of reserves and insurance, not material
to the Company and its subsidiaries considered as one
enterprise.
(vi) The information under "Item 1. Business--Regulation
and Environmental Matters" and "Item 3. Legal Proceedings" in
the Company's 1997 Annual Report on Form 10-K and in Item 15 in
Part II of the Registration Statement, to the extent that such
information constitutes matters of law, summaries of legal
matters, summaries of securities, instruments, agreements or
other documents or legal conclusions, has been reviewed by such
counsel and is correct in all material respects.
(vii) To the best of such counsel's knowledge and
information, there are no contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement or to be
filed or incorporated by reference as exhibits thereto other
than those described or referred to or filed as exhibits
thereto, the descriptions thereof or references thereto are
correct, and, to the best of such counsel's knowledge, no
default exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in (A)
any Subject Instrument or (B) any other contract, indenture,
mortgage, loan agreement, note, lease or other instrument so
described, referred to or filed or incorporated by reference,
which default (other than in the case of the Subject
Instruments) could have a material adverse effect on the Company
and its subsidiaries considered as one enterprise or on their
consolidated financial condition or earnings.
(viii) No authorization, approval, consent, order,
registration or qualification of or with any court or
governmental authority or agency is required in connection with
the entry by the Company into the Purchase Contracts underlying
the Income PRIDES and the Growth PRIDES, the offer, issuance or
sale of the Securities as contemplated herein and in the
Prospectus, the issuance or sale of the Common Securities or the
Debentures as contemplated in the Common Securities Purchase
Agreement and Debenture Purchase Agreement, respectively, and in
the Prospectus, the offering of the Shares or the issuance or
sale of the Shares by the Company pursuant to the Purchase
Contracts, or the execution, delivery or performance by the
Company or the Trust of the Operative Documents or the
consummation of the transactions contemplated therein or
compliance by the Company or the Trust with their respective
obligations thereunder, except such
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<PAGE> 26
as may be required under the 1933 Act, the 1933 Act Regulations,
the 1934 Act, the 1934 Act Regulations, the 1939 Act, the 1939
Act Regulations or state securities laws.
(ix) The entry by the Company into the Purchase Contracts
underlying the Income PRIDES and the Growth PRIDES, the offer,
issuance and sale of the Securities as contemplated herein and
in the Prospectus, the issuance and sale of the Common
Securities and the Debentures as contemplated in the Common
Securities Purchase Agreement and the Debenture Purchase
Agreement, respectively, and in the Prospectus, the offering of
the Shares and the issuance and sale of the Shares by the
Company pursuant to the Purchase Contracts, and the execution,
delivery and performance of the Operative Documents and the
consummation of the transactions contemplated therein
(including, without limitation, the issuance of the Securities,
the Trust Securities and the Debentures and the use of the
proceeds therefrom as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Company and the
Trust with their respective obligations thereunder, do not and
will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
or any of its Significant Subsidiaries or the Trust pursuant to,
(A) any Subject Instrument or (B) to the best of such counsel's
knowledge and information, any other contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which the Company or any of its Significant Subsidiaries is a
party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any of its
Significant Subsidiaries is subject, nor will such action result
in any violation of the provisions of the charter or by-laws of
the Company, or any applicable law, administrative regulation or
administrative or court decree.
(x) The documents incorporated or deemed to be
incorporated by reference in the Prospectus (other than the
financial statements and supporting schedules included or
incorporated by reference therein, as to which no opinion need
be rendered), at the time they were filed with the Commission,
complied as to form in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations.
(xi) At the time the Registration Statement became
effective, the Registration Statement (other than the financial
statements and supporting schedules included or incorporated by
reference therein and any Form T-1, as to which no opinion need
be rendered) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
(xii) To the best of such counsel's knowledge and
information, no default with respect to any Indebtedness of the
Company or any of its subsidiaries entitling, or which, with
notice or lapse of time or both, would entitle, the holders
thereof to accelerate the maturity thereof exists or will exist
as a result of the
24
<PAGE> 27
execution and delivery of the Operative Documents, the issuance
and sale of the Securities, the Trust Securities or the Shares
or the consummation of the transactions contemplated by the
Operative Documents.
In rendering such opinion, such counsel shall state that,
insofar as such opinion concerns the Declaration or the Trust
Securities (which are governed by the laws of the State of Delaware)
or any instrument or agreement which is governed by the laws of the
State of New York, such counsel has assumed without investigation
that the laws of the States of Delaware or New York, as the case may
be, are the same as the laws of the State of California. In
addition, in rendering such opinion, such counsel may, as to other
matters governed by the laws of any jurisdiction other than the law
of the State of California, the General Corporation Law of the State
of Delaware and the federal law of the United States of America,
either (a) assume without any investigation that the law of the
State of California is the same as the law governing such other
matters for all purposes relevant to such opinion or (b) rely on an
opinion or opinions of local counsel satisfactory to the
Representatives, so long as each such opinion shall be dated as of
the Closing Time or the relevant Date of Delivery, as the case may
be, and in form and substance satisfactory to the Representatives,
and shall expressly permit the Underwriters to rely thereon as if
such opinion were addressed to the Underwriters.
(3) The favorable opinion, dated as of the Closing Time, of
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Offerors, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Registration Statement (including any 462(b)
Registration Statement) as of its effective date, and the
Prospectus, as of the date thereof, appeared on their face to be
appropriately responsive in all material respects to the
requirements of the 1933 Act and the 1933 Act Regulations,
except that in each case such counsel need not express any
opinion as to the financial statements, schedules and other
financial data included or incorporated by reference therein or
excluded therefrom, or any statements of eligibility on Forms
T-1.
(ii) The Shares initially subject to the Purchase Contract
Agreement have been duly authorized and reserved for issuance by
the Company and, when certificates representing the Shares in
the form of the specimen certificate examined by such counsel
have been issued by the Company in accordance with the
provisions of the Purchase Contract Agreement and the Purchase
Contracts, will be validly issued, fully paid and
non-assessable; and the issuance of the Shares is not subject to
preemptive or other similar rights arising under the General
Corporation Law of the State of Delaware, any other Applicable
Law (as defined below) or under the charter or by-laws of the
Company.
(iii) The issuance of the Income PRIDES and Growth PRIDES is
not subject to preemptive or other similar rights arising under
the General Corporation Law of the State of Delaware, any other
Applicable Law or the charter or by-laws of the Company.
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<PAGE> 28
(iv) This Agreement, the Remarketing Agreement, the Common
Securities Purchase Agreement and the Debenture Purchase
Agreement have been duly authorized, executed and delivered by
each of the Company and the Trust. The Supplemental Remarketing
Agreement in the form attached as Exhibit A to the Remarketing
Agreement has been duly authorized by the Company and the Trust.
(v) The Purchase Contract Agreement has been duly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(vi) The Pledge Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms except to the extent that
enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(vii) The Guarantee Agreement has been duly authorized,
executed and delivered by the Company and, insofar as it relates
to the guarantee of the Capital Securities, constitutes a valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(viii) The Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding obligation
of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforcement thereof
may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(ix) The Debentures (i) are entitled to the benefits of the
Indenture, (ii)
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<PAGE> 29
have been duly authorized, executed and delivered by the
Company, and (iii) when authenticated by the Debt Trustee in the
manner provided for in the Indenture and delivered to the Trust
against payment therefor as set forth in the Debenture Purchase
Agreement, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with
their terms, except to the extent that enforcement thereof may
be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(x) The entry by the Company into the Purchase Contracts,
the offer, issuance and sale by the Company and the Trust of the
Income PRIDES, the Growth PRIDES and the Capital Securities as
contemplated by this Agreement and the Prospectus, the issuance
and sale of the Shares by the Company pursuant to the Purchase
Contracts, the execution and delivery of the Operative
Documents, and the consummation of the transactions contemplated
herein and therein will not (i) contravene any provision of the
charter or by-laws of the Company, the Declaration or the
Certificate of Trust, or (ii) violate any Applicable Laws or
Applicable Orders (as defined below).
(xi) When the Income PRIDES and the Growth PRIDES are
issued in accordance with the terms of the Purchase Contract
Agreement and delivered against payment therefor, the Income
PRIDES and the Growth PRIDES will entitle the holders thereof to
the rights specified in the Purchase Contract Agreement.
(xii) The provisions of the Pledge Agreement are effective
to create, in favor of the Collateral Agent for the benefit of
the Company to secure the obligations of the holders under the
Purchase Contract Agreement, a valid security interest in the
Purchase Contract Agent's rights in all Security Entitlements
(as defined below).
(xiii) The provisions of the Pledge Agreement are effective
to perfect the security interest of the Collateral Agent for the
benefit of the Company in the Security Entitlements.
(xiv) The certificates evidencing the Income PRIDES and the
Growth PRIDES are in the respective forms contemplated by the
Purchase Contract Agreement, the certificates evidencing the
Capital Securities and the Common Securities are in the
respective forms contemplated by the Declaration and the
certificates evidencing the Debentures are in the form
contemplated by the Indenture. The certificates evidencing the
Shares comply with all applicable requirements of the General
Corporation Law of the State of Delaware and with the applicable
requirements of the NYSE.
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(xv) The statements in the Prospectus under the captions
"Description of the FELINE PRIDES," "Description of the Purchase
Contracts" (except under the subsection "Book-Entry System"),
"Certain Provisions of the Purchase Contract Agreement and the
Pledge Agreement," "Description of Capital Securities,"
"Description of the Guarantee," "Description of the Debentures"
and "Effect of Obligations Under the Debentures and the
Guarantee," to the extent that they purport to summarize
provisions of documents described therein, fairly summarize such
provisions.
(xvi) No Governmental Approval (as defined below) which
has not been obtained or made (or such as will be obtained or
made pursuant to the Remarketing Agreement) is required for the
entry by the Company into the Purchase Contracts, the issuance
and sale by the Company and the Trust of the Income PRIDES, the
Growth PRIDES and the Capital Securities pursuant to this
Agreement or the issuance and sale of the Shares by the Company
pursuant to such Purchase Contracts or the performance by the
Company and the Trust of their respective obligations under the
Operative Documents.
(xvii) Neither the Trust nor the Company is, or upon the
issuance and sale of the Securities and the Capital Securities
as contemplated in this Agreement and the application of the net
proceeds therefrom as described in the Prospectus will be, an
"investment company," as such term is defined in the 1940 Act.
(xviii) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Act, and has the business trust power and authority to conduct
its business as described in the Prospectus.
(xix) The Declaration has been duly authorized, executed
and delivered by the Company, has been duly executed and
delivered by the Regular Trustees and is a valid and binding
obligation of the Company and the Regular Trustees, enforceable
against the Company and each of the Regular Trustees in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(xx) Under the Delaware Trust Act and the Declaration,
the Trust has the power and authority to (a) execute and
deliver, and to perform its obligations pursuant to this
Agreement, the Remarketing Agreement and the Supplemental
Remarketing Agreement, (b) issue and perform its obligations
under the Trust Securities and (c) perform its obligations under
the Declaration.
(xxi) The execution and delivery by the Trust of this
Agreement, the Remarketing Agreement and the Supplemental
Remarketing Agreement and the performance by the Trust of its
obligations thereunder, have been duly authorized
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by all necessary action on the part of the Trust.
(xxii) The Capital Securities have been duly authorized by
the Declaration and executed by a Regular Trustee and, when
issued and authenticated in accordance with the terms of the
Declaration and delivered against payment of the consideration
for the Income PRIDES, the Growth PRIDES and the Capital
Securities specified in this Agreement, will be validly issued
and, subject to the qualification set forth below, fully paid
and nonassessable undivided beneficial interests in the assets
of the Trust and will be entitled to the benefits of the
Declaration; and the holders of the Capital Securities will be
entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware. In
rendering such opinion, such counsel may state that they bring
to your attention, however, that the holders of Capital
Securities may be obligated, pursuant to the Declaration, to (i)
provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers of Capital
Securities and the issuance of replacement Capital Securities
and (ii) provide security and indemnity in connection with
requests of or directions to the Institutional Trustee to
exercise its rights and powers under the Declaration. The
issuance of the Capital Securities is not subject to preemptive
or other similar rights arising under the Delaware Act or the
Declaration.
(xxiii) The Common Securities have been authorized by the
Declaration and executed by a Regular Trustee and, when issued
and executed in accordance with the terms of the Declaration,
and delivered and paid for as set forth in the Common Securities
Purchase Agreement, will be validly issued, undivided beneficial
interests in the assets of the Trust. The issuance of the Common
Securities is not subject to preemptive or other similar rights
arising under the Delaware Act or the Declaration.
(xxiv) None of the execution and delivery by the Trust of,
or the consummation by the Trust of the transactions
contemplated by, this Agreement, the Remarketing Agreement or
the Supplemental Remarketing Agreement, or the issuance and sale
of the Capital Securities by the Trust in accordance with the
terms of this Agreement, or the consummation of the other
transactions contemplated thereby, will contravene any provision
of Applicable Law or the Declaration or any agreement, judgment,
order or decree applicable to the Trust which are identified to
such counsel in a trustee's certificate, in which a trustee of
the Trust shall indicate that such agreements, judgments, orders
or decrees are the only agreements, judgments, orders or decrees
which could reasonably be expected to result in a material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the
Trust, whether or not arising in the ordinary course of
business.
(xxv) Under current U.S. federal income tax law: (a) the
Trust will be
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classified as a grantor trust and not as an association taxable
as a corporation; (b) the Debentures will be classified as
indebtedness of the Company and (c) the discussion in the
Prospectus under the caption "Federal Income Tax Consequences"
is a fair and accurate summary of the matters addressed therein,
based upon current law and the assumptions stated or referred to
therein. In rendering such opinion, such counsel may state that
their opinion is conditioned on the initial and continuing
accuracy of the facts, financial and other information,
covenants and representations set forth in certificates of
officers of the Company and the Trust and other documents deemed
necessary for this opinion.
(xxvi) The issuance and sale of the Income PRIDES and the
Growth PRIDES do not violate the Commodity Exchange Act or the
regulations of the Commodity Futures Trading Commission
thereunder.
(xxvii) Each Purchase Contract constituting a part of the
Income PRIDES or the Growth PRIDES being delivered on the date
of such opinion constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general
principals of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); provided,
however, that upon the occurrence of a Termination Event (as
defined in the Purchase Contract Agreement), Section 365(e)(1)
of the Bankruptcy Code (11 U.S.C. Section 101-1330, as amended)
should not limit, invalidate or nullify the provisions of
Section 3.15 and 5.8 of the Purchase Contract Agreement or of
Section 4.3 of the Pledge Agreement that require termination of
the Purchase Contracts and release of the Collateral Agent's
security interest in the Capital Securities, the Debentures or
the Applicable Ownership Interest in the Treasury Portfolio (as
such terms are defined in the Declaration) as the case may be,
or the Treasury Securities; provided, however, that the
procedural restrictions respecting relief from the automatic
stay under Section 362 of the Bankruptcy Code may affect the
timing of the exercise of such rights and remedies.
(xxviii) The Income PRIDES and the Growth PRIDES (i) are
entitled to the benefits of the Purchase Contract Agreement,
(ii) have been duly authorized and executed by the Company, and
(iii) when duly authenticated by the Purchase Contract Agent in
the manner provided for in the Purchase Contract Agreement and
delivered against payment therefor as provided in this Agreement
and assuming the certificates evidencing the Income PRIDES and
Growth PRIDES have been duly executed by the Purchase Contract
Agent as attorney-in-fact of the holders thereof, will
constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles
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(regardless of whether enforcement is considered in a proceeding
at law or in equity).
As used in such opinion, (i) the "UCC" shall mean the Uniform
Commercial Code as in effect in the State of New York; (ii)
"Securities Intermediary" means The Bank of New York solely in its
capacity as a "securities intermediary" as defined in the UCC and
the Federal Book-Entry Regulations; (iii) "Securities Account" means
the account in the name "The First National Bank of Chicago, as
Purchase Contract Agent on behalf of the holders of certain
securities of KBHC Financing I, Collateral Account subject to the
security interest of The Bank of New York, as Collateral Agent, for
the benefit of Kaufman and Broad Home Corporation, as pledgee"
established at the Securities Intermediary; (iv) "Security
Entitlements" means "security entitlements" as defined in Section
8102(a)(17) of the UCC with respect to Capital Securities and as
defined in the Federal Book-Entry Regulations with respect to
Treasury Securities, in each case, whether such Capital Securities
or Treasury Securities are at the date of such opinion or thereafter
credited to the Securities Account; and (iv) "Federal Book-Entry
Regulations" means the United States Department of the Treasury's
regulations governing the transfer and pledge of marketable
securities issued by the U.S. Treasury and maintained in the form of
entries in the TRADES book-entry system in the records of the
federal reserve banks and set forth in 61 Fed. Reg. 43626 (1996)
(codified at 31 C.F.R. Part 357).
In addition, as used in such opinion, (i) the term "Applicable
Laws" means in relation to the execution, delivery and performance
of the Operative Documents and the issuance and sale of the Income
PRIDES, the Growth PRIDES, the Debentures and the Trust Securities,
those laws, rules and regulations of the States of New York,
Delaware and California and the United States of America, in each
case, that, in the experience of such counsel, are ordinarily
applicable to transactions of the type contemplated by the Operative
Documents (except for United States, state and foreign securities or
Blue Sky laws, antifraud laws and the rules and regulations of the
National Association of Securities Dealers, Inc.) but without such
counsel having made any investigation regarding the applicability of
any other laws, rules or regulations; (ii) the term "Applicable
Orders" means those judgments, orders or decrees which are
identified to such counsel in an officer's certificate as an exhibit
to such opinion, in which the Company shall have indicated that such
judgments, orders or decrees are the only judgments, orders or
decrees which could reasonably be expected to result in a material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and
its subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business; (iii) the term
"Governmental Authorities" means any New York, Delaware, California
or federal executive, legislative, judicial, administrative or
regulatory body under Applicable Laws; and (iv) the term
"Governmental Approval" means any consent, approval, license,
authorization or validation of, or notice to, or filing, recording
or registration with, any Governmental Authority required pursuant
to Applicable Laws.
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom LLP
shall expressly state that Munger, Tolles & Olson LLP, Barton P.
Pachino and Brown & Wood LLP, in
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rendering their opinions pursuant to this Agreement, may rely upon
such opinion as if it were addressed to them as to all matters
arising under the laws of the State of Delaware other than the
General Corporation Law of the State of Delaware.
(4) The favorable opinion, dated as of the Closing Time, of the
Law Department of The First National Bank of Chicago ("FNBC"), as
Purchase Contract Agent and Debt Trustee, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) FNBC is a national banking association with trust
powers, duly organized, validly existing and in good standing
under the laws of the United States with all necessary corporate
power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, the Purchase
Contract Agreement, the Pledge Agreement, the Indenture, and the
Remarketing Agreement.
(ii) The execution, delivery and performance by the
Purchase Contract Agent of the Purchase Contract Agreement, the
Pledge Agreement, and the Remarketing Agreement, and the
authentication and delivery by the Purchase Contract Agent of
the certificates evidencing the Income PRIDES and the Growth
PRIDES, have been duly authorized by all necessary corporate
action on the part of the Purchase Contract Agent. The Purchase
Contract Agreement and the Pledge Agreement have been duly
executed and delivered by the Purchase Contract Agent and
constitute valid and binding obligations of the Purchase
Contract Agent, enforceable against the Purchase Contract Agent
in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles. The Remarketing Agreement has been duly executed and
delivered by the Purchase Contract Agent.
(iii) The execution and delivery of the Pledge Agreement,
the Remarketing Agreement and the certificates evidencing the
Income PRIDES and the Growth PRIDES by FNBC, as attorney-in-fact
of the holders of the Income PRIDES and the Growth PRIDES, have
been duly authorized by FNBC and the Pledge Agreement, the
Remarketing Agreement and such certificates have been duly
executed by FNBC in such capacity.
(iv) The execution, delivery and performance by the Debt
Trustee of the Indenture, and the authentication and delivery by
the Debt Trustee of the certificates evidencing the Debentures,
have been duly authorized by all necessary corporate action on
the part of the Debt Trustee. The Indenture has been duly
executed and delivered by the Debt Trustee and constitutes a
valid and binding obligation of the Debt Trustee, enforceable
against the Debt Trustee in accordance with its terms, except to
the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating
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to or affecting creditors' rights generally or by general
equitable principles.
(v) The execution, delivery and performance of the
Purchase Contract Agreement, the Pledge Agreement and the
Remarketing Agreement by the Purchase Contract Agent and the
execution, delivery and performance of the Indenture by the Debt
Trustee, do not conflict with, or constitute a breach of, FNBC's
charter or bylaws.
(vi) No consent, approval or authorization of, or
registration with or notice to, any Illinois or federal
governmental authority or agency is required for the execution,
delivery or performance by the Purchase Contract Agent of the
Purchase Contract Agreement, the Pledge Agreement or the
Remarketing Agreement or for the execution, delivery or
performance of the Indenture by the Debt Trustee.
(5) The favorable opinion, dated as of the Closing Time, of
Pepper Hamilton LLP, counsel to FNBC, as Institutional Trustee and
Guarantee Trustee, and to First Chicago Delaware Inc., as Delaware
Trustee, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) FNBC is a national banking association with trust
powers, duly organized, validly existing and in good standing
under the laws of the United States with all necessary corporate
power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, the Declaration and
the Guarantee.
(ii) The Delaware Trustee is a Delaware corporation duly
organized, validly existing and in good standing, with full
corporate power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, the
Declaration.
(iii) The execution, delivery and performance by each of the
Institutional Trustee and the Delaware Trustee of the
Declaration have been duly authorized by all necessary corporate
action on the part of the Institutional Trustee and the Delaware
Trustee, respectively. The Declaration has been duly executed
and delivered by the Institutional Trustee and the Delaware
Trustee and constitutes a valid and binding obligation of the
Institutional Trustee and the Delaware Trustee, enforceable
against the Institutional Trustee and the Delaware Trustee in
accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles.
(iv) The execution, delivery and performance by the
Guarantee Trustee of the Guarantee Agreement have been duly
authorized by all necessary corporate action on the part of the
Guarantee Trustee. The Guarantee Agreement has been duly
executed and delivered by the Guarantee Trustee and constitutes
a valid and
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binding agreement of the Guarantee Trustee, enforceable against
the Guarantee Trustee in accordance with its terms, except to
the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(v) The execution, delivery and performance of the
Declaration by the Institutional Trustee and the Delaware
Trustee, and the execution, delivery and performance of the
Guarantee Agreement by the Guarantee Trustee, do not conflict
with, or constitute a breach of, FNBC's or the Delaware
Trustee's respective charter or bylaws.
(vi) No consent, approval or authorization of, or
registration with or notice to, any Delaware or federal banking
authority is required for the execution, delivery or performance
by the Institutional Trustee or the Delaware Trustee of the
Declaration or for the execution, delivery or performance of the
Guarantee Agreement by the Guarantee Trustee.
(6) The favorable opinion, dated as of the Closing Time, of
Brown & Wood LLP, counsel for the Underwriters, in form and
substance satisfactory to the Representatives, with respect to the
issuance and sale of the Securities, and other related matters as
the Representatives may reasonably require, and the Company shall
have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters. In rendering
such opinion, such counsel may rely, as to all matters arising under
or governed by the laws of the State of Delaware (other than the
General Corporation Law of the State of Delaware) upon the opinion
of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Offerors.
(7) In giving their opinions required by subsections (b)(1),
(b)(2) and (b)(6), respectively, of this Section, Munger, Tolles &
Olson LLP, Barton P. Pachino and Brown & Wood LLP shall each
additionally state that nothing has come to their attention that
would lead them to believe that the Registration Statement (except
for financial statements and schedules and other financial data
included therein and any Form T-1, as to which counsel need make no
statement), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus (except for financial
statements and schedules and other financial data included therein,
as to which counsel need make no statement), as of its date (unless
the term "Prospectus" refers to a prospectus which has been provided
to the Underwriters by the Company for use in connection with the
offering of the Securities which differs from the Prospectus filed
with at the Commission pursuant to Rule 424(b) of the 1933 Act
Regulations, in which case at the time it is first provided to the
Underwriters for such use) or at the date of such opinion, included
or includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
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(c) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Registration Statement or the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise or of the Trust, in each case whether or not arising in the ordinary
course of business, and the Representatives shall have received a certificate of
the Company signed by the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, and a
certificate of the Trust signed by a Regular Trustee of the Trust, each dated as
of Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1 are true and
correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) each of the Company and the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and, to the best of such officers'
and Trustee's knowledge and information, no proceedings for that purpose have
been initiated or threatened by the Commission and (v) the rating assigned by
any nationally recognized statistical rating organization to the Income PRIDES,
the Growth PRIDES, any other securities of the Company or the Capital Securities
has not been lowered, and no such rating organization has publicly announced
that it has under surveillance or review its rating of the Income PRIDES, the
Growth PRIDES, any other securities of the Company or the Capital Securities
unless such announcement indicates that such organization is considering an
upgrade in such rating.
(d) (i) At the time of the execution of this Agreement, the
Representatives shall have received from Ernst & Young LLP a letter dated such
date, in form and substance satisfactory to the Representatives, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
financial information included and incorporated by reference in the Registration
Statement and the Prospectus (including, without limitation, any pro forma
financial statements); and (ii) at Closing Time, the Representatives shall have
received from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter delivered pursuant
to clause (i) of this paragraph, except that the specified date referred to
shall be a date not more than three business days prior to the Closing Time.
(e) At Closing Time, the Income PRIDES, Growth PRIDES and Capital
Securities shall have a rating of at least Ba2, Ba1 and Ba2, respectively, from
Moody's Investor's Service Inc. ("Moody's") and at least BB-, BB- and BB-,
respectively from Standard & Poor's ("S&P"), and the Company shall have
delivered to the Representatives a letter from each such rating agency or other
evidence satisfactory to the Underwriter, confirming that the Securities have
such ratings.
(f) At the date of this Agreement, the Income PRIDES, the Growth
PRIDES and the Shares shall have been approved for listing on the NYSE, subject
to official notice of issuance.
(g) [Omitted intentionally]
(h) In the event that the Underwriters exercise their options
provided in Section 2(b)
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hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Offerors contained herein and the
statements in any certificates furnished by either of the Offerors hereunder
shall be true and correct as of, and as if made on, each Date of Delivery, and
at the relevant Date of Delivery, the Representatives shall have received:
(1) A certificate, dated such Date of Delivery, of the President
or a Vice-President of the Company and the chief financial officer
or chief accounting officer of the Company and a certificate of a
Regular Trustee of the Trust confirming that the certificate
delivered at the Closing Time pursuant to Section 5(c) hereof is
true and correct as of, and as if made on, such Date of Delivery.
(2) The favorable opinion of Munger, Tolles & Olson LLP, counsel
to the Company, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the
Option Securities and otherwise to the same effect as the opinion
required by Sections 5(b)(1) and 5(b)(7) hereof.
(3) The favorable opinion of Barton P. Pachino, Senior Vice
President and General Counsel of the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities and otherwise to the
same effect as the opinion required by Sections 5(b)(2) and 5(b)(7)
hereof.
(4) The favorable opinion of Skadden, Arps, Slate, Meagher &
Flom, LLP, special counsel to the Offerors, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities and otherwise to the
same effect as the opinion required by Section 5(b)(3) hereof.
(5) The favorable opinion of the Law Department of FNBC, in form
and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities and
otherwise to the same effect as the opinion required by Section
5(b)(4) hereof.
(6) The favorable opinion of Pepper Hamilton LLP, counsel to
FNBC and First Chicago Delaware Inc., in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities and otherwise to the
same effect as the opinion required by Section 5(b)(5) hereof.
(7) The favorable opinion of Brown & Wood LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required
by Section 5(b)(6) and 5(b)(7) hereof.
(8) A letter from Ernst & Young LLP, in form and substance
satisfactory to the Representatives and dated such Date of Delivery,
substantially the same in form and substance as the letter furnished
to the Representatives pursuant to Section 5(d)(ii) hereof, except
that the "specified date" in the letter furnished pursuant to this
Section shall be a date not more than five days prior to such Date
of Delivery.
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(9) At such Date of Delivery, the Income PRIDES, Growth PRIDES
and Capital Securities shall have a rating of at least Ba2, Ba1 and
Ba2, respectively, from Moody's and at least BB-, BB- and BB-,
respectively, from S&P.
(i) At Closing Time and at each Date of Delivery (if any), counsel
for the Underwriters shall have been furnished with such documents and opinions
as they may require for the purpose of enabling them to pass upon the issuance
and sale of the Securities as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Offerors in connection with the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and substance to
the Representatives and counsel for the Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement, or, in the case
of any condition to the purchase of Option Securities on a Date of Delivery
which is after the Closing Time, the obligations of the Underwriters to purchase
such Option Securities, may be terminated by the Representatives by notice to
the Company at any time at or prior to the Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without liability of
any party to any other party except as provided in Section 4. Notwithstanding
any such termination, the provisions of Sections 4, 6, 7 and 8 shall remain in
effect.
SECTION 6. Indemnification.
(a) The Offerors agree, jointly and severally, to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable,
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Offerors; and
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(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and
disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that (A) the foregoing indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission (1) made in
reliance upon and in conformity with written information furnished to the
Offerors by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) or (2) in any Form
T-1; and (B) the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Securities, or any person controlling such Underwriter, if it shall be
determined that a copy of the Prospectus (as it may then be amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto in accordance with the provisions of Sections 3(b) and 3(d) of this
Agreement, but excluding documents incorporated by reference therein) was not
sent or given by or on behalf of such Underwriter to such person, if such is
required by law, at or prior to the written confirmation of the sale of such
Securities to such person and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense, except that this clause (B) shall not be applicable if such defect
shall have been corrected in a document which is incorporated or deemed to be
incorporated by reference in the Prospectus.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, the Trust and each of its Trustees who signed the Registration
Statement, and each person, if any, who controls the Company or the Trust within
the meaning of Section 15 of the 1933 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Offerors by such
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give written notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
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defense of any such action. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
SECTION 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Offerors and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Offerors and one or more of the Underwriters, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the total underwriting commission set forth
in the table on the cover page of the Prospectus (or, if Rule 434 is used, in
the corresponding location on the Term Sheet) bears to the sum of (i) such total
underwriting commission plus (ii) the total proceeds to Company set forth in the
table on the cover page of the Prospectus (or, if Rule 434 is used, in the
corresponding location on the Term Sheet) and the Offerors are responsible for
the balance; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation; and provided, further, that no Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact. For purposes of this Section, each person, if any, who controls
an Underwriter within the meaning of Section 15 of the 1933 Act shall have the
same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement, the
Trust, each of its Trustees who signed the Registration Statement, and each
person, if any, who controls the Company or the Trust within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as the
Offerors. The Offerors' obligations to contribute pursuant to this Section 7 are
joint and several. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the aggregate number of
Income PRIDES set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company or trustees
of the Trust submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, or by or on behalf of the Company or the
Trust, and shall survive delivery of the Securities to the Underwriters.
39
<PAGE> 42
SECTION 9. Termination of Agreement.
(a) The Representatives may terminate this Agreement, by notice to
the Company, at any time at or prior to Closing Time (i) if there has been,
since the date of this Agreement or since the respective dates as of which
information is given in the Registration Statement, any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise or of the Trust, in each case, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States or any outbreak of hostilities or
escalation thereof or other calamity or crisis the effect of which is such as to
make it, in the judgment of the Representatives, impracticable to market any of
the Securities or to enforce contracts for the sale of any of the Securities, or
(iii) if trading in securities of the Company or the Trust 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, New York or California
authorities, (iv) if the rating assigned by any nationally recognized
statistical rating organization to the Income PRIDES, the Growth PRIDES, any
other securities of the Company or the Capital Securities shall have been
lowered, or if any such rating organization shall have publicly announced that
it has under surveillance or review its rating of the Income PRIDES, the Growth
PRIDES, any other securities of the Company or the Capital Securities unless
such announcement indicates that such organization is considering an upgrade in
such rating.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof. Notwithstanding any such termination, the
provisions of Sections 4, 6, 7 and 8 shall remain in effect.
SECTION 10. Default by One of the Underwriters. If one of the
Underwriters shall fail at Closing Time or a Date of Delivery to purchase the
Securities which it is obligated to purchase under this Agreement (the
"Defaulted Securities"), the non-defaulting Underwriter shall have the right,
within 24 hours thereafter, to make arrangements for such non-defaulting
Underwriter or any other underwriters to purchase all, but not less than all, of
the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the non-defaulting Underwriter shall not
have completed such arrangements within such 24-hour period, then:
(a) if the aggregate number of Defaulted Securities of each type
does not exceed 10% of the aggregate number of Securities of such
type to be purchased on such date, the non-defaulting Underwriter
shall be obligated to purchase all of the Defaulted Securities, or
(b) if the aggregate number of Defaulted Securities of any type
exceeds 10%
40
<PAGE> 43
of the aggregate number of Securities of such type to be purchased
on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and the Company to sell the Securities to
be purchased and sold on such Date of Delivery, shall terminate
without liability on the part of the non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either the non-defaulting Underwriter or the
Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be, for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to them at Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, World Financial Center, North Tower, New
York, New York 10281-1209, Attention: Phil Jones; and notices to the Offerors
shall be directed to them at 10990 Wilshire Boulevard, Los Angeles, California
90024, attention of Michael F. Henn, Senior Vice President and Chief Financial
Officer.
SECTION 12. Parties. This Agreement shall inure to the benefit of
and be binding upon the Underwriters and the Offerors and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Offerors and their respective successors and the
controlling persons and officers, directors and Trustees referred to in Sections
6 and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein. This Agreement and all conditions and provisions hereof are intended to
be for the sole and exclusive benefit of the Underwriters and the Company and
their respective successors, and said controlling persons and officers,
directors and Trustees and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. Governing Law and Time. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said State. Unless otherwise set forth
herein, specified times of day refer to New York City time.
SECTION 14. Effect of Headings. The Article and Section headings
herein are for
41
<PAGE> 44
convenience only and shall not affect the construction hereof.
42
<PAGE> 45
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Offerors a counterpart hereof,
whereupon this instrument, along with all counterparts, shall become a binding
agreement among the Company, the Trust and the Underwriters in accordance with
its terms.
Very truly yours,
KAUFMAN AND BROAD HOME CORPORATION
By: /s/ Michael F. Henn
----------------------------------------------------
Name: Michael F. Henn
Title: Senior Vice President, Chief Financial
Officer
KBHC FINANCING I
By: /s/ Dennis Welsch
----------------------------------------------------
Name: Dennis Welsch
Title: Trustee
Solely as Trustee and not in his individual capacity
By: /s/ Barton P. Pachino
----------------------------------------------------
Name: Barton P. Pachino
Title: Trustee
Solely as Trustee and not in his individual capacity
43
<PAGE> 46
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Mathew M. Pendo
-----------------------------------
Authorized Signatory
For themselves and as Representatives of the Underwriters
named in Schedule A hereto.
44
<PAGE> 47
Schedule A
<TABLE>
<CAPTION>
Number Number Number
of Income of Growth of Capital
Name of Underwriter PRIDES PRIDES Securities
------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith ............. 7,750,000 500,000 500,000
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation 7,750,000 500,000 500,000
---------- ---------- ----------
Total ............................................. 15,500,000 1,000,000 1,000,000
========== ========== ==========
</TABLE>
Sch A-1
<PAGE> 48
Schedule B
1. The initial public offering price per Security shall be (a) in
the case of each Income PRIDES, $10.00, (b) in the case of each Growth PRIDES,
$8.446 and (c) in the case of each Separate Capital Security, $9.931.
2. The purchase price payable by the several Underwriters for the
Initial Securities shall be (a) $10.00 per Income PRIDES, (b) $8.446 per Growth
PRIDES and (c) $10.00 per Separate Capital Security. The aggregate Underwriters'
Compensation payable to the Underwriters by the Company in respect of the
Initial Securities is $4,950,000.
3. The purchase price payable by the several Underwriters for any
Option Securities shall be $10.00 per Option Security plus, in the case of any
Option Security which is purchased by the Underwriters on a Date of Delivery
which is after the Closing Time, accrued and unpaid distributions thereon. The
Underwriters' Compensation payable to the Underwriters by the Company in respect
of any Option Securities purchased by the several Underwriters is $.30 per
Option Security.
4. Contract Adjustment Payments will be payable on the Income PRIDES
and the Growth PRIDES at the rate of .25% per annum and .75% per annum,
respectively, distributions on the Capital Securities shall be payable at the
rate of 8% per annum and the rate of interest on the Debentures shall be 8% per
annum.
Capitalized terms used in this Schedule and not defined have the
respective meanings set forth in the accompanying Underwriting Agreement.
Sch B-1
<PAGE> 1
Exhibit 4.9
AMENDED AND RESTATED DECLARATION
OF TRUST
KBHC Financing I
Dated as of July 7, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS............................................... 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.......................... 10
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES............................ 10
SECTION 2.3 REPORTS BY THE INSTITUTIONAL TRUSTEE...................... 11
SECTION 2.4 PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE................. 11
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.......... 11
SECTION 2.6 EVENTS OF DEFAULT; WAIVER................................. 11
SECTION 2.7 EVENT OF DEFAULT; NOTICE.................................. 13
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME...................................................... 13
SECTION 3.2 OFFICE.................................................... 14
SECTION 3.3 PURPOSE................................................... 14
SECTION 3.4 AUTHORITY................................................. 14
SECTION 3.5 TITLE TO PROPERTY OF THE TRUST............................ 14
SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES................. 14
SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES...... 17
SECTION 3.8 POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE............ 18
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL..
TRUSTEE................................................... 19
SECTION 3.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE................... 21
SECTION 3.11 DELAWARE TRUSTEE.......................................... 23
SECTION 3.12 EXECUTION OF DOCUMENTS.................................... 23
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES .. 23
SECTION 3.14 DURATION OF TRUST......................................... 23
SECTION 3.15 MERGERS................................................... 23
ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES................... 25
SECTION 4.2 RIGHTS AND RESPONSIBILITIES OF THE SPONSOR................ 25
i
<PAGE> 3
Page
----
SECTION 4.3 RIGHT TO PROCEED.......................................... 26
SECTION 4.4 EXPENSES.................................................. 26
ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES........................................ 27
SECTION 5.2 DELAWARE TRUSTEE.......................................... 27
SECTION 5.3 INSTITUTIONAL TRUSTEE; ELIGIBILITY........................ 27
SECTION 5.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND
DELAWARE TRUSTEE GENERALLY................................ 28
SECTION 5.5 REGULAR TRUSTEES.......................................... 28
SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.......... 29
SECTION 5.7 VACANCIES AMONG TRUSTEES.................................. 30
SECTION 5.8 EFFECT OF VACANCIES....................................... 30
SECTION 5.9 MEETINGS.................................................. 30
SECTION 5.10 DELEGATION OF POWER....................................... 31
SECTION 5.11 MERGER, CONVERSION. CONSOLIDATION OR SUCCESSION TO
BUSINESS.................................................. 31
ARTICLE VI
THE SECURITIES
SECTION 6.1 DESIGNATION AND NUMBER.................................... 31
SECTION 6.2 DISTRIBUTIONS............................................. 32
SECTION 6.3 LIQUIDATION DISTRIBUTION UPON DISSOLUTION. ............... 33
SECTION 6.4 REDEMPTION AND DISTRIBUTION............................... 34
SECTION 6.5 REDEMPTION OR DISTRIBUTION PROCEDURES..................... 35
SECTION 6.6 REPAYMENT AT OPTION OF HOLDERS............................ 36
SECTION 6.7 VOTING RIGHTS - CAPITAL SECURITIES........................ 37
SECTION 6.8 VOTING RIGHTS - COMMON SECURITIES......................... 38
SECTION 6.9 AMENDMENTS TO DECLARATION AND INDENTURE. ................. 39
SECTION 6.10 REFERENCE TO PRO RATA..................................... 40
SECTION 6.11 RANKING................................................... 40
SECTION 6.12 ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. ........ 40
SECTION 6.13 NO PREEMPTIVE RIGHTS...................................... 40
SECTION 6.14 MISCELLANEOUS............................................. 40
SECTION 6.15 PAYING AGENT.............................................. 41
ARTICLE VII
TERMINATION OF TRUST
SECTION 7.1 TERMINATION OF TRUST...................................... 42
ii
<PAGE> 4
Page
----
ARTICLE VIII
TRANSFER OF INTERESTS
SECTION 8.1 TRANSFER OF SECURITIES.................................... 42
SECTION 8.2 TRANSFER OF CERTIFICATES.................................. 43
SECTION 8.3 DEEMED SECURITY HOLDERS................................... 43
SECTION 8.4 BOOK ENTRY INTERESTS...................................... 43
SECTION 8.5 NOTICES TO CLEARING AGENCY................................ 44
SECTION 8.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.................. 44
SECTION 8.7 DEFINITIVE CAPITAL SECURITY CERTIFICATES.................. 44
SECTION 8.8 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES......... 45
ARTICLE IX
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 9.1 LIABILITY................................................. 46
SECTION 9.2 EXCULPATION...............................................
SECTION 9.3 FIDUCIARY DUTY............................................ 46
SECTION 9.4 INDEMNIFICATION........................................... 47
SECTION 9.5 OUTSIDE BUSINESSES........................................ 49
ARTICLE X
ACCOUNTING
SECTION 10.1 FISCAL YEAR............................................... 50
SECTION 10.2 CERTAIN ACCOUNTING MATTERS................................ 50
SECTION 10.3 BANKING................................................... 50
SECTION 10.4 WITHHOLDING............................................... 51
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 AMENDMENTS................................................ 51
SECTION 11.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY
WRITTEN CONSENT........................................... 53
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL
TRUSTEE................................................... 54
SECTION 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE....... 55
iii
<PAGE> 5
Page
----
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 NOTICES................................................. 55
SECTION 13.2 GOVERNING LAW........................................... 56
SECTION 13.3 INTENTION OF THE PARTIES................................ 57
SECTION 13.4 HEADINGS................................................ 57
SECTION 13.5 SUCCESSORS AND ASSIGNS.................................. 57
SECTION 13.6 PARTIAL ENFORCEABILITY.................................. 57
SECTION 13.7 COUNTERPARTS............................................ 57
SECTION 13.8 REMARKETING............................................. 57
iv
<PAGE> 6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
KBHC Financing I
Dated as of July 7, 1998
AMENDED AND RESTATED DECLARATION OF TRUST (the "Declaration") dated and
effective as of July 7, 1998, by the Trustees (as defined herein), the Sponsor
(as defined herein) and by the Holders (as defined herein), from time to time,
of the securities representing undivided beneficial interests in the assets of
the Trust to be issued pursuant to this Declaration;
WHEREAS, certain of the Trustees and the Sponsor established KBHC
Financing I (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a declaration of trust dated as of April 30, 1998 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on April 30, 1998, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer (as defined herein);
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the Trust and the Holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Declaration as modified, supplemented or amended from time to time;
<PAGE> 7
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act as in effect on the date of this Declaration.
"Agent" means any Paying Agent.
"Applicable Ownership Interest" means, with respect to an Income
PRIDES and the Treasury Securities in the Treasury Portfolio, (A) a 1/100, or
1%, undivided beneficial ownership interest in a $1,000 principal or interest
amount of a principal or interest strip in a U.S. Treasury Security included in
such Treasury Portfolio which matures on or prior to August 15, 2001 and (B) for
each scheduled interest payment date on the Debentures that occurs after the Tax
Event Redemption Date, a .02% undivided beneficial ownership interest in a
$1,000 face amount of such U.S. Treasury Security which is a principal or
interest strip maturing on such date.
"Applicable Principal Amount" means either (i) if the Tax Event
Redemption Date occurs prior to August 16, 2001, the aggregate principal amount
of the Debentures corresponding to the aggregate stated liquidation amount of
the Capital Securities which are components of Income PRIDES on the Tax Event
Redemption Date or (ii) if the Tax Event Redemption occurs on or after August
16, 2001, the aggregate principal amount of the Debentures corresponding to the
aggregate stated liquidation amount of the Capital Securities outstanding on
such Tax Event Redemption Date.
"Authorized Newspaper" means a daily newspaper, in the English
language, customarily published on each day that is a Business Day in The City
of New York, whether or not published on days that are Legal Holidays, and of
general circulation in The City of New York. The Authorized Newspaper for the
purposes of the Reset Announcement Date is currently anticipated to be The Wall
Street Journal.
"Authorized Officer" of a Person means any Person that is authorized
to bind such Person.
"Base Indenture" means the Indenture dated as of July 7, 1998
between the Debenture Issuer and the Debenture Trustee.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 8.4.
"Business Day" means any day other than Saturday, Sunday or any day
on which banking institutions in New York City, in the State of New York, are
permitted or required by any applicable law to close.
2
<PAGE> 8
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Capital Security" means the 8% Capital Securities.
"Capital Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Capital Security Certificate" means a certificate representing a
Capital Security substantially in the form of Exhibit A-1.
"Certificate" means a Common Security Certificate or a Capital
Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the "Closing Time" and each "Date of Delivery"
under the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Security" means the 8% Common Securities.
"Common Security Certificate" means a definitive certificate in
fully registered form representing a Common Security substantially in the form
of Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Institutional
Trustee at which the corporate trust business of the Institutional Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Declaration is located at One First National Plaza,
Suite 0126, Chicago, IL 60670-0126.
3
<PAGE> 9
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Kaufman and Broad Home Corporation, a
Delaware corporation, in its capacity as issuer of the Debentures under the
Indenture.
"Debenture Repayment Price" means, with respect to any Debentures
put to the Sponsor on September 1, 2001, an amount per Debenture equal to $10,
plus accrued and unpaid interest (including deferred interest, if any).
"Debenture Trustee" means The First National Bank of Chicago, as
trustee under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.
"Debentures" means the series of 8% Debentures due August 16, 2003
to be issued by the Debenture Issuer under the Indenture.
"Definitive Capital Security Certificates" has the meaning set forth
in Section 8.4.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Direction" by a Person means a written direction signed:
(a) if the Person is a natural person, by that Person; or
(b) in any other case, in the name of such Person by one or
more Authorized Officers of that Person.
"Direct Action" has the meaning specified in Section 3.8(e).
"Distribution" and "distribution" has the meaning specified in
Section 6.2.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) has occurred and is continuing in respect
of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Exchange Agent" shall mean the Person acting as Institutional
Trustee.
"Failed Remarketing" has the meaning specified in Section 5.4(b) of
the Purchase Contract Agreement.
4
<PAGE> 10
"FELINE PRIDES"(sm) means (A) 17,975,000 units referred to as Income
PRIDES(sm) with a Stated Amount, per Income PRIDES, equal to $10 and (B)
1,000,000 units referred to as Growth PRIDES(sm) with a Stated Amount, per
Growth PRIDES, equal to $10.
"Fiduciary Indemnified Person" has the meaning set forth in Section
9.4(b).
"First Supplemental Indenture" means the First Supplemental
Indenture dated as of July 7, 1998 between the Debenture Issuer and the
Debenture Trustee.
"Global Certificate" has the meaning set forth in Section 8.4.
"Growth PRIDES" has the meaning specified in Section 1.1 of the
Purchase Contract Agreement.
"Guarantee" means the guarantee agreement to be dated as of July 7,
1998 of the Sponsor in respect of the Common Securities and the Capital
Securities.
"Holder" or "holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Income PRIDES" has the meaning specified in Section 1.1 of the
Purchase Contract Agreement.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means, collectively, the Base Indenture and the First
Supplemental Indenture, and any other indentures supplemental thereto pursuant
to which the Debentures are to be issued.
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Institutional Trustee Account" has the meaning set forth in Section
3.8(c).
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, or any successor legislation.
"Investment Company Event" means that the Regular Trustees shall
have received an opinion of independent counsel experienced in practice under
the Investment Company Act (an "Investment Company Event Opinion") to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in 1940 Act Law"), which Change in 1940 Act Law becomes effective on or after
the date of the Prospectus, there is a more than an insubstantial risk that
5
<PAGE> 11
the Trust is or will be considered an Investment Company which is required to be
registered under the Investment Company Act.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means, except as
provided in Article VI hereof or by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Ministerial Action" means the taking of an action, such as filing a
form or making an election, or pursuing some other similar reasonable measure
that will have no adverse effect on the Trust, the Debenture Issuer, the Sponsor
or the Holders of the Securities and will involve no material cost.
"Officer's Certificate" means, with respect to any Person, a
certificate of such Person signed by an Authorized Officer of such Person. Any
Officer's Certificate delivered with respect to compliance with a condition or
covenant provided for in this Declaration shall include:
(a) a statement that the officer signing the Officer's Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by the officer in rendering the Officer's Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 6.15.
"Person" and "person" means a legal person, including any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Pledge Agreement" means the Pledge Agreement dated as of July 7,
1998 among the Sponsor, The Bank of New York, as collateral agent (the
"Collateral Agent") and Custodial Agent (the "Custodial Agent") and securities
intermediary (the "Securities Intermediary"), and The First National Bank of
Chicago, as purchase contract agent (the "Purchase Contract Agent").
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"Primary Treasury Dealer"means a primary U.S. government securities
dealer in The City of New York.
"Pro Rata" has the meaning specified in Section 6.10.
"Purchase Contract Agreement" means the Purchase Contract Agreement
dated as of July 7, 1998 between The First National Bank of Chicago, as Purchase
Contract Agent, and the Sponsor.
"Purchase Contract Settlement Date" means August 16, 2001.
"Put Option" has the meaning specified in Section 6.6.
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both of them.
"Quotation Agent" means (i) Merrill Lynch Government Securities,
Inc. and its respective successors, provided, however, that if the foregoing
shall cease to be a Primary Treasury Dealer, the Sponsor shall substitute
therefor another Primary Treasury Dealer or (ii) any other Primary Treasury
Dealer selected by the Sponsor.
"Redemption Amount" means for each Debenture, the product of (i) the
principal amount of such Debenture and (ii) a fraction whose numerator is the
Treasury Portfolio Purchase Price and whose denominator is the Applicable
Principal Amount.
"Redemption Price" means the redemption price per Security equal to
the Redemption Amount plus any accrued and unpaid Distributions to the date of
redemption or, in the case of any redemption in connection with the final
maturity of the Debentures, an amount per Security equal to the redemption price
for $10 in principal amount of Debentures plus accrued and unpaid Distributions
to the date of redemption.
"Regular Trustee" has the meaning set forth in Section 5.1.
"Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Remarketing Agent" means Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated or such other persons who shall be the
remarketing agent under the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement among the
Debenture Issuer, the Trust, The First National Bank of Chicago, as Purchase
Contract Agent, and the Remarketing Agent.
"Remarketing Date" shall mean the third Business Day immediately
preceding the Purchase Contract Settlement Date.
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"Reset Agent" means a nationally recognized investment banking firm
chosen by the Sponsor to determine the Reset Rate. It is currently anticipated
that Merrill Lynch, Pierce, Fenner & Smith Incorporated will act in such
capacity.
"Reset Announcement Date" means the tenth Business Day immediately
preceding the Purchase Contract Settlement Date.
"Reset Rate" means the distribution rate per annum (to be determined
by the Reset Agent), equal to the sum of (X) the Reset Spread and (Y) the rate
of interest on the Two-Year Benchmark Treasury in effect on the third Business
Day immediately preceding the Purchase Contract Settlement Date that the Capital
Securities should bear in order for the Capital Securities to have an
approximate market value of 100.75% of their aggregate stated liquidation amount
on the third Business Day immediately preceding the Purchase Contract Settlement
Date; provided, that the Sponsor may limit such Reset Spread to be no higher
than 300 basis points (3.00%) and the Sponsor shall limit the Reset Rate, if
applicable, to the maximum rate permitted by applicable law.
"Reset Spread" means a spread amount to be determined by the Reset
Agent on the tenth Business Day immediately preceding the Purchase Contract
Settlement Date.
"Responsible Officer" means, with respect to the Institutional
Trustee, any officer within the Corporate Trust Office of the Institutional
Trustee, including, without limitation, any vice-president, any assistant
vice-president, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Institutional Trustee
assigned by the Institutional Trustee to administer its corporate trust matters
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Sponsor" means Kaufman and Broad Home Corporation, a Delaware
corporation, or any successor entity in a merger or consolidation, in its
capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
"Supplemental Remarketing Agreement" means the agreement to be dated
as of the third Business Day immediately preceding the Purchase Contract
Settlement Date among the Company, the Trust (if applicable), The First National
Bank of Chicago, and the Remarketing Agent.
"Tax Event" means the receipt by the Regular Trustees on behalf of
the Trust of an opinion of a nationally recognized independent tax counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof
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or therein affecting taxation, (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority or (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the generally accepted position on
the date the Securities are issued, which amendment, change or proposed change
is effective or which interpretation or pronouncement is announced on or after
the date of the first issuance of Securities under the Declaration, there is
more than an insubstantial risk that (i) interest payable by the Debenture
Issuer on the Debentures would not be deductible, in whole or in part, by the
Debenture Issuer for United States federal income tax purposes or (ii) the
income of the Trust would be subject to United States federal income tax or the
Trust would be subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
"Tax Event Redemption" means, if a Tax Event shall occur and be
continuing, the redemption of the Debentures, at the option of the Debenture
Issuer, in whole but not in part, on not less than 30 days nor more than 60 days
notice.
"Tax Event Redemption Date" means the date upon which a Tax Event
Redemption is to occur.
"10% in liquidation amount of the Securities" means, except as
provided in Article VI hereof or by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Termination Event" has the meaning set forth in Section 1.1 of the
Purchase Contract Agreement.
"Treasury Portfolio" means, with respect to the Applicable Principal
Amount of Debentures (a) if the Tax Event Redemption Date occurs prior to August
16, 2001, a portfolio of zero-coupon U.S. Treasury Securities consisting of (i)
principal or interest strips of U.S. Treasury Securities which mature on or
prior to August 15, 2001 in an aggregate amount equal to the Applicable
Principal Amount and (ii) with respect to each scheduled interest payment date
on the Debentures that occurs after the Tax Event Redemption Date, principal or
interest strips of U.S. Treasury Securities which mature on or prior to such
date in an aggregate amount equal to the aggregate interest payment that would
be due on the Applicable Principal Amount of the Debentures on such date, and
(b) if the Tax Event Redemption Date occurs after August 16, 2001, a portfolio
of zero-coupon U.S. Treasury Securities consisting of (i) principal or interest
strips of U.S. Treasury Securities which mature on or prior to August 15, 2003
in an aggregate amount equal to the Applicable Principal Amount and (ii) with
respect to each scheduled interest payment date on the Debentures that occurs
after the Tax Event Redemption Date, principal or interest strips of such U.S.
Treasury Securities which mature on or prior to such date in an aggregate amount
equal to the aggregate interest payment that would be due on the Applicable
Principal Amount of the Debentures on such date.
"Treasury Portfolio Purchase Price" means the lowest aggregate price
quoted by the Primary Treasury Dealer to the Quotation Agent on the third
Business Day immediately preceding the Tax
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Event Redemption Date for the purchase of the Treasury Portfolio for settlement
on the Tax Event Redemption Date.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Treasury Securities" has the meaning set forth in Section 1 of the
Purchase Contract Agreement.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Two-Year Benchmark Treasury" means direct obligations of the United
States (which may be obligations traded on a when-issued basis only) having a
maturity comparable to the remaining term to maturity of the Trust Securities,
as agreed upon by the Sponsor and the Reset Agent. The rate for the Two-Year
Benchmark Treasury will be the bid side rate displayed at 10:00 A.M., New York
City time, on the third Business Day immediately preceding the Purchase Contract
Settlement Date in the Telerate system (or if the Telerate system is (a) no
longer available on the third Business Day immediately preceding the Purchase
Contract Settlement Date or (b) in the opinion of the Reset Agent (after
consultation with the Sponsor) no longer an appropriate system from which to
obtain such rate, such other nationally recognized quotation system as, in the
opinion of the Reset Agent (after consultation with the Sponsor) is
appropriate). If such rate is not so displayed, the rate for the Two-Year
Benchmark Treasury shall be, as calculated by the Reset Agent, the yield to
maturity for the Two-Year Benchmark Treasury, expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis, and computed by taking the arithmetic mean of the secondary market bid
rates, as of 10:30 A.M., New York City time, on the third Business Day
immediately preceding the Purchase Contract Settlement Date of three leading
United States government securities dealers selected by the Reset Agent (after
consultation with the Sponsor) (which may include the Reset Agent or an
Affiliate thereof).
"Underwriting Agreement" means the Underwriting Agreement for the
offering and sale of Capital Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
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(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall control.
(d) Any application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) Each of the Sponsor and the Regular Trustees, on behalf of the Trust,
shall provide the Institutional Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Institutional
Trustee may reasonably require, of the names and addresses of the Holders of the
Securities ("List of Holders") as of such record date, provided that neither the
Sponsor nor the Regular Trustees, on behalf of the Trust, shall be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Institutional Trustee by the
Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request by the
Institutional Trustee for a List of Holders as of a date no more than 14 days
before such List of Holders is given to the Institutional Trustee. The
Institutional Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in the Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if acting in such capacity),
provided that the Institutional Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its obligations under
ss.ss. 311(a), 310(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE INSTITUTIONAL TRUSTEE.
Within 60 days after May 15 of each year, commencing May 15, 1999, the
Institutional Trustee shall provide to the Holders of the Trust Securities such
reports as are required by ss.313 of the Trust Indenture Act, if any, in the
form and in the manner provided by ss.313 of the Trust Indenture Act. The
Institutional Trustee shall also comply with the requirements of ss.313(d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE.
Each of the Sponsor and the Regular Trustees, on behalf of the Trust,
shall provide to the Institutional Trustee such documents, reports and
information as required by ss.314 (if any) and the compliance certificate
required by ss.314 of the Trust Indenture Act in the form, in the manner and at
the times required by ss.314 of the Trust Indenture Act.
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SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Sponsor and the Regular Trustees, on behalf of the Trust,
shall provide to the Institutional Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to ss. 314(c)
(1) may be given in the form of an Officer's Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of Capital Securities
may, by vote, on behalf of the Holders of all of the Capital Securities, waive
any past Event of Default in respect of the Capital Securities and its
consequences, provided that, if the underlying Event of Default under the
Indenture:
(i) is not waivable under the Indenture, the Event of Default under
this Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "Super Majority") to
be waived under the Indenture, the Event of Default under this Declaration
may only be waived by the vote of the Holders of at least the proportion
in liquidation amount of the Capital Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of ss. 316(a)
(1)(B) of the Trust Indenture Act and such ss. 316(a) (1) (B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the Capital
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders
of the Common Securities are deemed to have waived such Event of Default
under this Declaration as provided below in this Section 2.6(b), the Event
of Default under this Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have
waived such Event of Default under this Declaration as provided below in
this Section 2.6(b), the Event of Default under this Declaration
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may only be waived by the vote of the Holders of at least the proportion
in liquidation amount of the Common Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences until all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Institutional Trustee will be deemed to be acting solely on behalf of the
Holders of the Capital Securities and only the Holders of the Capital Securities
will have the right to direct the Institutional Trustee in accordance with the
terms of the Securities; and provided, further, that any waiver by the Holders
of the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holder of the Common Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Institutional Trustee at the direction of the Holders of the Capital Securities
constitutes a waiver of the corresponding Event of Default with respect to the
Capital Securities under this Declaration. Any waiver of an Event of Default
under the Indenture by the Institutional Trustee at the direction of the Holders
of the Capital Securities shall also be deemed to constitute a waiver by the
Holders of the Common Securities of the corresponding Event of Default under
this Declaration with respect to the Common Securities for all purposes of this
Declaration without further act, vote or consent of the Holders of the Common
Securities. The foregoing provisions of this Section 2.6(c) shall be in lieu of
ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Institutional Trustee shall, within 90 days after the occurrence
of an Event of Default, actually known to a Responsible Officer of the
Institutional Trustee, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all such defaults with respect to the
Securities, unless such defaults have been cured before the giving of such
notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby
defined to be an Event of Default as defined in the Indenture, not including any
periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures, the
Institutional Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Institutional Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
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(b) The Institutional Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Section 501 or 503 of the Indenture; or
(ii) any default as to which the Institutional Trustee shall have
received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of this Declaration
shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME.
The Trust is named "KBHC Financing I," as such name may be modified from
time to time by the Regular Trustees following written notice to the Holders of
the Securities. The Trust's activities may be conducted under the name of the
Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o Kaufman and Broad
Home Corporation, 10990 Wilshire Boulevard, Los Angeles, California 90024 Attn:
Barton P. Pachino. On ten Business Days written notice to the Institutional
Trustee and Holders of the Securities, the Regular Trustees may designate
another principal office.
SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to issue and
sell the Securities and use the gross proceeds from such sale to acquire the
Debentures, and (b) except as otherwise set forth herein, to engage in only
those other activities necessary, appropriate, convenient or incidental thereto.
The Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust. It is the intent
of the parties to this Declaration for the Trust to be classified as a grantor
trust for United States federal income tax purposes under Subpart E of
Subchapter J of the Code, pursuant to which the beneficial owners of the Capital
Securities and the Common Securities will be the owners of the Trust for United
States federal income tax purposes, and such owners will include directly in
their gross income the income, gain, deduction or loss of the Trust as if the
Trust did not exist. By the acceptance of this Trust, neither the Trustees, the
Sponsor nor the Holders of the Capital Securities or Common Securities will take
any position for United States federal income tax purposes which is contrary to
the classification of the Trust as a grantor trust.
SECTION 3.4 AUTHORITY.
Subject to the limitations provided in this Declaration and to the
specific duties of the Institutional Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the
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Trust. An action taken by the Regular Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Institutional Trustee on behalf of the Trust in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 3.8 with respect to the Debentures and the
Institutional Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. A Holder
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES.
The Regular Trustees shall have the exclusive power, duty and authority to
cause the Trust to engage in the following activities:
(a) to execute, issue and sell the Capital Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Capital Securities and no more than
one series of Common Securities, and, provided further, that there shall be no
interests in the Trust other than the Securities, and the issuance of Securities
shall be limited to a simultaneous issuance of both Capital Securities and
Common Securities on each Closing Date;
(b) in connection with the issue and sale of the Capital Securities to:
(i) assist in filing with the Commission the registration statement
and the prospectus relating to the registration statement on Form S-3
prepared by the Sponsor, including any amendments or supplements, thereto,
pertaining to the Capital Securities and to take any other action
requested by the Sponsor relating to the registration and sale of the
Capital Securities under federal and state securities laws;
(ii) execute and assist in filing any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be necessary in
order to qualify or register all or part of the FELINE PRIDES in any State
in which the Sponsor has determined to qualify or register such FELINE
PRIDES for sale;
(iii) assist in filing an application, prepared by the Sponsor, to
the New York Stock Exchange, Inc. or any other national stock exchange or
the Nasdaq National Market for listing upon notice of issuance of any
Capital Securities;
(iv) assist in filing with the Commission a registration statement
on Form 8-A, including any amendments thereto, prepared by the Sponsor,
relating to the registration of the Capital Securities under Section 12(b)
of the Exchange Act; and
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(v) execute and enter into the Underwriting Agreement providing for
the sale of the FELINE PRIDES and the Capital Securities and the
Remarketing Agreement and Supplemental Remarketing Agreement in connection
with the remarketing of the Capital Securities;
(c) to acquire the Debentures with the proceeds of the sale of the Capital
Securities and the Common Securities and to execute and enter into a Debenture
purchase agreement and a Common Securities purchase agreement with the Sponsor;
provided, however, that the Regular Trustees shall cause legal title to the
Debentures to be held of record in the name of the Institutional Trustee for the
benefit of the Trust and the Holders of the Capital Securities and the Holders
of Common Securities;
(d) to give the Sponsor and the Institutional Trustee prompt written
notice of the occurrence of a Tax Event or an Investment Company Event; provided
that the Regular Trustees shall consult with the Sponsor before taking or
refraining from taking any Ministerial Action in relation to a Tax Event or
Investment Company Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of ss.316(c) of the Trust Indenture Act, Distributions,
voting rights, repayments, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Securities and this Declaration;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e) the Institutional Trustee
has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the Trust
Indenture Act to the Institutional Trustee, which certificate may be executed by
any Regular Trustee;
(k) to incur expenses that are necessary, appropriate, convenient or
incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and transfer
agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of any
notice received from the Debenture Issuer of its election to defer payments of
interest on the Debentures by extending the interest payment period under the
Indenture;
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(n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and in each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Capital
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(o) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust, including,
but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes, provided that such action
relating to this clause (iii) does not adversely affect the interests of
Holders;
(p) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Regular Trustees, on behalf of the Trust;
(q) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary, appropriate, convenient or incidental to the foregoing; and
(r) if applicable, to solicit holders of Securities which form a part of
the Income PRIDES to timely instruct the Purchase Contract Agent in order to
enable the Purchase Contract Agent to vote such Securities.
The Regular Trustees must exercise the powers set forth in this Section
3.6 in a manner that is consistent with the purposes and functions of the Trust
set out in Section 3.3, and the Regular Trustees shall not take any action that
is inconsistent with the purposes and functions of the Trust set forth in
Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Institutional Trustee set forth in Section 3.8.
No permissive power or authority available to the Regular Trustees shall be
construed to be a duty.
Any expenses incurred by the Regular Trustees pursuant to this Section 3.6
shall be reimbursed by the Sponsor.
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SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the Institutional
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall not
and the Trustees (including the Institutional Trustee) shall cause the Trust not
to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than the Debentures and any cash
proceeds received with respect thereto;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness for borrowed money,
other than loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the
assets of the Trust or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(vii) other than as provided in this Declaration, (A) direct the
time, method and place of exercising any trust or power conferred upon the
Debenture Trustee with respect to the Debentures, (B) waive any past
default that is waivable under the Indenture, (C) exercise any right to
rescind or annul any declaration that the principal of all the Debentures
shall be due and payable, or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures unless the Trust shall have
received an opinion of counsel to the effect that such modification will
not cause the Trust to be classified as other than a grantor trust for
United States federal income tax purposes.
SECTION 3.8 POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of record
in the name of the Institutional Trustee in trust for the benefit of the Trust
and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 5.6. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Institutional Trustee does not also act as Delaware Trustee).
(c) The Institutional Trustee shall:
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(i) establish and maintain a segregated non-interest bearing trust
account (the "Institutional Trustee Account") in the name of and under the
exclusive control of the Institutional Trustee on behalf of the Trust and
the Holders of the Securities and, upon the receipt of payments of funds
made in respect of the Debentures held by the Institutional Trustee,
deposit such funds into the Institutional Trustee Account and make
payments to the Holders of the Capital Securities and Holders of the
Common Securities from the Institutional Trustee Account in accordance
with Article VI. Funds in the Institutional Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration. The
Institutional Trustee Account shall be an account that is maintained with
a banking institution the rating on whose long-term unsecured indebtedness
is rated at least "A" or above by a "nationally recognized statistical
rating organization", as that term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be necessary,
appropriate, convenient or incidental to effect the repayment of the
Capital Securities and the Common Securities to the extent the Debentures
mature or are redeemed or the Put Option is exercised; and
(iii) upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Securities, engage in such
ministerial activities as shall be necessary, appropriate, convenient or
incidental to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain special events (as may be
defined in the terms of the Securities) arising from a change in law or a
change in legal interpretation or other specified circumstances pursuant
to the terms of the Securities.
(d) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities and this Declaration.
(e) The Institutional Trustee shall take any Legal Action which arises out
of or in connection with an Event of Default of which a Responsible Officer of
the Institutional Trustee has actual knowledge or the Institutional Trustee's
duties and obligations under this Declaration, the Business Trust Act or the
Trust Indenture Act; provided, however, that if the Institutional Trustee fails
to enforce its rights under the Debentures after a Holder of Capital Securities
has made a written request, such Holder of Capital Securities may, to the
fullest extent permitted by applicable law, institute a legal proceeding against
the Debenture Issuer without first instituting any legal proceeding against the
Institutional Trustee or any other Person. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Debenture Issuer to pay interest or premium, if any, on or
principal of the Debentures on any date such interest or premium, if any, or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a Holder of Capital Securities may directly institute a proceeding
for enforcement of payment to such Holder of the principal of or interest or
premium, if any, on the Debentures having a principal amount equal to the
aggregate liquidation amount of the Capital Securities of such holder (a "Direct
Action") on or after the respective due dates specified in the Debentures and
the Indenture. In connection with such Direct Action, the rights of the Holders
of Common Securities will be subrogated to the rights of such Holders of Capital
Securities. In connection with such Direct Action, the Debenture Issuer shall be
subrogated to the rights of such Holder of Capital Securities with respect to
payments on the Capital Securities under this Declaration to the extent of any
payment made by the Debenture Issuer to such Holder of Capital Securities in
such Direct Action. Except as provided in the preceding sentences, the Holders
of Capital Securities will not be able to exercise directly any other remedy
available to the Holders of the Debentures.
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(f) The Institutional Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of Securities pursuant to the terms
of the Securities; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(g) The Institutional Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer of
the Institutional Trustee occurs and is continuing, the Institutional Trustee
shall, for the benefit of Holders of the Securities, enforce its rights as
holder of the Debentures subject to the rights of the Holders pursuant to the
terms of such Securities and this Declaration.
(h) Subject to this Section 3.8, the Institutional Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.
The Institutional Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.3.
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE.
(a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing or waiver of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct or bad faith, except
that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Institutional Trustee
shall be determined solely by the express provisions of this
Declaration and the Institutional Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration
against the Institutional Trustee; and
(B) in the absence of bad faith on the part of the
Institutional Trustee, the Institutional Trustee may conclusively
rely, as to the truth of the statements and the
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correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Institutional Trustee and conforming to
the requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Institutional Trustee,
the Institutional Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Declaration;
(ii) the Institutional Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Institutional Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in
liquidation amount of the Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or indemnity
reasonably satisfactory to the Institutional Trustee against such risk or
liability is not reasonably assured to it;
(v) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Institutional Trustee Account shall be to deal with such property in a
similar manner as the Institutional Trustee deals with similar property
for its fiduciary accounts generally, subject to the protections and
limitations on liability afforded to the Institutional Trustee under this
Declaration, the Business Trust Act and the Trust Indenture Act;
(vi) the Institutional Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;
(vii) the Institutional Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the
Sponsor. Money held by the Institutional Trustee need not be segregated
from other funds held by it except in relation to the Institutional
Trustee Account maintained by the Institutional Trustee pursuant to
Section 3.8(c)(i) and except to the extent otherwise required by law; and
(viii) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Regular Trustees or the Sponsor.
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SECTION 3.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE.
(b) Subject to the provisions of Section 3.9:
(i) the Institutional Trustee may conclusively rely and shall be
fully 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, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced by a
Director's or Officer's Certificate;
(iii) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer's Certificate which, upon receipt of
such request, shall be promptly delivered by the Sponsor or the Regular
Trustees;
(iv) the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities
laws) or any rerecording, refiling or registration thereof;
(v) the Institutional Trustee may consult with counsel or other
experts and the advice or opinion of such counsel and experts with respect
to legal matters or advice within the scope of such experts' area of
expertise 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 accordance with such advice or opinion. Such counsel may be
counsel to the Sponsor or any of its Affiliates, and may include any of
its employees. The Institutional Trustee shall have the right at any time
to seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction;
(vi) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at
the request or direction of any Holder, unless such Holder shall have
provided to the Institutional Trustee security and indemnity, reasonably
satisfactory to the Institutional Trustee, against the costs, expenses
(including reasonable attorneys' fees and expenses and the reasonable
expenses of the Institutional Trustee's agents, nominees or custodians)
and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Institutional Trustee provided, that, nothing contained
in this Section 3.10(a)(vi) shall be taken to relieve the Institutional
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Declaration;
(vii) the Institutional Trustee shall be under no obligation to
conduct an 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
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or other paper or document, but the Institutional Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit;
(viii) the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Institutional
Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Institutional
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Institutional Trustee's or its agent's taking such
action;
(x) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Institutional Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of the Securities as
would be entitled to direct the Institutional Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions;
and
(xi) except as otherwise expressly provided by this Declaration,
the Institutional Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
SECTION 3.11 DELAWARE TRUSTEE.
Notwithstanding any other provision of this Declaration other than Section
5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor
shall the Delaware Trustee have any of the duties and responsibilities of the
Trustees (except as required under the Business Trust Act) described in this
Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807(a) of the Business Trust Act.
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SECTION 3.12 EXECUTION OF DOCUMENTS.
Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act, a majority of or, if there are
only two, any Regular Trustee or, if there is only one, such Regular Trustee is
authorized to execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to Section 3.6.
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration shall be taken as the
statements of the Sponsor, and the Trustees do not assume any responsibility for
their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Securities.
SECTION 3.14 DURATION OF TRUST.
The Trust, unless dissolved pursuant to the provisions of Article VII
hereof, shall dissolve on August 16, 2005.
SECTION 3.15 MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity or person,
except as described in Section 3.15(b) and (c) or Section 6.3
(b) The Trust may, with the consent of the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees and without the consent of
the Holders of the Securities, the Delaware Trustee or the Institutional
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided that if the Trust is not
the surviving entity:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Capital Securities other securities
having substantially the same terms as the Capital Securities (the
"Successor Securities"), so long as the Successor Securities rank
the same as the Capital Securities rank with respect to
Distributions and payments upon liquidation, redemption, repayment
and otherwise and substitutes for the Common Securities other
securities having substantially the same terms as the Common
Securities (the "Successor Common Securities"), so long as the
Successor Common Securities rank the same as the Common Securities
rank with respect to Distributions and payments upon liquidation,
redemption, repayment and otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the holder of the Debentures;
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(iii) if necessary, the Capital Securities or any Successor
Securities will be listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with
another organization on which the Capital Securities are then listed or
quoted;
(iv) such merger, consolidation, amalgamation or replacement does
not cause the Capital Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating
organization;
(v) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities and any Successor
Common Securities) in any material respect (other than with respect to any
dilution of such Holders' interests in the successor entity);
(vi) such Successor Entity has a purpose substantially identical to
that of the Trust;
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such matters to
the effect that:
(A) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of
the Holders of the Securities (including any Successor Securities
and Successor Common Securities) in any material respect (other than
with respect to any dilution of the Holders' interest in the
successor entity);
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be
required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will continue to be
classified as a grantor trust for United States federal income tax
purposes; and
(viii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities and Successor Common Securities at
least to the extent provided by the Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger or replacement would cause the Trust or
Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes.
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ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
On each Closing Date the Sponsor will purchase all of the Common
Securities issued by the Trust, in an amount at least equal to 3.0% of the total
capital of the Trust, at the same time as the Capital Securities are sold.
SECTION 4.2 RIGHTS AND RESPONSIBILITIES OF THE SPONSOR.
In connection with the issue, sale and, if necessary, the remarketing of
the Capital Securities, the Sponsor shall have the exclusive right and
responsibility to engage in the following activities:
(a) to prepare, execute and file with the Commission a registration
statement on Form S-3 in relation to the Capital Securities, including any
amendments thereto;
(b) if necessary, to determine the States in which to take appropriate
action to qualify or register for sale all or part of the FELINE PRIDES and to
do any and all such acts, other than actions which must be taken by the Trust,
and advise the Trust of actions it must take, and prepare for execution and
filing any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(c) if necessary, to prepare, execute and file an application to the New
York Stock Exchange or any other national stock exchange or the Nasdaq National
Market for listing upon notice of issuance of any Capital Securities;
(d) if necessary, to prepare, execute and file with the Commission of a
registration statement on Form 8-A relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto;
(e) to negotiate the terms of the Remarketing Agreement, the Supplemental
Remarketing Agreement and the Underwriting Agreement providing for the sale of
the FELINE PRIDES; and
(f) execute and enter into the Underwriting Agreement, the Remarketing
Agreement, the Debenture purchase agreement and Common Securities purchase
agreement to be entered into with the Company and, if applicable, the
Supplemental Remarketing Agreement.
SECTION 4.3 RIGHT TO PROCEED.
The Sponsor acknowledges the rights of Holders to institute a Direct
Action as set forth in Section 3.8(e) hereto.
SECTION 4.4 EXPENSES.
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In connection with the offering, sale and issuance of the Debentures to
the Institutional Trustee and in connection with the sale of the Securities by
the Trust, the Debenture Issuer, in its capacity as borrower with respect to the
Debentures, is required under Section 5.1 of the First Supplemental Indenture
to:
(a) pay all costs and expenses relating to the offering, sale and issuance
of the Debentures, including commissions to the underwriters payable pursuant to
the Underwriting Agreement and compensation of the Debenture Trustee under the
Indenture in accordance with the provisions of Section 607 of the Base
Indenture;
(b) be responsible for and shall pay all debts and obligations (other than
with respect to the Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the organization,
maintenance and dissolution of the Trust, the offering, sale and issuance of the
Securities (including commissions to the underwriters in connection therewith),
the fees and expenses (including reasonable counsel fees and expenses) of the
Institutional Trustee, the Delaware Trustee and the Regular Trustees (including
any amounts payable under Article IX of this Declaration), the costs and
expenses relating to the operation of the Trust, including, without limitation,
costs and expenses of accountants, attorneys, statistical or bookkeeping
services, expenses for printing and engraving and computing or accounting
equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel
and telephone and other telecommunications expenses and costs and expenses
incurred in connection with the acquisition, financing, and disposition of Trust
assets and the enforcement by the Institutional Trustee of the rights of the
Holders of the Securities;
(c) be primarily liable for any indemnification obligations arising under
Section 9.4 with respect to this Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
The Sponsor's obligations under this Section 4.4 shall be for the benefit
of, and shall be enforceable by, any person to whom such debts, obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
has received notice hereof. Any such Creditor may enforce the Sponsor's
obligations under this Section 4.4 directly against the Sponsor and the Sponsor
irrevocably waives, to the extent permitted by law, any right or remedy to
require that any such Creditor take any action against the Trust or any other
Person before proceeding against the Sponsor. The Debenture Issuer agrees to
execute such additional agreements as may be necessary or desirable in order to
give full effect to the provisions of this Section 4.4.
ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES.
The number of Trustees initially shall be four, and:
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(a) at any time before the issuance of any Securities, the Sponsor may, by
written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities; provided, however, that, the number of Trustees shall in
no event be less than two, provided further that (1) one Trustee shall meet the
requirements of Section 5.2 (a) or (b); (2) there shall be at least one Trustee
who is an employee or officer of, or is affiliated with the Sponsor (a "Regular
Trustee"); and (3) one Trustee shall be the Institutional Trustee for so long as
this Declaration is required to qualify as an indenture under the Trust
Indenture Act, and such Institutional Trustee may also serve as Delaware Trustee
if it meets the applicable requirements.
SECTION 5.2 DELAWARE TRUSTEE.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, provided that, if the Institutional Trustee has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law, then the Institutional Trustee shall also be the Delaware
Trustee and Section 3.11 shall have no application.
(c) The initial Delaware Trustee shall be:
First Chicago Delaware Inc.
300 King Street
Wilmington, DE 19801
SECTION 5.3 INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as
Institutional Trustee for so long as this Declaration is required to qualify as
an indenture under the Trust Indenture Act, which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State thereof or of the District of
Columbia, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $750,000,000, and
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 the supervising
or examining authority referred to above, then for the purposes of this
Section 5.3(a)(ii), 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.
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(b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 5.3(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 5.6(c).
(c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of ss. 310(b) of the Trust Indenture Act.
(d) The Guarantee and the Indenture shall be deemed to be specifically
described in this Declaration and the Indenture for purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Institutional Trustee shall be:
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
SECTION 5.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE
GENERALLY.
Each Regular Trustee and the Delaware Trustee (unless the Institutional
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 REGULAR TRUSTEES.
The initial Regular Trustees shall be:
Barton P. Pachino
Dennis Welsch
(a) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.
(b) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.6; and
(c) a Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purposes of signing any documents that the Regular Trustees have power
and authority to cause the Trust to execute pursuant to Section 3.6.
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SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the Holders of
a Majority in liquidation amount of the Common Securities voting as a
class at a meeting of the Holders of the Common Securities.
(b) (i) The Trustee that acts as Institutional Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Institutional
Trustee possessing the qualifications to act as Institutional Trustee
under Section 5.3 (a "Successor Institutional Trustee") has been appointed
and has accepted such appointment by written instrument executed by such
Successor Institutional Trustee and delivered to the Regular Trustees and
the Sponsor; and
(ii) The Trustee that acts as Delaware Trustee shall not be removed
in accordance with Section 5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until such Trustee's
successor shall have been appointed or until such Trustee's death, bankruptcy,
dissolution, termination, removal or resignation. Any Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Institutional Trustee and delivered to the Trust, the
Sponsor and the resigning Institutional Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of
the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use all reasonable efforts
to promptly appoint a Successor Delaware Trustee or Successor Institutional
Trustee, as the case may be, if the Institutional Trustee or the Delaware
Trustee delivers an instrument of resignation in accordance with this Section
5.6.
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(e) If no Successor Institutional Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument
of resignation, the resigning Institutional Trustee or Delaware Trustee, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Institutional Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Institutional Trustee or Successor Delaware
Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two Regular Trustees, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul, dissolve or terminate the Trust or terminate this
Declaration. Whenever a vacancy among the Regular Trustees shall occur, until
such vacancy is filled by the appointment of a Regular Trustee in accordance
with Section 5.6, the Regular Trustees in office, regardless of their number,
shall have all the powers granted to the Regular Trustees and shall discharge
all the duties imposed upon the Regular Trustees by this Declaration.
SECTION 5.9 MEETINGS.
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of a Regular Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at (i) a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or (ii) without a meeting by the
unanimous written consent of the Regular Trustees. In the event there is only
one Regular Trustee, any and all action of such Regular Trustee shall be
evidenced by a written consent of such Regular Trustee.
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SECTION 5.10 DELEGATION OF POWER.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6; and
(b) the Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Regular Trustees or otherwise as the Regular Trustees may deem expedient,
to the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
SECTION 5.11 MERGER, CONVERSION. CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Institutional Trustee or
the Delaware Trustee, as the case may be, shall be the successor of the
Institutional Trustee or the Delaware Trustee, as the case may be, 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.
ARTICLE VI
THE SECURITIES
SECTION 6.1 DESIGNATION AND NUMBER.
(a) Capital Securities, with an aggregate liquidation amount with respect
to the assets of the Trust of $189,750,000 and a liquidation amount with respect
to the assets of the Trust of $10 per Capital Security will be issued by the
Trust. The Capital Security Certificates evidencing the Capital Securities shall
be substantially in the form of Exhibit A-1 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be required by
applicable law or the rules of any stock exchange on which the Capital
Securities are listed or to conform to ordinary usage, custom or practice.
(b) Common Securities with an aggregate liquidation amount with respect to
the assets of the Trust of $5,868,560 and a liquidation amount with respect to
the assets of the Trust of $10 per common security will be issued by the Trust.
The Common Security Certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by applicable
law or to conform to ordinary usage, custom or practice.
SECTION 6.2 DISTRIBUTIONS.
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(a) Distributions payable on each Security will be fixed initially at a
rate per annum of 8% (the "Coupon Rate") of the stated liquidation amount of $10
per Security through and including August 15, 2001, and at the Reset Rate
thereafter, such rates being the rates of interest payable on the Debentures to
be held by the Institutional Trustee. Distributions in arrears for more than one
quarter will accumulate and compound quarterly at the rate per annum of 8%
through and including August 15, 2001, and at the Reset Rate thereafter (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes such cash distributions and any such accumulated distribution that are
payable unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Institutional
Trustee and to the extent the Institutional Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year
consisting of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
in such 90-day period.
(b) Distributions on the Securities will be cumulative, will accrue from
July 7, 1998, and will be payable quarterly in arrears on February 16, May 16,
August 16 and November 16 of each year, commencing on August 16, 1998, except as
otherwise described below. The Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
from time to time on the Debentures for a period not extending, in the
aggregate, beyond the maturity date of the Debentures (each an "Extension
Period"); provided that an Extension Period must end on one of the quarterly
Distribution payment dates referred to above. During such Extension Period no
interest shall be due and payable on the Debentures. As a consequence of such
deferral, Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accumulate at the rate per annum of 8% through
and including August 15, 2001, and at the Reset Rate thereafter, compounded
quarterly during any such Extension Period (to the extent permitted by
applicable law). Payments of accrued Distributions will be payable to Holders as
they appear on the books and records of the Trust at the close of business on
the record date next preceding the quarterly Distribution payment date on which
the relevant Extension Period ends. Upon the termination of any Extension Period
and the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed beyond the maturity date
of the Debentures or end other than on such a quarterly Distribution payment
date.
(c) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Trust at the close of business on
the Business Day immediately preceding each of the relevant payment dates on the
Securities. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment in respect of the Capital Securities will be
made as described under the heading "Description of the Capital Securities --
Book-Entry Only Issuance -The Depository Trust Company" in the Prospectus dated
June 30, 1998 (the "Prospectus") of the Sponsor and the Trust relating to the
Registration Statement on Form S-3 (file nos. 333-51825 and 333-51825-01) of the
Sponsor and the Trust. The relevant record dates for the Common Securities shall
be the same record date as for the Capital Securities. If the Capital Securities
shall not continue to remain in book-entry only form or are not in book-entry
only form at issuance, the relevant record dates for the Capital Securities,
shall conform to the rules of any securities exchange on which the securities
are listed and, if none, shall be one Business Day before the relevant payment
dates, which payment dates correspond to the interest payment dates on the
Debentures. Distributions payable on any Securities that are not punctually paid
on any Distribution payment date, as a result of the Debenture Issuer having
failed to make a payment under the Debentures, will cease to be payable to the
Person in whose name such Securities are registered on the
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relevant record date, and such defaulted Distribution will instead be payable to
the Person in whose name such Securities are registered at the close of business
on the special record date or other specified date determined in accordance with
the Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distribution payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. So long as the Holder of any Capital Securities
is the Collateral Agent, the payment of Distributions on such Capital Securities
held by the Collateral Agent will be made at such place and to such account as
may be designated by the Collateral Agent.
(d) The Coupon Rate on the Securities (as well as the interest rate on the
Debentures) will be reset on the third Business Day immediately preceding the
Purchase Contract Settlement Date to the Reset Rate (which Reset Rate will be in
effect on and after the Purchase Contract Settlement Date). On the Reset
Announcement Date, the Reset Spread and the Two-Year Benchmark Treasury to be
used to determine the Reset Rate will be announced by the Sponsor. On the
Business Day immediately following the Reset Announcement Date, the Holders of
Securities will be notified of such Reset Spread and Two-Year Benchmark Treasury
by the Sponsor. Such notice shall be sufficiently given to Holders of Securities
if published in an Authorized Newspaper.
(e) Not later than seven calendar days nor more than 15 calendar days
prior to the Reset Announcement Date, the Sponsor will request DTC or its
nominee (or any successor Clearing Agency or its nominee) to notify the Capital
Security Beneficial Owners and Clearing Agency Participants holding Capital
Securities, Income PRIDES or Growth PRIDES, of such Reset Announcement Date and
the procedures to be followed by such Holders of Income PRIDES who intend to
settle their obligation under the Purchase Contract with separate cash.
(f) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined in Section 6.10 of this Agreement) among the
Holders of the Securities.
SECTION 6.3 LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any voluntary or involuntary dissolution of the Trust
(unless a Tax Event Redemption has occurred), the Holders of the Securities on
the date of the dissolution will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, Debentures in an
aggregate principal amount equal to the aggregate stated liquidation amount of
such Securities, with an interest rate equal to the rate of 8%, if on or prior
to August 15, 2001, and the Reset Rate thereafter, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
such Securities and which shall be distributed on a Pro Rata basis to the
Holders of the Securities in exchange for such Securities (such amount being a
"Liquidation Distribution").
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, except as otherwise provided in
Section 6.11 hereof, the amounts payable directly by the Trust on the Securities
shall be paid on a Pro Rata basis.
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SECTION 6.4 REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Debentures in whole (but not in part) at
maturity, the proceeds from such repayment shall, after satisfaction of
liabilities to creditors, be simultaneously applied to redeem Securities (on a
Pro Rata basis) having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so redeemed at a redemption price of $10 per
Security plus an amount equal to accrued and unpaid Distributions thereon at the
date of the repayment, payable in cash.
(b) If an Investment Company Event shall occur and be continuing the
Regular Trustees shall dissolve the Trust and, after satisfaction of liabilities
to creditors, cause Debentures held by the Institutional Trustee, having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate the rate of 8%, if on or prior to August 15, 2001, and the
Reset Rate thereafter, and accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record date for payment as, the
Securities, to be distributed to the Holders of the Securities in liquidation of
such Holders' interests in the Trust on a Pro Rata basis, within 90 days
following the occurrence of such Investment Company Event (the "90 Day Period");
provided, however, that, if at the time there is available to the Trust the
opportunity to eliminate, within the 90 Day Period, the Investment Company Event
by taking some Ministerial Action, the Regular Trustees will pursue such
Ministerial Action in lieu of dissolution.
(c) If a Tax Event shall occur and be continuing, the Debentures are, at
the option of the Debenture Issuer, redeemable pursuant to a Tax Event
Redemption. If the Debenture Issuer redeems the Debentures upon the occurrence
and continuance of a Tax Event, the proceeds from such redemption shall
simultaneously be applied by the Institutional Trustee to redeem the Securities
(on a Pro Rata basis) having an aggregate stated liquidation amount equal to the
aggregate principal amount of the Debentures so redeemed at the Redemption
Price. If, following the occurrence of a Tax Event, the Debenture Issuer
exercises its option to redeem the Debentures prior to August 15, 2001, the
Debenture Issuer shall appoint the Quotation Agent to assemble the Treasury
Portfolio in consultation with the Company. The Institutional Trustee will
distribute, to the record Holder of the Securities the Redemption Price payable
in liquidation of such Holder's interests in the Trust.
On and from the date fixed by the Regular Trustees for a Tax Event
Redemption or any distribution of Debentures upon dissolution of the Trust: (i)
the Securities will no longer be deemed to be outstanding and (ii) DTC or its
nominee (or any successor Clearing Agency or its nominee) or the record Holder
of the Capital Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such distribution
and any certificates representing Securities, except for certificates
representing Capital Securities held by DTC or its nominee (or any successor
Clearing Agency or its nominee), will be deemed to represent beneficial
interests in the Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of $189,750,000, with an interest rate of 8%
if on or prior to August 15, 2001, and at the Reset Rate thereafter, and accrued
and unpaid interest equal to accrued and unpaid Distributions on, such
Securities until such certificates are presented to the Debenture Issuer or its
agent for transfer or reissue.
SECTION 6.5 REDEMPTION OR DISTRIBUTION PROCEDURES.
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(a) Notice of any redemption (other than in connection with the maturity
of the Debentures) of, or notice of distribution of Debentures in exchange for,
the Securities (a "Redemption/Distribution Notice") will be given by the Trust
by mail to each Holder of Securities to be redeemed or exchanged not fewer than
30 nor more than 60 days before the date fixed for redemption or exchange
thereof which, in the case of a redemption, will be the Tax Event Redemption
Date. For purposes of the calculation of the date of redemption or exchange and
the dates on which notices are given pursuant to this Section 6.5(a), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Securities. Each Redemption/Distribution Notice shall be addressed to the
Holders of Securities at the address of each such Holder appearing in the books
and records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(b) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 6.5(a) (such notice will be
irrevocable), then (A) while the Capital Securities are in book-entry only form,
with respect to the Capital Securities, by 12:00 noon, New York City time, on
the redemption date, provided that the Debenture Issuer has paid the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Institutional Trustee will deposit
irrevocably with DTC or its nominee (or any successor Clearing Agency or its
nominee), the Purchase Contract Agent or the Collateral Agent, as applicable,
funds sufficient to pay the applicable Redemption Price with respect to the
Capital Securities and will give DTC irrevocable instructions and authority to
pay the Redemption Price to the Holders of the Capital Securities so called for
redemption, and (B) with respect to Capital Securities issued in definitive form
and Common Securities, provided that the Debenture Issuer has paid the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Institutional Trustee will pay the
relevant Redemption Price to the Holders of such Securities by check mailed to
the address of the relevant Holder appearing on the books and records of the
Trust. Notwithstanding the foregoing, so long as the Holder of any Capital
Securities is the Collateral Agent or the Purchase Contract Agent, the payment
of the Redemption Price in respect of such Capital Securities held by the
Collateral Agent or the Purchase Contract Agent shall be made no later than
12:00 noon, New York City time, on the Tax Event Redemption Date by check or
wire transfer in immediately available funds at such place and to such account
as may be designated by the Collateral Agent or the Purchase Contract Agent. If
a Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
date of such deposit, or on the redemption date, as applicable, distributions
will cease to accrue on the Securities so redeemed and all rights of Holders of
such Securities so called for redemption will cease, except the right of the
Holders of such Securities to receive the Redemption Price, but without interest
on such Redemption Price. Neither the Regular Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any Securities
that have been so called for redemption. If any date fixed for redemption of
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(without any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date fixed for repayment. If payment of the
Redemption Price in respect of any Securities is improperly withheld or refused
and not paid either by the Institutional Trustee or by the Sponsor as guarantor
pursuant to the Guarantee, Distributions on such Securities will continue to
accrue from the original redemption date
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to the actual date of payment, in which case the actual payment date will be
considered the date fixed for repayment for purposes of calculating the
Redemption Price.
(c) Redemption/Distribution Notices shall be sent by the Trust to (A) in
respect of the Capital Securities, DTC or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or, if
Definitive Capital Security Certificates have been issued, to the Holders
thereof, and (B) in respect of the Common Securities, to the Holder thereof.
(d) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws) the Sponsor or any of its
subsidiaries may at any time and from time to time purchase outstanding Capital
Securities by tender, in the open market or by private agreement.
SECTION 6.6 REPAYMENT AT OPTION OF HOLDERS.
(a) If a Failed Remarketing (as described in Section 5.4(b) of the
Purchase Contract Agreement and incorporated herein by reference) has occurred,
each holder of Securities who holds such Securities on the day immediately
following the Purchase Contract Settlement Date, shall have the right (the "Put
Option") on the Business Day immediately following August 16, 2001 to require
the Trust to distribute their pro rata share of the Debentures to the Exchange
Agent and to require the Exchange Agent to put such Debentures to the Debenture
Issuer on behalf of such holders on September 1, 2001, upon at least three
Business Days' prior notice (the "Put Option Exercise Date"), at a repayment
price of $10 per Security plus an amount equal to the accrued and unpaid
Distributions (including deferred distributions if any) thereon to the date of
payment (the "Put Option Repayment Price").
(b) The Exchange Agent shall obtain funds to pay the Put Option Repayment
Price of Securities being repaid under the Put Option through presentation by it
to the Debenture Issuer of Debentures in an aggregate principal amount equal to
the aggregate stated liquidation amount of such Securities for repayment on the
Put Option Exercise Date at the Put Option Repayment Price.
(c) In order for the Securities to be repaid on the Put Option Exercise
Date, the Trust must receive on or prior to 4:00 p.m. on the third Business Day
immediately preceding the Put Option Exercise Date, at the Corporate Trust
Office or the New York Office of the Institutional Trustee (who will in turn
notify the Exchange Agent), the Securities to be repaid with the form entitled
"Option to Elect Repayment" on the reverse thereof or otherwise accompanying
such Security duly completed. Any such notice received by the Trust shall be
irrevocable. All questions as to the validity, eligibility (including time of
receipt) and acceptance of the Securities for repayment shall be determined by
the Trust, whose determination shall be final and binding.
(d) Payment of the Put Option Repayment Price to Holders of Securities
shall be made at the Corporate Trust Office of the Exchange Agent, provided that
the Debenture Issuer has paid the Exchange Agent a sufficient amount of cash in
connection with the related repayment of the Debenture no later than 1:00 p.m.,
New York City time, on the Put Option Exercise Date by check or wire transfer in
immediately available funds at such place and to such account as may be
designated by such Holders. If the Exchange Agent holds immediately available
funds sufficient to pay the Put Option Repayment Price of such Securities, then,
immediately prior to the close of business on the Put Option Exercise Date, such
Securities will cease to be outstanding and Distributions thereon will cease to
accrue, whether or not Securities are delivered to the Institutional Trustee,
and all other rights of the Holder in respect of such Securities,
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including the Holder's right to require the Trust to repay such Securities,
shall terminate and lapse (other than the right to receive the Put Option
Repayment Price but without interest on such Put Option Repayment Price).
Neither the Regular Trustees nor the Trust shall be required to register or
cause to be registered the transfer of any Securities for which repayment has
been elected. If payment of the Put Option Repayment Price in respect of
Securities is (i) improperly withheld or refused and not paid either by the
Exchange Agent or by the Sponsor as guarantor pursuant to the Securities
Guarantee, or (ii) not paid by the Exchange Agent as the result of an Event of
Default with respect to the Debentures presented for repayment as described in
Section 6.6(b), Distributions on such Securities will continue to accrue from
and including the original Put Option Exercise Date to the actual date of
payment, in which case the actual payment date will be considered the Put Option
Exercise Date for purposes of calculating the Put Option Repayment Price.
(e) The Debenture Issuer will request, not later than seven nor more than
15 calendar days prior to August 16, 2001 (the date on which some or all of the
Capital Securities could be remarketed in the manner described in Section 5.4(b)
of the Purchase Contract Agreement and incorporated herein by reference) that
DTC notify the Capital Securities Beneficial Owner as well as the Income PRIDES
and Growth PRIDES holders of such remarketing and of the procedures that must be
followed if a Capital Securities Beneficial Owner wishes to exercise such
holder's rights with respect to the Put Option.
SECTION 6.7 VOTING RIGHTS - Capital Securities.
(a) Except as provided under Sections 6.7(b) and 6.9 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights.
(b) Subject to the requirements set forth in this paragraph, the Holders
of a Majority in liquidation amount of the Capital Securities, voting separately
as a class, may direct the time, method, and place of conducting any proceeding
for any remedy available to the Institutional Trustee, or the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including (i) directing the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee, or exercising any trust or
power conferred on the Debenture Trustee with respect to the Debentures, (ii)
waiving any past default and its consequences that is waivable under the
Indenture, (iii) exercising any right to rescind or annul a declaration that the
principal of all the Debentures shall be due and payable, or (iv) consenting to
any amendment, modification or termination of the Indenture or the Debentures
where such consent shall be required, provided, however, that, where a consent
or action under the Indenture would require the consent or act of the Holders of
a Super Majority, the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Capital Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Capital Securities. Other
than with respect to directing the time, method and place of conducting any
remedy available to the Institutional Trustee or the Debenture Trustee as set
forth above, the Institutional Trustee shall not take any action in accordance
with the directions of the Holders of the Capital Securities under this
paragraph unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income tax
the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under the
Declaration, the Indenture or the Debentures after a Holder of Capital
Securities has made a written request, such Holder of Capital Securities may, to
the fullest extent permitted by applicable law, institute a legal proceeding
directly against the Debenture Issuer
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to enforce the Institutional Trustee's rights under the Declaration, the
Indenture or the Debentures without first instituting a legal proceeding against
the Institutional Trustee or any other Person. Notwithstanding the foregoing, if
an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest, premium, if
any, or principal on the Debentures on the date such interest, premium, if any,
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Capital Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest or premium, if any, on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Capital Securities of such Holder on
or after the respective due date specified in the Debentures. Except as provided
in the preceding sentence, the Holders of Capital Securities shall not exercise
directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may be given at
a separate meeting of Holders of Capital Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Capital Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities. Notwithstanding that Holders of Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
SECTION 6.8 VOTING RIGHTS - COMMON SECURITIES.
(a) Except as provided under Sections 6.8(b) and (c) and Section 6.9 and
as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V hereof, to vote to appoint, remove or replace any Trustee or to
increase or decrease the number of Trustees.
(c) Subject to Section 2.6 hereof and only after any Event of Default with
respect to the Capital Securities has been cured, waived, or otherwise
eliminated and subject to the requirements of the second to last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Common
Securities, voting separately as a class, may direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under the Declaration, including (i) directing the time, method, and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture Trustee
with respect to the Debentures, (ii) waiving any past default and its
consequences that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable, provided that, where a consent
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or action under the Indenture would require the consent or act of the Holders of
a Super Majority, the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Common Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding.
Pursuant to this Section 6.8(c), the Institutional Trustee shall not revoke any
action previously authorized or approved by a vote of the Holders of the Common
Securities. Other than with respect to directing the time, method and place of
conducting any remedy available to the Institutional Trustee or the Debenture
Trustee as set forth above, the Institutional Trustee shall not take any action
in accordance with the directions of the Holders of the Common Securities under
this paragraph unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that for United States federal income tax purposes the
Trust will not be classified as other than a grantor trust on account of such
action. If the Institutional Trustee fails to enforce its rights under the
Declaration, any Holder of Common Securities may institute a legal proceeding
directly against any Person to enforce the Institutional Trustee's rights under
the Declaration, without first instituting a legal proceeding against the
Institutional Trustee or any other Person.
Any approval or direction of Holders of Common Securities may be given at
a separate meeting of Holders of Common Securities convened for such purpose, at
a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
SECTION 6.9 AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 11.1 hereof, if any
proposed amendment to the Declaration provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would materially adversely
affect the powers, preferences or special rights of the Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution of the
Trust, other than as described in Section 7.1 or Section 3.14 hereof, then the
Holders of outstanding Securities as a class will be entitled to vote on such
amendment or proposal (but not on any other amendment or proposal) and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, voting
together as a single class; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Capital
Securities or only the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a Majority in liquidation
amount of such class of Securities.
(b) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination on the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with
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respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a Majority
in liquidation amount of the Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require a
Super Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding; provided, further, that the
Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this Section 6.9(b) unless (i)
the Institutional Trustee has obtained an opinion of tax counsel to the effect
that for United States federal income tax purposes, the Trust will not be
classified as other than a grantor trust on account of such action or (ii) such
action would not reduce or otherwise adversely affect powers of the
Institutional Trustee or cause the Trust to be deemed an Investment Company
which is required to be registered under the Investment Company Act.
SECTION 6.10 REFERENCE TO PRO RATA.
A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Indenture has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the Capital
Securities pro rata according to the aggregate liquidation amount of Capital
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Capital Securities outstanding, and only after satisfaction of all
amounts owed to the Holders of the Capital Securities, to each Holder of Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Common Securities outstanding.
SECTION 6.11 RANKING.
The Capital Securities rank pari passu and payment thereon shall be made
Pro Rata with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Debentures held
by the Institutional Trustee, the rights of Holders of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights to payment of the Holders of the
Capital Securities.
SECTION 6.12 ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
Each Holder of Capital Securities and Common Securities by the acceptance
thereof, agrees to the provisions of the Indenture and the Guarantee,
respectively.
SECTION 6.13 NO PREEMPTIVE RIGHTS.
The Holders of the Securities shall have no preemptive rights to subscribe
for any additional securities.
SECTION 6.14 MISCELLANEOUS.
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(a) The Sponsor will provide a copy of the Declaration, the
Guarantee and the Indenture to a Holder without charge on written request to the
Sponsor at its principal place of business.
(b) The Trust shall issue no securities or other interests in the
assets of the Trust other than the Capital Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by a
Regular Trustee. Such signature shall be the manual or facsimile signature of
any present or any future Regular Trustee. In case any Regular Trustee who shall
have signed any of the Securities shall cease to be such Regular Trustee before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Regular Trustee; and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Certificate, shall be the Regular Trustees of the Trust, although at the date of
the execution and delivery of the Declaration any such person was not such a
Regular Trustee. Certificates shall be printed, lithographed or engraved or may
be produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof, and may have such letters,
numbers or other marks of identification or designation and such legends or
endorsements as the Regular Trustees may deem appropriate, or as may be required
to comply with any law or with any rule or regulation of any stock exchange on
which Securities may be listed, or to conform to usage.
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
Every Person, by virtue of having become a Holder or a Capital Security
Beneficial Owner in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be bound
by, this Declaration.
SECTION 6.15 PAYING AGENT.
The Trust shall maintain in the Borough of Manhattan, City of New York,
State of New York, an office or agency (the "New York Office") where the Capital
Securities may be presented for payment ("Paying Agent") and where Capital
Securities may be surrendered for registration of transfer and exchange, and any
such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act.
The Trust may appoint the Paying Agent and may appoint one or more additional
paying agents in such other locations as it shall determine. The term "Paying
Agent" includes any additional paying agent. The Trust may change any Paying
Agent without prior notice to any Holder. The Trust shall notify the
Institutional Trustee of the name and address of any Paying Agent not a party to
this Declaration. If the Trust fails to appoint or maintain another entity as
Paying Agent, the Institutional Trustee shall act as such. The Trust or any of
its Affiliates (including the Sponsor) may act as Paying Agent. The First
National Bank of Chicago shall initially act as Paying Agent for the Capital
Securities and the Common Securities.
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ARTICLE XIII
TERMINATION OF TRUST
SECTION 7.1 TERMINATION OF TRUST.
(a) The Trust shall dissolve:
(i) upon a Termination Event;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor; or the revocation of the Sponsor's
charter and the expiration of 90 days after the date of revocation without
a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor or the Trust;
(iv) upon the occurrence and continuation of an Investment Company
Event pursuant to which the Trust shall have been dissolved in accordance
with the terms of the Securities and all of the Debentures shall have been
distributed to the Holders of Securities in exchange for all of the
Securities;
(v) when all the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to
the Holders in accordance with the terms of the Securities; or
(vi) with the consent of all of the Regular Trustees and the
Sponsor.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 7.1(a) or a dissolution pursuant to Section 3.14 and upon completion
of the winding-up of the Trust, the Trustees shall file a certificate of
cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Section 4.4 and Article IX shall survive the
termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
SECTION 8.1 TRANSFER OF SECURITIES.
(a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms of
the Securities. Any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void.
(b) Subject to this Article VIII, Capital Securities shall be freely
transferable.
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(c) Subject to this Article VIII, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor; provided that any such transfer is subject to the condition precedent
that the transferor obtain the written opinion of nationally recognized
independent counsel experienced in such matters that such transfer would not
cause more than an insubstantial risk that:
(i) the Trust would be classified for United States federal income
tax purposes as other than a grantor trust; and
(ii) the Trust would be an Investment Company or the transferee
would be an Investment Company.
SECTION 8.2 TRANSFER OF CERTIFICATES.
The Regular Trustees shall provide for the registration of Certificates
and of transfers and exchanges of Certificates, which will be effected without
charge but only upon payment in respect of any tax or other government charges
that may be imposed in relation to it. Upon surrender for registration of
transfer or exchange of any Certificate, the Regular Trustees shall cause one or
more new Certificates to be issued in the name of the designated transferee or
transferees or, in the case of an exchange, the Holder. Every Certificate
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Certificate surrendered for registration of transfer or exchange shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a Certificate. By acceptance of a Certificate,
each transferee shall be deemed to have agreed to be bound by this Declaration.
SECTION 8.3 DEEMED SECURITY HOLDERS.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 8.4 BOOK ENTRY INTERESTS.
17,975,000 of the Capital Securities Certificates, on original issuance,
will be issued in the form of one or more definitive, fully registered Capital
Securities Certificates (each a "Definitive Capital Securities Certificate")
issued in the name of The First National Bank of Chicago, as Purchase Contract
Agent (the "Purchase Contract Agent"); 1,000,000 Capital Securities
Certificates, on original issuance, will be issued in the form of one or more
fully registered, global Capital Security Certificates (each a "Global
Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on
behalf of, the Trust. Such Global Certificate(s) shall initially be registered
on the books and records of the Trust in the name of Cede & Co., the nominee of
DTC, and no Capital Security Beneficial Owner will receive a definitive Capital
Security Certificate representing such Capital Security Beneficial Owner's
interests in such Global Certificate(s), except as provided in Section 8.7
except as provided in the next sentence. However,
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notwithstanding anything to the contrary contained in this Declaration, the
Capital Securities Certificates which are a component of the FELINE PRIDES shall
be issued in definitive registered form in the name of the Purchase Contract
Agent under the Purchase Contract Agreement (and such Capital Securities shall
thereupon, so long as so registered, be deemed Definitive Capital Securities
Certificates) and, in the event that any Capital Security which is evidenced by
a Global Certificate is to be combined with a Growth PRIDES to create or
re-create an Income PRIDES, then such Capital Security shall be issued in
definitive registered form in the name of the Purchase Contract Agent as
aforesaid and there shall be a corresponding reduction in the number of Capital
Securities represented by the Global Certificate (either by endorsement on a
schedule to the Global Certificate or by reissuance thereof). Except for the
Definitive Capital Security Certificates as specified herein and the definitive,
fully registered Capital Securities Certificates that have been issued to the
Capital Security Beneficial Owners pursuant to Section 8.7:
(a) the provisions of this Section 8.4 shall be in full force and effect;
(b) the Trust and the Trustees shall be entitled to deal with the Clearing
Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificate(s) and receiving approvals, votes or
consents hereunder) as the Holder of the Capital Securities and the sole holder
of the Global Certificate(s) and shall have no obligation to the Capital
Security Beneficial Owners;
(c) to the extent that the provisions of this Section 8.4 conflict with
any other provisions of this Declaration, the provisions of this Section 8.4
shall control; and
(d) the rights of the Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Capital Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants to
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants. DTC will make book entry transfers among the
Clearing Agency Participants; provided, that, solely for the purposes of
determining whether the Holders of the requisite amount of Capital Securities
evidenced by a Global Certificate have voted on any matter provided for in this
Declaration, the Trustees may conclusively rely on, and shall be protected in
relying on, any written instrument (including a proxy) delivered to the Trustees
by the Clearing Agency setting forth the Capital Security Beneficial Owners'
votes or assigning the right to vote on any matter to any other Persons either
in whole or in part.
SECTION 8.5 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Capital Security Holders
is required under this Declaration, unless and until definitive fully registered
Capital Security Certificates shall have been issued to the Capital Security
Beneficial Owners pursuant to Section 8.7 or otherwise, the Regular Trustees
shall give all such notices and communications specified herein to be given to
the Capital Security Holders to the Clearing Agency, and shall have no notice
obligations to the Capital Security Beneficial Owners.
SECTION 8.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Capital Securities, the Regular Trustees may, in
their sole discretion, appoint a successor Clearing Agency with respect to such
Capital Securities.
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SECTION 8.7 DEFINITIVE CAPITAL SECURITY CERTIFICATES.
In addition to the Definitive Capital Security Certificates being issued
pursuant to Section 8.4, in the event that:
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Capital Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 8.6; or
(b) the Regular Trustees elect after consultation with the Sponsor to
terminate the book entry system through the Clearing Agency with respect to the
Capital Securities, then:
(i) definitive fully registered Capital Security Certificates shall
be prepared by the Regular Trustees on behalf of the Trust with respect to
such Capital Securities; and
(ii) upon surrender of the Global Certificate(s) by the Clearing
Agency, accompanied by registration instructions, the Regular Trustees
shall cause definitive fully registered Capital Securities Certificates to
be delivered to Capital Security Beneficial Owners in accordance with the
instructions of the Clearing Agency. Neither the Trustees nor the Trust
shall be liable for any delay in delivery of such instructions and each of
them may conclusively rely on and shall be protected in relying on, said
instructions of the Clearing Agency. The definitive fully registered
Capital Security Certificates shall be printed, lithographed or engraved
or may be produced in any other manner as is reasonably acceptable to the
Regular Trustees, as evidenced by their execution thereof, and may have
such letters, numbers or other marks of identification or designation and
such legends or endorsements as the Regular Trustees may deem appropriate,
or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which Capital Securities may be listed, or to conform to
usage. Notwithstanding the foregoing, if and to the extent that any of the
Capital Securities evidenced by the Capital Security Certificates referred
to in this paragraph are still pledged pursuant to the Pledge Agreement,
such Certificates shall be delivered to the Collateral Agent to be held by
the Collateral Agent as collateral pledged pursuant to the Pledge
Agreement.
SECTION 8.8 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If:
(a) any mutilated Certificate should be surrendered to the Regular
Trustees or the Institutional Trustee, or if the Regular Trustees or the
Institutional Trustee shall receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees and Institutional
Trustee such security or indemnity as may be required by them to keep each of
them and the Trust harmless,
then, in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like denomination. In connection
with the issuance of any new Certificate under this Section 8.8, the Regular
Trustees may require the payment
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of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Certificate issued pursuant to
this Section shall constitute conclusive evidence of an ownership interest in
the relevant Securities, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
ARTICLE XVII
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 9.1 LIABILITY.
(a) Except as expressly set forth in this Declaration, the Debentures, the
Guarantee and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Securities,
which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of Securities any
deficit upon dissolution of the Trust or otherwise.
(b) Under Section 5.1 of the First Supplemental Indenture, the Debenture
Issuer, in its capacity as Borrower, shall be liable for all of the debts and
obligations of the Trust (other than with respect to the Securities) to the
extent not satisfied out of the Trust's assets.
(c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of the
Capital Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 9.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence, bad faith or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
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SECTION 9.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Institutional Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace, to the extent permitted by law, such
other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any
Covered Person or any Indemnified Person; or
(ii) whenever this Declaration or any other agreement contemplated
herein or therein provides that an Indemnified Person shall act in a
manner that is, or provides terms that are, fair and reasonable to the
Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no duty
or obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 9.4 INDEMNIFICATION.
(a)
(i) Under Section 5.1 of the First Supplemental Indenture, the
Debenture Issuer, in its capacity as borrower, shall be required to
indemnify, to the full extent permitted by law, any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative
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or investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Person of the type described in the
definition of Company Indemnified Person contained herein against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with such action, suit or proceeding, judgments, fines and
amounts paid in settlement if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Company Indemnified Person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) Under Section 5.1 of the First Supplemental Indenture, the
Debenture Issuer, in its capacity as borrower, shall be required to
indemnify, to the full extent permitted by law, any Person of the type
described in the definition of Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit, judgments, fines and amounts paid in
settlement if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust and
except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person shall have
been adjudged to be liable to the Trust unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem
proper.
(iii) Any indemnification under paragraphs (i) and (ii) of this
Section 9.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Regular Trustees by a majority vote of a Quorum consisting of such
Regular Trustees who were not parties to such action, suit or proceeding,
(2) if such a Quorum is not obtainable, or, even if obtainable, if a
Quorum of disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion, or (3) by the Common Security Holders of the
Trust.
(iv) Expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 9.4(a) shall be paid by the Debenture Issuer in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified
Person to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Debenture Issuer as
authorized in this Section 9.4(a). Notwithstanding the foregoing, no
advance shall be made by the Debenture Issuer if a determination is
reasonably and promptly made (i) by the Regular Trustees by a majority
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vote of a quorum of disinterested Regular Trustees, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a Quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written
opinion or (iii) by the Common Security Holders of the Trust, that, based
upon the facts known to the Regular Trustees, independent legal counsel or
Common Security Holder at the time such determination is made, such person
acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the Trust, or, with respect to
any criminal proceeding, that such Company Indemnified Person believed or
had reasonable cause to believe his conduct was unlawful. In no event
shall any advance be made in instances where the Regular Trustees,
independent legal counsel or Common Security Holders reasonably determine
that such person deliberately breached such person's duty to the Trust or
the Common or Capital Security Holders.
(v) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of shareholders or disinterested directors of the Sponsor
or Capital Security Holders of the Trust or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office. All rights to indemnification under this Section
9.4(a) shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such capacity at
any time while this Section 9.4(a) is in effect. Any repeal or
modification of this Section 9.4(a) shall not affect any rights or
obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not
the Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 9.4(a).
(vii) For purposes of this Section 9.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed
in a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 9.4(a) with respect to the
resulting or surviving entity as such person would have with respect to
such constituent entity if its separate existence had continued.
(viii) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 9.4(a) shall continue as to a person
who has ceased to be a Company Indemnified Person and shall inure to the
benefit of the successors, heirs, executors and administrators of such a
person.
(b) The Debenture Issuer shall indemnify the (i) Institutional Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee or
the Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Institutional Trustee or the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as
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a "Fiduciary Indemnified Person") from, and shall hold each Fiduciary
Indemnified Person harmless against, any loss, liability or expense incurred
without gross negligence and, in the case of the Institutional Trustee, pursuant
to Section 3.9, negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The provisions of this Section 9.4(b) shall survive the satisfaction
and discharge of this Declaration or the resignation or removal of the
Institutional Trustee or the Delaware Trustee, as the case may be.
SECTION 9.5 OUTSIDE BUSINESSES.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee or the Institutional Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Sponsor, the Delaware Trustee and the Institutional
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Covered Person, the Delaware Trustee and the
Institutional Trustee may engage or be interested in any financial or other
transaction with the Sponsor or any Affiliate of the Sponsor, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE X
ACCOUNTING
SECTION 10.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year,
or such other year as is required by the Code.
SECTION 10.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Trust shall keep,
or cause to be kept, full books of account, records and supporting documents,
which shall reflect in reasonable detail, each transaction of the Trust. The
books of account shall be maintained on the accrual method of accounting, in
accordance with generally accepted accounting principles, consistently applied.
The books of account and the records of the Trust shall be examined by and
reported upon as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the Regular Trustees.
(b) The Trust shall cause to be duly prepared and delivered to each of the
Holders of Securities, any annual United States federal income tax information
statement required by the Code, containing such
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information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Trust shall endeavor to
deliver all such statements within 30 days after the end of each Fiscal Year of
the Trust.
(c) The Trust shall cause to be duly prepared and filed with the
appropriate taxing authority an annual United States federal income tax return,
on a Form 1041 or such other form or statement as may be required under United
States federal income tax law, and any other annual income tax returns required
to be filed by the Trust on behalf of the Trust with any state or local taxing
authority. A copy of such returns as filed will be delivered to the
Institutional Trustee promptly after filing.
SECTION 10.3 BANKING.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided however, that all payments of funds in
respect of the Debentures held by the Institutional Trustee shall be made
directly to the Institutional Trustee Account and no other funds of the Trust
shall be deposited in the Institutional Trustee Account. The sole signatories
for such accounts shall be designated by the Regular Trustees; provided,
however, that the Institutional Trustee shall designate the signatories for the
Institutional Trustee Account.
SECTION 10.4 WITHHOLDING.
The Trust shall comply with all withholding requirements under United
States federal, state and local law. The Trust shall request, and the Holders
shall provide to the Trust, such forms or certificates as are necessary to
establish an exemption from withholding with respect to each Holder, and any
representations and forms as shall reasonably be requested by the Trust to
assist it in determining the extent of, and in fulfilling, its withholding
obligations. The Trust shall file required forms with applicable jurisdictions
and, unless an exemption from withholding is properly established by a Holder,
shall remit amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Trust is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, the amount withheld shall be deemed to be a distribution in the amount
of the withholding to the Holder. In the event of any claimed over withholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Trust may reduce subsequent Distributions by the amount of such
withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by the Regular Trustees (or, if there are more
than two Regular Trustees, a majority of the Regular Trustees); and
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(i) if the amendment affects the rights, powers, duties,
obligations or immunities of the Institutional Trustee, also by the
Institutional Trustee; and
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, also by the Delaware
Trustee;
(b) no amendment shall be made:
(i) unless, in the case of any proposed amendment, the
Institutional Trustee shall have first received an Officer's Certificate
from each of the Trust and the Sponsor that such amendment is permitted
by, and conforms to, the terms of this Declaration (including the terms of
the Securities);
(ii) unless, in the case of any proposed amendment which affects the
rights, powers, duties, obligations or immunities of the Institutional
Trustee, the Institutional Trustee shall have first received:
(A) an Officer's Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities);
and
(B) an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the
Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of the
Institutional Trustee in contravention of the Trust Indenture Act;
or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(c) at such time after the Trust has issued any Securities that remain
outstanding, any amendment that would materially and adversely affect the
rights, privileges or preferences of any Holder of Securities may be effected
only with such additional requirements as may be set forth in the terms of such
Securities;
(d) This Section 11.1 shall not be amended without the consent of all of
the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities;
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(f) the rights of the Holders of the Common Securities under Article V to
increase or decrease the number of, and appoint and remove Trustees shall not be
amended without the consent of the Holders of a Majority in liquidation amount
of the Common Securities; and
(g) notwithstanding Section 11.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor;
(iv) to conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the right, preferences or privileges of the
Holders;
(v) to modify, eliminate and add to any provision of the Declaration
to such extent as may be necessary and which does not adversely affect the
interests of the Holders of Capital Securities; and
(vi) cause the Trust to continue to be classified for United States
federal income tax purposes as a grantor trust.
SECTION 11.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Regular Trustees (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of such class of Securities
are entitled to act under the terms of this Declaration, the terms of the
Securities or the rules of any stock exchange on which the Capital Securities
are listed or admitted for trading. The Regular Trustees shall call a meeting of
the Holders of such class if directed to do so by the Holders of at least 10% in
liquidation amount of such class of Securities. Such direction shall be given by
delivering to the Regular Trustees one or more calls in a writing stating that
the signing Holders of Securities wish to call a meeting and indicating the
general or specific purpose for which the meeting is to be called. Any Holders
of Securities calling a meeting shall specify in writing the Security
Certificates held by the Holders of Securities exercising the right to call a
meeting and only those Securities specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the Holders of
Securities having a right to vote thereat at least 7 days and not more
than 60 days before the date of such meeting.
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Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration, the terms of the Securities
or the rules of any stock exchange on which the Capital Securities are
listed or admitted for trading, such vote, consent or approval may be
given at a meeting of the Holders of Securities. Any action that may be
taken at a meeting of the Holders of Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is
signed by the Holders of Securities owning not less than the minimum
amount of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of
Securities having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot submitted to the
Security Holder for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified by the Regular
Trustees;
(ii) each Holder of a Security may authorize any Person to act for
it by proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration
of 11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation
and the Holders of the Securities were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
<iv) unless the Business Trust Act, this Declaration, the terms of
the Securities, the Trust Indenture Act or the listing rules of any stock
exchange on which the Capital Securities are then listed or trading
otherwise provides, the Regular Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders of
Securities, including notice of the time, place or purpose of any meeting
at which any matter is to be voted on by any Holders of Securities, waiver
of any such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy or any
other matter with respect to the exercise of any such right to vote.
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE.
The Trustee that acts as initial Institutional Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Institutional Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Institutional Trustee's acceptance of
its appointment as Institutional Trustee, that:
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(a) the Institutional Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing under the laws of
the United States of America, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration;
(b) the Institutional Trustee satisfies the requirements set forth in
Section 5.3(a);
(c) the execution, delivery and performance by the Institutional Trustee
of the Declaration has been duly authorized by all necessary corporate action on
the part of the Institutional Trustee. The Declaration has been duly executed
and delivered by the Institutional Trustee, and it constitutes a legal, valid
and binding obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(d) the execution, delivery and performance of the Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
Articles of Organization or By-laws of the Institutional Trustee; and
(e) no consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee, of the Declaration.
SECTION 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Trustee that acts as initial Delaware Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
(a) The Delaware Trustee is a Delaware corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with power and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, the Declaration;
(b) the execution, delivery and performance by the Delaware Trustee of the
Declaration has been duly authorized by all necessary corporate action on the
part of the Delaware Trustee. The Declaration has been duly executed and
delivered by the Delaware Trustee, and it constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);
(c) No consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of the Declaration; and
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(d) the execution, delivery and performance of the Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the Articles
of Organization or By-laws of the Delaware Trustee; and
(e) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 NOTICES.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
KBHC Financing I
c/o Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, CA 90024
Attn: Chief Financial Officer
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
First Chicago Delaware Inc.
300 King Street
Wilmington, DE 19801
Attention: Michael J. Majchrzak
(c) if given to the Institutional Trustee, at its Corporate Trust Office
to the attention of Corporate Trust Administration (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
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Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, CA 90024
Attn: Chief Financial Officer
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 13.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
SECTION 13.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be classified for
United States federal income tax purposes as a grantor trust. The provisions of
this Declaration shall be interpreted to further this intention of the parties.
SECTION 13.4 HEADINGS.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 13.5 SUCCESSORS AND ASSIGNS.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 13.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
SECTION 13.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the Trustees to one of such counterpart
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signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
SECTION 13.8 REMARKETING
(a) The Debenture Issuer will request, not later than 7 nor more
than 15 calendar days prior to the Remarketing Date that the Clearing Agency
notify the Holders of Capital Securities and the Holders of Income PRIDES and
Growth PRIDES of the Remarketing and of the procedures that must be followed if
a Holder of Capital Securities wishes to exercise such Holder's rights with
respect to the Put Option if there is a Failed Remarketing.
(b) Not later than 5:00 P.M., New York City time, on the fifth
Business Day immediately preceding the Purchase Contract Settlement Date, each
Holder of the Capital Securities may elect to have Capital Securities held by
such Holder remarketed. Under Section 5.4 of the Purchase Contract Agreement,
Holders of Income PRIDES that do not give notice of intention to make a Cash
Settlement (as defined in the Purchase Contract Agreement) of their related
Purchase Contracts (as defined in the Purchase Contract Agreement) shall be
deemed to have consented to the disposition of the Capital Securities comprising
a component of such Income PRIDES. Holders of Capital Securities that are not a
component of Income PRIDES shall give notice of their election to have such
Capital Securities remarketed to the Custodial Agent pursuant to the Pledge
Agreement. Any such notice shall be irrevocable after 5:00 P.M., New York City
time on the fifth Business Day immediately preceding the Purchase Contract
Settlement Date and may not be conditioned upon the level at which the Reset
Rate is established. Promptly after 5:30 P.M., New York City time, on such fifth
Business Day, the Institutional Trustee, based on the notices received by it
prior to such time (including notices from the Purchase Contract Agent as to
Purchase Contracts for which cash settlement has been elected), shall notify the
Trust, the Sponsor and the Remarketing Agent of the number of Capital Securities
to be tendered for remarketing.
(c) If any Holder of Income PRIDES does not give a notice of its
intention to make a Cash Settlement or gives a notice of election to tender
Capital Securities as described in Section 13.8(b), the Capital Securities of
such Holder shall be deemed tendered, notwithstanding any failure by such Holder
to deliver or properly deliver such Capital Securities to the Remarketing Agent
for purchase.
(d) The right of each Holder to have Capital Securities tendered for
purchase shall be limited to the extent that (i) the Remarketing Agent conducts
a remarketing pursuant to the terms of the Remarketing Agreement, (ii) Capital
Securities tendered have not been called for redemption, (iii) the Remarketing
Agent is able to find a purchaser or purchasers for tendered Capital Securities,
at a price of not less than 100% of the stated liquidation amount thereof plus
accrued and unpaid distributions thereon, and (iv) such purchaser or purchasers
deliver the purchase price therefor to the Remarketing Agent as and when
required.
(e) On the Remarketing Date, the Remarketing Agent shall use
reasonable efforts to remarket at a price equal to approximately 100.75% of the
aggregate liquidation amount thereof, Capital Securities tendered or deemed
tendered for purchase.
(f) If none of the Holders elect to have Capital Securities held by
them remarketed, the Reset Rate shall be the rate determined by the Remarketing
Agent, subject to the terms of the Remarketing
59
<PAGE> 65
Agreement, as the rate that would have been established had a remarketing been
held on the Remarketing Date.
(g) If the Remarketing Agent has determined that it will be able to
remarket all Capital Securities tendered or deemed tendered prior to 4:00 P.M.,
New York City time, on the Remarketing Date, the Remarketing Agent shall
determine the Reset Rate, which shall be the rate per annum (rounded to the
nearest one-thousandth (0.001) of one percent per annum) which the Remarketing
Agent determines, subject to the terms of the Remarketing Agreement, to be the
lowest rate per annum that will enable it to remarket all Capital Securities
tendered or deemed tendered for remarketing.
(h) If, by 4:00 P.M., New York City time, on the Remarketing Date,
the Remarketing Agent is unable to remarket all Capital Securities tendered or
deemed tendered for purchase or if the remarketing shall not have occurred
because a condition precedent to the remarketing shall not have been fulfilled,
a failed remarketing ("Failed Remarketing") shall be deemed to have occurred and
the Remarketing Agent shall so advise by telephone the Collateral Agent,
Debenture Issuer, Institutional Trustee, Delaware Trustee and Clearing Agency.
(i) By approximately 4:30 P.M., New York City time, on the
Remarketing Date, provided that there has not been a Failed Remarketing, the
Remarketing Agent shall advise, by telephone (i) the Collateral Agent, Debenture
Issuer, Institutional Trustee, Delaware Trustee and Clearing Agency of the Reset
Rate determined in the Remarketing and the number of Capital Securities sold in
the remarketing, (ii) each purchaser (or the Clearing Agency Participant
thereof) of the Reset Rate and the number of Capital Securities such purchaser
is to purchase and (iii) each purchaser to give instructions to its Clearing
Agency Participant to pay the purchase price on the Purchase Contract Settlement
Date in same day funds against delivery of the Capital Securities purchased
through the facilities of the Clearing Agency.
(j) In accordance with the Clearing Agency's normal procedures, on
the Purchase Contract Settlement Date, the transactions described above with
respect to each Capital Security tendered for purchase and sold in the
remarketing shall be executed through the Clearing Agency, and the accounts of
the respective Clearing Agency Participants shall be debited and credited and
such Capital Securities delivered by book entry as necessary to effect purchases
and sales of such Capital Securities. The Clearing Agency shall make payment in
accordance with its normal procedures.
(k) If any Holder selling Capital Securities in the remarketing
fails to deliver such Capital Securities, the Clearing Agency Participant of
such selling Holder and of any other Person that was to have purchased Capital
Securities in the remarketing may deliver to any such other Person a number of
Capital Securities that is less than the number of Capital Securities that
otherwise was to be purchased by such person. In such event, the number of
Capital Securities to be so delivered shall be determined by such Clearing
Agency Participant, and delivery of such lesser number of Capital Securities
shall constitute good delivery.
(l) The Remarketing Agent is not obligated to purchase any Capital
Securities in a remarketing or otherwise. Neither the Trust, any Trustee, the
Sponsor nor the Remarketing Agent shall be obligated in any case to provide
funds to make payment upon tender of Capital Securities for remarketing.
60
<PAGE> 66
(m) The tender and settlement procedures set forth in this Section
13.8, including provisions for payment by purchasers of Capital Securities in
the remarketing, shall be subject to modification, notwithstanding any provision
to the contrary set forth herein to the extent required by the Clearing Agency
or if the book-entry system is no longer available for the Capital Securities at
the time of the remarketing, to facilitate the tendering and remarketing of
Capital Securities in certificated form. In addition, the Remarketing Agent may,
notwithstanding any provision to the contrary set forth in Article 11, modify
the settlement procedures set forth herein in order to facilitate the settlement
process.
(n) Anything herein to the contrary notwithstanding, the Reset Rate
shall in no event exceed the maximum rate permitted by applicable law and, as
provided in the Remarketing Agreement, neither the Remarketing Agent nor the
Reset Agent (as defined in the Remarketing Agreement) shall have any obligation
to determine whether there is any limitation under applicable law on the Reset
Rate or, if there is any such limitation, the maximum permissible Reset Rate on
the Capital Securities and they shall rely solely upon written notice from the
Sponsor and the Trust (which the Sponsor and the Trust agree to provide prior to
the 10th Business Day before the Purchase Contract Settlement Date) as to
whether or not there is any such limitation and, if so, the maximum permissible
Reset Rate.
61
<PAGE> 67
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
/s/ Barton P. Pachino
--------------------------------------------
Barton P. Pachino,
as Regular Trustee
/s/ Dennis Welsch
--------------------------------------------
Dennis Welsch,
as Regular Trustee
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee
By /s/ Steve M. Wagner
-----------------------------------------
Name: Steve M. Wagner
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
as Institutional Trustee
By Mark J. Frye
-----------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
KAUFMAN AND BROAD HOME CORPORATION,
as Sponsor
By /s/ Dennis Welsch
-----------------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
<PAGE> 68
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[IF THE CAPITAL SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This
Capital Security is a Global Certificate within the meaning of the Declaration
hereinafter referred to and is registered in the name of The Depository Trust
Company (the "Depositary") or a nominee of the Depositary. This Capital Security
is exchangeable for Capital Securities registered in the name of a person other
than the Depositary or its nominee only in the limited circumstances described
in the Declaration and no transfer of this Capital Security (other than a
transfer of this Capital Security 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) may be registered except in limited circumstances.
Unless this Capital Security is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Trust or its agent for registration of transfer, exchange or payment, and any
Capital Security issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.]
Certificate Number _________ Number of Capital Securities _________
CUSIP NO. 482398401
Certificate Evidencing Capital Securities
of
KBHC Financing I
8% Capital Securities
(liquidation amount $10 per Capital Security)
KBHC Financing I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that __________ (the "Holder")
is the registered owner of _________ Capital Securities of the Trust
representing undivided beneficial ownership interests in the assets of the Trust
designated as the 8% Capital Securities (liquidation amount $10 per Capital
Security) (the "Capital Securities"). The Capital Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Capital Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of July 7, 1998, as the same
may be amended from time to time (the "Declaration"). Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration. The
Holder is entitled to the benefits of the Guarantee to the extent provided
therein. The Sponsor will provide a copy of the Declaration, the Guarantee and
the Indenture to a Holder without charge upon written request to the Sponsor at
its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
<PAGE> 69
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Capital Securities
as evidence of indirect beneficial ownership in the Debentures.
<PAGE> 70
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of
_____, 1998.
KBHC FINANCING I
By:
-----------------------------------------
Name:
---------------------------------------
Title: Regular Trustee
<PAGE> 71
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at a rate per
annum of 8% through and including August 15, 2001, and at the Reset Rate
thereafter (the "Coupon Rate") of the stated liquidation amount of $10 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Institutional Trustee. Distributions in arrears for more than
one quarter will bear interest thereon compounded quarterly at the rate of 8%
through and including August 15, 2001, and at the Reset Rate thereafter (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed in such 90-day period.
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on February 16, May 16, August 16 and
November 16 of each year, commencing on August 16, 1998, to Holders of record
one Business Day prior to such payment date, which payment dates shall
correspond to the interest payment dates on the Debentures. If the Capital
Securities shall not continue to remain in book-entry form or are not in
book-entry only form at issuance, the relevant record dates for the Capital
Securities shall conform to the rules of any securities exchange on which the
Capital Securities are listed and, if none, shall be one Business Day before the
relevant payment dates, which payment dates shall correspond to the interest
payment dates on the Debentures. The Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
from time to time on the Debentures for a period not extending beyond the date
of maturity of the Debentures (each an "Extension Period") and, as a consequence
of such deferral, Distributions will also be deferred. Despite such deferral,
quarterly Distributions will continue to accrue with interest thereon at the
rate of 8% through and including August 15, 2001, and at the Reset Rate
thereafter, compounded quarterly during any such Extension Period (to the extent
permitted by applicable law). Payments of accrued Distributions will be payable
to Holders as they appear on the books and records of the Trust on the record
date next preceding the quarterly Distribution payment date on which the
relevant Extension Period ends. Upon the termination of any Extension Period and
the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed beyond the maturity date
of the Debentures, and no Extension Period may end other than on a quarterly
Distribution payment date.
The Capital Securities shall be redeemable as provided in the Declaration.
<PAGE> 72
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Trust to
repay $_____ stated liquidation amount of the within Capital Security, pursuant
to its terms, on the "Put Option Exercise Date," together with Distributions
thereon accrued but unpaid to the date of repayment, to the undersigned at:
________________________________________________________________
(Please print or type Name and Address of the Undersigned)
and to issue to the undersigned, pursuant to the terms of the Declaration, a new
Capital Security or Capital Securities representing the remaining stated
liquidation amount, if any, of this Capital Security.
For this Option to Elect Repayment to be effective, the within Capital Security
with this Option to Elect Repayment duly completed must be received by the Trust
at the Corporate Trust Office of the Institutional Trustee at The First National
Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670-0126,
Attention: Corporate Trust Administration, no later than 5:00 p.m. on the third
Business Day immediately preceding September 1, 2001.
Dated: Signature:
----------------------------------------------
Signature Guarantee:
------------------------------------
Note: The signature to this Option to Elect Repayment must correspond with the
name as written upon the face of the within Capital Security in every particular
without alternation or enlargement or any change whatsoever.
<PAGE> 73
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
------------------
Signature:
---------------------------------------------
Signature Guarantee:
-----------------------------------
(Sign exactly as your name appears on the other side
of this Capital Security Certificate)
<PAGE> 74
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THE COMMON SECURITIES MAY ONLY BE TRANSFERRED BY THE DEBENTURE
ISSUER AND ANY RELATED PARTY TO THE DEBENTURE ISSUER OR A RELATED PARTY OF THE
DEBENTURE ISSUER; PROVIDED THAT, ANY SUCH TRANSFER IS SUBJECT TO THE CONDITION
PRECEDENT THAT THE TRANSFEROR OBTAIN THE WRITTEN OPINION OF NATIONALLY
RECOGNIZED INDEPENDENT COUNSEL EXPERIENCED IN SUCH MATTERS THAT SUCH TRANSFER
WOULD NOT CAUSE:
(I) THE TRUST TO BE CLASSIFIED FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES AS OTHER THAN A GRANTOR TRUST; AND
(II) THE TRUST TO BE AN INVESTMENT COMPANY OR THE TRANSFEREE TO
BECOME AN INVESTMENT COMPANY.
Certificate Number ________ Number of Common Securities ________
Certificate Evidencing Common Securities
of
KBHC Financing I
8% Common Securities
(liquidation amount $10 per Common Security)
KBHC Financing I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that Kaufman and Broad Home
Corporation (the "Holder") is the registered owner of _____ Common Securities of
the Trust representing undivided beneficial ownership interests in the assets of
the Trust designated as the 8% Common Securities (liquidation amount $10 per
Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of July 7, 1998,
as the same may be amended from time to time (the "Declaration"). Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Guarantee to the
extent provided therein. The Sponsor will provide a copy of the Declaration, the
Guarantee and the Indenture to a Holder without charge upon written request to
the Sponsor at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
<PAGE> 75
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day
of _____, 1998.
KBHC FINANCING I
By:
-----------------------------------------
Name:
---------------------------------------
Title: Regular Trustee
<PAGE> 76
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per
annum of 8% through and including August 15, 2001, and at the Reset Rate
thereafter (the "Coupon Rate") of the stated liquidation amount of $10 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Institutional Trustee. Distributions in arrears for more than
one quarter will bear interest thereon compounded quarterly at the rate of 8%
through and including August 15, 2001, and at the Reset Rate thereafter (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed in such 90-day period.
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on February 16, May 16, August 16 and
November 16, of each year, commencing on August 16, 1998, to Holders of record
one Business Day prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures. The Debenture Issuer
has the right under the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures for a period not
extending beyond the date of maturity of the Debentures (each an "Extension
Period") and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to accrue
with interest thereon at the rate of 8% through and including August 15, 2001,
and at the Reset Rate thereafter, compounded quarterly during any such Extension
Period (to the extent permitted by applicable law). Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the record date next preceding the quarterly Distribution
payment date on which the relevant Extension Period ends. Upon the termination
of any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period; provided, that such Extension Period
together with all such previous and further extensions thereof may not exceed
beyond the maturity date of the Debentures, and no Extension Period may end
other than on a quarterly Distribution payment date.
The Common Securities shall be redeemable as provided in the Declaration.
<PAGE> 77
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Trust to
repay $_____ stated liquidation amount of the within Common Security, pursuant
to its terms, on the "Put Option Exercise Date," together with Distributions
thereon accrued and unpaid to the date of repayment, to the undersigned at:
- ----------------------------------------------------------
(Please print or type Name and Address of the Undersigned)
and to issue to the undersigned, pursuant to the terms of the Declaration, a new
Common Security or Common Securities representing the remaining stated
liquidation amount, if any, of this Common Security.
For this Option to Elect Repayment to be effective, the within Common Security
with this Option to Elect Repayment duly completed must be received by the Trust
at the Corporate Trust Office of the Institutional Trustee at The First National
Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670-0126,
Attention: Corporate Trust Administration, no later than 5:00 p.m. on the third
Business Day immediately preceding September 1, 2001.
Date: Signature:
---------------------------------------------
Signature Guarantee:
-----------------------------------
Note: The signature to this Option to Elect Repayment must correspond with the
name as written upon the face of the within Common Security in every particular
without alternation or enlargement or any change whatsoever.
<PAGE> 78
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
------------------------------
Signature:
-----------------------------------
Signature Guarantee:
-------------------------
(Sign exactly as your name appears on the other side
of this Capital Security Certificate)
<PAGE> 1
Exhibit 4.11
===========================================
GUARANTEE AGREEMENT
KBHC FINANCING I
Dated as of July 7, 1998
===========================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions and Interpretation.............................1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act: Application...........................4
SECTION 2.2 List of Holders of Securities..............................4
SECTION 2.3 Reports by the Guarantee Trustee...........................4
SECTION 2.4 Periodic Reports to Guarantee Trustee.....................4
SECTION 2.5 Evidence of Compliance with Conditions Precedent...........5
SECTION 2.6 Events of Default; Waiver..................................5
SECTION 2.7 Event of Default; Notice...................................5
SECTION 2.8 Conflicting Interests......................................5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Guarantee Trustee.................5
SECTION 3.2 Certain Rights of the Guarantee Trustee....................7
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee......8
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1 Guarantee Trustee; Eligibility.............................8
SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees9
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.................................................10
SECTION 5.2 Waiver of Notice and Demand...............................10
SECTION 5.3 Obligations Not Affected..................................10
SECTION 5.4 Rights of Holders.........................................11
SECTION 5.5 Guarantee of Payment......................................11
SECTION 5.6 Subrogation...............................................11
i
<PAGE> 3
SECTION 5.7 Independent Obligations...................................11
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1 Limitation of Transactions................................12
SECTION 6.2 Ranking...................................................12
ARTICLE VII
TERMINATION
SECTION 7.1 Termination...............................................12
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation...............................................13
SECTION 8.2 Indemnification...........................................13
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns....................................13
SECTION 9.2 Amendments................................................14
SECTION 9.3 Notices...................................................14
SECTION 9.4 Benefit...................................................15
SECTION 9.5 Governing Law.............................................15
ii
<PAGE> 4
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Guarantee"), dated as of July 7, 1998, is
executed and delivered by Kaufman and Broad Home Corporation, a Delaware
corporation (the "Guarantor"), and The First National Bank of Chicago, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Securities (as defined herein) of KBHC
Financing I, a Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of July 7, 1998, among the trustees of the Issuer named
therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial ownership interests in the assets of the Issuer, the Issuer
is issuing on the date hereof 18,975,000 capital securities, liquidation amount
$10 per capital security, having an aggregate liquidation amount of $189,750,000
designated the 8% Capital Securities (the "Capital Securities") and 586,856
common securities, liquidation amount $10 per common security, having an
aggregate liquidation amount $5,868,560, designated the 8% Common Securities
(the "Common Securities" and, together with the Capital Securities, the
"Securities");
WHEREAS, as incentive for the Holders to purchase the Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth in this Guarantee, to pay to the Holders the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein; and
WHEREAS, if an Event of Default (as defined in the Declaration), has
occurred and is continuing, the rights of holders of the Common Securities to
receive Guarantee Payments under this Guarantee are subordinated to the rights
of the holders of the Capital Securities to receive Guarantee Payments under
this Guarantee.
NOW, THEREFORE, in consideration of the purchase of the FELINE PRIDES (as
defined in the Declaration), the separate Capital Securities and the Common
Securities, as, applicable by each Holder, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions and Interpretation
In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all reference to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles and Sections are to
Articles and Sections of this Guarantee, unless otherwise specified;
<PAGE> 5
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee, unless otherwise defined in this Guarantee
or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, as in effect on the date of the Guarantee.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Business Day" means any day other than Saturday, Sunday or any day on
which banking institutions in the City of New York, New York are authorized or
required by any applicable law to close.
"Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at The First National Bank of Chicago,
One First National Plaza, Suite 0126, Chicago, IL 60670-0126, Attention:
Corporate Services Division
"Covered Person" means any Holder or beneficial owner of Securities.
"Debentures" means the series of debt securities of the Guarantor
designated the 8% Debentures due August 16, 2003.
"Direction" by a person means a written direction signed: (a) if the
Person is a natural person, by that Person; or (b) in any other case in the name
of such Person by one or more Authorized Officers of that Person.
"Distribution" has the meaning specified in the Declaration.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions that are required
to be paid on such Securities to the extent the Issuer shall have funds
available therefor, (ii) the Redemption Price (as defined in the Declaration),
including all accrued and unpaid Distributions (including deferred
Distributions) to the date of redemption with respect to Securities in respect
of which the related Debentures have been redeemed by the Company upon the
occurrence of a Tax Event Redemption, to the extent the Issuer has funds
available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Issuer (other than in connection with the
distribution of Debentures to the Holders in exchange for the Securities as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions (including deferred
Distributions) on the Securities to the date of payment, to the extent the
Issuer shall have funds available therefor, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution"). If an Event of Default
(as defined in the Declaration and the Indenture) has occurred and is
continuing, the rights of holders of the Common Securities to receive payments
under this Guarantee are subordinated to the rights of holders of Capital
Securities to receive Guarantee Payments under this Guarantee.
2
<PAGE> 6
"Guarantee Trustee" means The First National Bank of Chicago, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records of
the Issuer, of any Securities; provided, however, that, in determining whether
the holders of the requisite percentage of Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or
any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means, collectively, the Indenture and the First Supplemental
Indenture, each dated as of July 7, 1998, among the Guarantor (the "Debenture
Issuer") and The First National Bank of Chicago, as trustee, and any other
indentures supplemental thereto.
"Majority in liquidation amount of the Securities" means, except as
provided by the Trust Indenture Act or Article VI of the Declaration, Holder(s)
of outstanding Securities, voting separately as a single class or as the context
may require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class who are the record owners of more
than 50% of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Officer's Certificate" means, with respect to any Person, a certificate
signed on behalf of such Person by an Authorized Officer of such Person. Any
Officer's Certificate delivered with respect to compliance with a condition or
covenant provided for in this Guarantee shall include:
(a) a statement that each officer signing the Officer's Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officer's
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of such Person, such
condition or covenant has been complied with.
"Person" or "person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee, including
any vice-president, any assistant
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vice-president, any assistant secretary, the treasurer, any assistant treasurer
or other officer in the Corporate Trust Office of the Guarantee 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 that
officer's knowledge of and familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Tax Event Redemption" has the same meaning as in the Declaration.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
or any successor thereto.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act: Application
(a) This Guarantee is subject to the provisions of the Trust Indenture Act
that are required to be part of this Guarantee and shall, to the extent
applicable, be governed by such provisions; and
(b) If and to the extent that any provision of this Guarantee limits,
qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2 List of Holders of Securities
(a) The Guarantor shall provide the Guarantee Trustee with a list, in such
form as the Guarantee Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of such date, (i) within one Business Day
after January 1 and July 1 of each year, and (ii) at any other time within 30
days of receipt by the Guarantor of a written request for a List of Holders as
of a date no more than 14 days before such List of Holders is given to the
Guarantee Trustee provided, that the Guarantor shall not be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Guarantee Trustee by the Guarantor. The
Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under Section
311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Guarantee Trustee
Within 60 days after May 15 of each year, commencing May 15, 1999, the
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Guarantee Trustee
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The Guarantor shall provide to the Guarantee Trustee such documents,
reports and information as required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Guarantee
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officer's
Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Securities may, by
vote, on behalf of all Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default actually known to a Responsible Officer of the Guarantee
Trustee, transmit by mail, first class postage prepaid, to the Holders, notices
of all such Events of Default, unless such defaults have been cured or waived
before the giving of such notice, provided, that the Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written notice
thereof, or a Responsible Officer of the Guarantee Trustee charged with the
administration of the Declaration shall have obtained actual knowledge thereof.
SECTION 2.8 Conflicting Interests
The Declaration and the Indenture shall be deemed to be specifically
described in this Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Guarantee Trustee
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit
of the Holders, and the Guarantee Trustee shall not transfer this Guarantee to
any Person except a Holder exercising his or her rights pursuant to Section
5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The
right, title and interest of the Guarantee
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Trustee shall automatically vest in any Successor Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee or as to which the Guarantee Trustee has received written
notice has occurred and is continuing, the Guarantee Trustee shall enforce this
Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing or waiver of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee, and no implied covenants shall be read into this Guarantee
against the Guarantee Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6) and is actually known to a
Responsible Officer of the Guarantee Trustee or as to which the Guarantee
Trustee has received written notice, the Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Guarantee, and use the same degree
of care and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own bad faith or willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee, and the
Guarantee Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Guarantee,
and no implied covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Guarantee Trustee and
conforming to the requirements of this Guarantee; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee, the
Guarantee Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee; and
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(iv) no provision of this Guarantee shall require the Guarantee Trustee to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its rights or
powers, if the Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee or indemnity, reasonably satisfactory to the
Guarantee Trustee, against such risk or liability is not reasonably assured to
it.
SECTION 3.2 Certain Rights of the Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully
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, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee shall be sufficiently evidenced by a Direction or an Officer's
Certificate.
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer's Certificate which, upon receipt of
such request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any rerecording,
refiling or reregistration thereof).
(v) The Guarantee Trustee may consult with competent legal counsel,
and the written advice or opinion of such counsel with respect to legal
matters 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 accordance with such advice or opinion. Such counsel may be counsel to
the Guarantor or any of its Affiliates and may include any of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee from any
court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee at the request
or direction of any Holder, unless such Holder shall have provided to the
Guarantee Trustee such security and indemnity, reasonably satisfactory to
the Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Guarantee Trustees, agents,
nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Guarantee Trustee; provided that,
nothing contained in this Section 3.2 (a) (vi) shall be taken to relieve
the Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Guarantee.
(vii) The Guarantee 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,
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direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, nominees, custodians or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders, and the signature of the Guarantee
Trustee or its agents alone shall be sufficient and effective to perform
any such action. No third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance with
any of the terms and provisions of this Guarantee, both of which shall be
conclusively evidenced by the Guarantee Trustee's or its agent's taking
such action.
(x) Whenever in the administration of this Guarantee the Guarantee
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(b) No provision of this Guarantee shall be deemed to impose any duty or
obligation on the Guarantee Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it in any jurisdiction
in which it shall be illegal, or in which the Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee
The recitals contained in this Guarantee shall be taken as the statements
of the Guarantor, and the Guarantee Trustee does not assume any responsibility
for their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1 Guarantee Trustee; Eligibility
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State thereof or of the District of
Columbia, or a corporation authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
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$750,000,000, and 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
the supervising or examining authority referred to above, then, for the
purposes of this Section 4.1 (a)(ii), 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.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance with Section
4.2(a) until a Successor Guarantee Trustee has been appointed and has accepted
such appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act
of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the
Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the
Guarantee Trustee all amounts accrued to the date of such termination, removal
or resignation.
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ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full on a
senior unsecured basis to the Holders, the Guarantee Payments (without
duplication of amounts theretofore paid by the Issuer), as and when due (taking
into account any permitted deferral thereof), regardless of any defense, right
of set-off or counter claim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives, to the extent permitted by law, notice of
acceptance of this Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Securities or the extension of time
for the performance of any other obligation under, arising out of, or in
connection with, the Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Securities, or any action
on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Securities or the
Debentures;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
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(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders, to the extent permitted by
law, to give notice to, or obtain the consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the Securities have
the right to direct the time, method and place of conducting of any proceeding
for any remedy available to the Guarantee Trustee in respect of this Guarantee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under this Guarantee.
(b) If the Guarantee Trustee fails to enforce this Guarantee, any Holder
may institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee, without first instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other Person. Notwithstanding
the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder
may directly institute a proceeding against the Guarantor for enforcement of the
Guarantee for such payment. The Guarantor waives any right or remedy to require
that any action on this Guarantee be brought first against the Issuer or any
other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Guarantee creates a guarantee of payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all rights, if any, of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Securities, and that the
Guarantor shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Guarantee notwithstanding, to the extent
permitted by law, the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
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ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1 Limitation of Transactions
So long as any Securities remain outstanding, if there shall have occurred
an Event of Default or an Event of Default under the Declaration then (a) the
Guarantor shall not declare or pay any dividend on, make any distribution with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of capital stock of the Guarantor in connection with the satisfaction by the
Guarantor of its obligations under any employee benefit plans or the
satisfaction by the Guarantor of its obligations pursuant to any contract or
security outstanding on the date of such event requiring the Guarantor to
purchase capital stock of the Guarantor, (ii) as a result of a reclassification
of the Guarantor's capital stock or the exchange or conversion of one class or
series of the Guarantor's capital stock for another class or series of the
Guarantor's capital stock, (iii) the purchase of fractional interests in shares
of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(iv) dividends or distributions in capital stock of the Guarantor (or rights to
acquire capital stock) or repurchases or redemptions of capital stock solely
from the issuance or exchange of capital stock or (v) redemptions or purchases
of any rights outstanding under a shareholder rights plan, or the declaration
thereunder of a dividend of rights in the future) and (b) the Guarantor shall
not make any guarantee payments with respect to the foregoing (other than
payments pursuant to the Guarantee).
SECTION 6.2 Ranking
This Guarantee constitutes a senior unsecured obligation of the Guarantor
and ranks on a parity with all of the Guarantor's senior unsecured obligations.
If an Event of Default under the Indenture or an Event of Default under
the Declaration has occurred and is continuing, the rights of the holders of the
Common Securities hereunder will be subordinate and junior in right of payment
to the rights of Holders of Capital Securities hereunder and no payments shall
be made hereunder in respect to any Common Securities until the prior payment in
full of all amounts due and owing hereunder to the holders of the Capital
Securities.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Guarantee shall terminate upon (i) full payment of the Redemption
Price of all Securities, (ii) upon the distribution of the Debentures to all
Holders or (iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must return payment of any sums paid under the
Securities or under this Guarantee.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee or by
law, except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified Person's negligence, bad faith
or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
SECTION 8.2 Indemnification
(a) To the fullest extent permitted by applicable law, the Guarantor shall
indemnify and hold harmless each Indemnified Person from and against any loss,
damage or claim incurred by such Indemnified Person by reason of any act or
omission performed or omitted by such Indemnified Person in good faith in
accordance with this Guarantee and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of negligence or willful misconduct with
respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, reasonable
out-of-pocket expenses (including legal fees) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).
(c) The provisions set forth in this Section 8.2 shall survive the
termination of the Guarantee or the resignation or removal of the Guarantee
Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
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All guarantees and agreements contained in this Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Securities then
outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely affect the rights
of Holders or the Guarantee Trustee (in which case no consent of Holders or the
Guarantee Trustee, respectively, will be required), this Guarantee may only be
amended with the prior approval of the Guarantor, the Guarantee Trustee and the
Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all the outstanding Securities; provided, however, if any
amendment or proposal would adversely affect only the Capital Securities or only
the Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities . The provisions of Section 11.2 of the Declaration with respect to
meetings of Holders apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Guarantee shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may give
notice of to the Holders of the Securities):
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust
Services Division
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders):
Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, CA 90024
Attn: Chief Financial Officer
(c) If given to any Holder, at the address set forth on the books and
records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
14
<PAGE> 18
SECTION 9.4 Benefit
This Guarantee is solely for the benefit of the Holders and, subject to
Section 3.1(a), is not separately transferable from the Securities.
SECTION 9.5 Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15
<PAGE> 19
THIS GUARANTEE is executed as of the day and year first above written.
KAUFMAN AND BROAD HOME CORPORATION,
as Guarantor
By: /s/ Dennis Welsch
-----------------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
By: /s/ Barton P. Pachino
-----------------------------------------
Name: Barton P. Pachino
Title: Senior Vice President and
General Counsel
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
By: /s/ Mark J. Frye
-----------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
<PAGE> 1
Exhibit 4.12
- --------------------------------------------------------------------------------
KAUFMAN AND BROAD HOME CORPORATION
AS ISSUER
TO
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
- --------------------------------------------------------------------------------
SENIOR DEBT SECURITIES INDENTURE
DATED AS OF July 7, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
Kaufman and Broad Home Corporation
RECONCILIATION AND TIE BETWEEN TRUST
INDENTURE ACT OF 1939, AS AMENDED
AND INDENTURE, DATED AS OF JULY 7, 1998
TRUST INDENTURE INDENTURE SECTION
ACT SECTION
Section 310 (a)(1).........................................................609
(a)(2).........................................................609
(a)(3)..............................................Not Applicable
(a)(4)..............................................Not Applicable
(b).......................................................608, 610
Section 311 (a)............................................................613
(b)............................................................613
Section 312 (a)....................................................701, 702(a)
(b).........................................................702(b)
(c).........................................................702(c)
Section 313 (a).........................................................703(a)
(b).................................................Not Applicable
(c).................................................703(a), 703(b)
(d).........................................................703(b)
Section 314 (a)............................................................704
(b).................................................Not Applicable
(c)(1).........................................................102
(c)(2).........................................................102
(c)(3)..............................................Not Applicable
(d).................................................Not Applicable
(e)............................................................102
Section 315 (a).........................................................601(a)
(b)............................................................602
(c).........................................................601(b)
(d).........................................................601(c)
(d)(l)..............................................601(a), 601(c)
(d)(2)......................................................601(c)
(d)(3)......................................................601(c)
(e)............................................................514
Section 316 (a)(1)(A)......................................................512
(a)(1)(B).................................................502, 513
(a)(2)..............................................Not Applicable
(b)............................................................508
Section 317 (a)(1).........................................................503
(a)(2).........................................................504
(b)...........................................................1009
Section 318 (a)............................................................107
- ----------
NOTE: THIS RECONCILIATION AND TIE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A
PART OF THIS INDENTURE.
<PAGE> 3
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................... 1
Act ...................................................................... 1
Affiliate................................................................... 1
Authenticating Agent........................................................ 2
Bankruptcy Law.............................................................. 2
Board of Directors.......................................................... 2
Board Resolution............................................................ 2
Business Day................................................................ 2
Capitalized Lease Obligation................................................ 2
Capital Stock............................................................... 2
Commission.................................................................. 2
Common Depositary........................................................... 2
Company..................................................................... 2
Company Request............................................................. 2
Company Order............................................................... 2
Corporate Trust Office...................................................... 2
Covenant Defeasance......................................................... 2
Custodian................................................................... 2
Default..................................................................... 2
Defaulted Interest.......................................................... 2
Defeasance.................................................................. 2
Dollars..................................................................... 3
Event of Default............................................................ 3
Exchange Act................................................................ 3
GAAP ...................................................................... 3
Holder...................................................................... 3
Security holder............................................................. 3
Indebtedness................................................................ 3
Indenture................................................................... 3
Interest.................................................................... 3
Interest Payment Date....................................................... 3
Lien ...................................................................... 3
Maturity.................................................................... 3
Officer..................................................................... 3
Officer's Certificate....................................................... 3
Opinion of Counsel.......................................................... 4
Original Issue Discount Security............................................ 4
Outstanding................................................................. 4
Paying Agent................................................................ 4
Person...................................................................... 4
Place of Payment............................................................ 4
Redemption Date............................................................. 4
Redemption Price............................................................ 4
Registered Security......................................................... 4
Regular Record Date......................................................... 4
Responsible Officer......................................................... 5
<PAGE> 4
Securities.................................................................. 5
Security Register........................................................... 5
Security Registrar.......................................................... 5
Special Record Date......................................................... 5
Stated Maturity............................................................. 5
Subsidiary.................................................................. 5
Trust Indenture Act......................................................... 5
Trustee..................................................................... 5
U.S. Depositary............................................................. 5
U.S. Government Obligations................................................. 5
Vice President.............................................................. 6
SECTION 102. Compliance Certificates and Opinions.......................... 6
SECTION 103. Form of Documents Delivered to Trustee........................ 6
SECTION 104. Acts of Holders............................................... 7
SECTION 105. Notices, Etc., to Trustee and Company......................... 7
SECTION 106. Notice to Holders; Waiver..................................... 8
SECTION 107. Conflict with Trust Indenture Act............................. 8
SECTION 108. Effect of Headings and Table of Contents...................... 8
SECTION 109. Successors and Assigns........................................ 8
SECTION 110. Separability Clause........................................... 8
SECTION 111. Benefits of Indenture......................................... 8
SECTION 112. Governing Law................................................. 8
SECTION 113. Legal Holidays................................................ 9
SECTION 114. No Recourse Against Others.................................... 9
ARTICLE 2
SECURITY FORMS
SECTION 201. Forms Generally............................................... 9
SECTION 202. Form of Face of Security...................................... 9
SECTION 203. Form of Reverse of Security................................... 11
SECTION 204. Form of Trustee's Certificate of Authentication............... 14
SECTION 205. Securities in Global Form..................................... 14
SECTION 206. CUSIP Number.................................................. 15
SECTION 207. Form of Legend for the Securities in Global Form.............. 15
ARTICLE 3
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.......................... 15
SECTION 302. Denominations................................................. 17
SECTION 303. Execution, Authentication, Delivery and Dating................ 17
SECTION 304. Temporary Securities.......................................... 18
SECTION 305. Registration, Registration of Transfer and Exchange........... 19
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.............. 20
SECTION 307. Payment of Interest; Interest Rights Preserved................ 21
SECTION 308. Persons Deemed Owners......................................... 22
SECTION 309. Cancellation.................................................. 22
SECTION 310. Computation of Interest....................................... 22
SECTION 311. Ranking....................................................... 22
<PAGE> 5
ARTICLE 4
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture....................... 22
SECTION 402. Application of Trust Money.................................... 23
ARTICLE 5
REMEDIES
SECTION 501. Events of Default............................................. 23
SECTION 502. Acceleration of Maturity; Rescission and Annulment............ 25
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee ................................................... 25
SECTION 504. Trustee May File Proofs of Claim.............................. 26
SECTION 505. Trustee May Enforce Claims Without Possession of Securities... 26
SECTION 506. Application of Money Collected................................ 26
SECTION 507. Limitation on Suits........................................... 27
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest ......................................... 27
SECTION 509. Restoration of Rights and Remedies............................ 28
SECTION 510. Rights and Remedies Cumulative................................ 28
SECTION 511. Delay or Omission Not Waiver.................................. 28
SECTION 512. Control by Holders............................................ 28
SECTION 513. Waiver of Past Defaults....................................... 28
SECTION 514. Undertaking for Costs......................................... 29
ARTICLE 6
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities of the Trustee............ 29
SECTION 602. Notice of Defaults............................................ 29
SECTION 603. Certain Rights of Trustee..................................... 29
SECTION 604. Not Responsible for Recitals or Issuance of Securities........ 30
SECTION 605. May Hold Securities........................................... 30
SECTION 606. Money Held in Trust........................................... 30
SECTION 607. Compensation and Reimbursement................................ 31
SECTION 608. Disqualification; Conflicting Interests....................... 31
SECTION 609. Corporate Trustee Required; Eligibility....................... 31
SECTION 610. Resignation and Removal; Appointment of Successor............. 31
SECTION 611. Acceptance of Appointment by Successor........................ 32
SECTION 612. Merger, Conversion, Consolidation or Succession to Business .. 33
SECTION 613. Preferential Collection of Claims Against Company............. 33
SECTION 614. Appointment of Authenticating Agent........................... 33
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders .... 35
SECTION 702. Preservation of Information; Communications to Holders........ 35
SECTION 703. Reports by Trustee............................................ 36
SECTION 704. Reports by Company............................................ 36
<PAGE> 6
ARTICLE 8
CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER
SECTION 801. When Company May Merge, Etc................................... 37
SECTION 802. Opinion of Counsel............................................ 37
SECTION 803. Successor Corporation Substituted............................. 37
ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders............ 37
SECTION 902. Supplemental Indentures with Consent of Holders............... 38
SECTION 903. Execution of Supplemental Indentures.......................... 39
SECTION 904. Effect of Supplemental Indentures............................. 39
SECTION 905. Conformity with Trust Indenture Act........................... 39
SECTION 906. Reference in Securities to Supplemental Indentures............ 39
ARTICLE 10
COVENANTS
SECTION 1001. Payments of Securities........................................ 40
SECTION 1002. Maintenance of Office or Agency............................... 40
SECTION 1003. Corporate Existence........................................... 40
SECTION 1004. Payment of Taxes and Other Claims............................. 40
SECTION 1005. Maintenance of Properties..................................... 41
SECTION 1006. Compliance Certificates....................................... 41
SECTION 1007. Commission Reports............................................ 41
SECTION 1008. Waiver of Stay, Extension or Usury Laws....................... 42
SECTION 1009. Money for Securities Payments to Be Held in Trust............. 42
SECTION 1010. Waiver of Certain Covenants................................... 43
ARTICLE 11
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article...................................... 43
SECTION 1102. Election to Redeem; Notice to Trustee......................... 43
SECTION 1103. Selection by Trustee of Securities to Be Redeemed............. 43
SECTION 1104. Notice of Redemption.......................................... 44
SECTION 1105. Deposit of Redemption Price................................... 44
SECTION 1106. Securities Payable on Redemption Date......................... 44
SECTION 1107. Securities Redeemed in Part................................... 45
ARTICLE 12
SINKING FUNDS
SECTION 1201. Applicability of Article...................................... 45
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities......... 45
SECTION 1203. Redemption of Securities for Sinking Fund..................... 45
ARTICLE 13
<PAGE> 7
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance...................... 46
SECTION 1302. Defeasance and Discharge...................................... 46
SECTION 1303. Covenant Defeasance........................................... 46
SECTION 1304. Conditions to Defeasance or Covenant Defeasance............... 46
SECTION 1305. Deposited Money and Government Obligations
To Be Held In Trust........................................... 48
ARTICLE 14
MISCELLANEOUS
SECTION 1401. Miscellaneous................................................. 48
<PAGE> 8
Indenture, dated as of July 7, 1998, between KAUFMAN AND BROAD HOME
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
10990 Wilshire Blvd., Los Angeles, CA 90024, and The First National Bank of
Chicago, as 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
debentures, notes or other evidences of 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 series
thereof, as follows:
ARTICLE 1
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 GAAP;
(4) the word "including" (and with the correlative meaning "include")
means including, without limiting the generality of, any description preceding
such term; and
(5) 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.
<PAGE> 9
"Authenticating Agent" means any Person authorized by the Trustee to act
on behalf of the Trustee to authenticate Securities.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the board of directors of the Company;
provided, however, that when the context refers to actions or resolutions of the
Board of Directors, then the term "Board of Directors" shall also mean any duly
authorized committee of the Board of Directors of the Company authorized to act
with respect to any particular matter to exercise the power of the Board of
Directors of the Company.
"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 are authorized or obligated by law
or regulation to close. "Business Day," when used other than with respect to a
Place of Payment, means any day other than a Saturday, Sunday or other day on
which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close.
"Capitalized Lease Obligation" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligations determined ln accordance with such
principles.
"Capital Stock" of any Person shall mean any and all shares, interests,
participations or other equivalents of or interests (however designated) in the
equity of such Person, including any preferred stock, but excluding any debt
securities convertible into such equity.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Depositary" has the meaning specified in Section 304.
"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 of the Board, 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.
"Compound Interest," when used with respect to the Securities of any
series, shall have the meaning set forth in the Officer's Certificate or
supplemental indenture setting forth the terms of such Securities pursuant to
Section 301 hereof.
"Corporate Trust Office" means the office of the Trustee in Chicago,
Illinois at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at One
First National Plaza, Suite 0126, Chicago, Illinois 60670-0126.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
2
<PAGE> 10
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Dollars" and "$" means lawful money of the United States of America.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder.
"GAAP" means such accounting principles that are generally accepted in the
United States of America as of the date of any computation required hereunder.
"Holder" or "Security holder" means a Person in whose name a Security if
registered in the Security Register.
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all obligations under any title
retention agreements (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the types referred to in
clauses (i) through (iv) of other Persons and all dividends of other Persons for
the payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the types referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as contemplated
by Section 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 and, when used with respect to any Security the terms of which
provide for the payment of Compound Interest, the term "interest" shall be
deemed to include a reference to "and Compound Interest, if any".
"Interest Payment Date," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"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.
"Officer" means the Chairman of the Board, the Vice Chairman of the Board,
the President, any Executive Vice President, any Vice President, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Assistant
Secretary of the Company.
3
<PAGE> 11
"Officer's Certificate" means a certificate of the Company signed on its
behalf by an Officer 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, and who shall be reasonably acceptable
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 or Securities of any
series, means, as of the date of determination, all such 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 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; (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; and (iv) Securities which have been defeased
pursuant to Section 1302; provided, however, that in determining whether the
Holders of the requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding for such purposes shall be that portion of the
principal amount thereof that could be declared to be due and payable upon the
occurrence of an Event of Default pursuant to the terms of such Original Issue
Discount Security as of the date of such determination and (b) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Company may act as Paying Agent with respect to any Securities
issued hereunder.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company 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 on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" means every previous Security of any series
evidencing all or a portion of the same debt as that evidenced by a particular
Security of such series; and for the purposes of this definition, any Security
of any series authenticated and delivered under Section 306 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security of such series shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security of such series.
"Redemption Date," when used with respect to any Security of any series to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
4
<PAGE> 12
"Redemption Price," when used with respect to any Security of any series
to be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" means any Security issued hereunder and registered
in the Security Register.
"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 any
officer of the Trustee in its Corporate Trust Office 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" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any other Person more than 50% of the ownership interests of which shall at
the time be so owned or controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of the Company.
"Trust," when used with respect to the Securities of any series, shall
have the meaning set forth in the Officer's Certificate or supplemental
indenture establishing the terms of such Securities pursuant to Section 301.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
as in force at the date as of which this Indenture was executed; provided,
however, that in the event that such Act is amended after such date, "Trust
Indenture Act" means the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to the Securities
of any series shall mean the Trustee with respect to Securities of that series.
"U.S. Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more permanent
global Securities, the Person designated as U.S. Depositary by the Company
pursuant to Section 301, which must be a clearing agency registered under the
Exchange Act until a successor U.S. Depositary shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "U.S. Depositary"
shall mean or include each Person who is then a U.S. Depositary hereunder, and
if at any time there is more than one such Person, "U.S. Depositary" shall mean
the U.S. Depositary with respect to the Securities of that series.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed by the full
faith and credit of the United States of America which, in either case, are
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<PAGE> 13
not callable or redeemable at the option of the issuer thereof or otherwise
subject to prepayment, and shall also include a depository receipt issued by a
New York Clearing House bank or trust company as custodian with respect to any
such U.S. Government Obligation or a specific payment or interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt or from any amount held by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depository receipt.
"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, other than an action permitted by
Sections 205 and 704 hereof, the Company shall furnish to the Trustee an
Officer's 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:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) 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 covenant or condition has been
complied with; and
(d) 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 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.
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<PAGE> 14
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 may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents 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,
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.
(c) The ownership of Registered Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e) 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 or pursuant to a 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.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(a) 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 and received by the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
(b) 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
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<PAGE> 15
to it at the address of its principal office specified in the first paragraph of
this Indenture, attention: Chief Financial Officer, or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture or any Security provides for notice to Holders of any
event, such notice shall be deemed sufficiently given (unless otherwise herein
or in such Security 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 or the
validity of the proceedings to which such notice relates. Where this Indenture
or any Security 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.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
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. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or shall be
excluded, as the case may be.
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 in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 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 and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
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<PAGE> 16
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws (other than the choice of law provisions) of the State
of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security 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 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, except that, if such Business Day is in the next
succeeding calendar year, then such payment shall be made on the immediately
preceding Business Day, or on such other day as may be set out in the Officer's
Certificate pursuant to Section 301 at such Place of Payment with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity, provided that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
SECTION 114. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Security holder, by accepting
a Security, waives and releases all such liability. Such waivers and releases
are part of the consideration for the issuance of the Securities.
ARTICLE 2
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set forth
in this Article, or in such other 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, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Securities.
The Trustee's certificates of authentication shall be in substantially the
form set forth in this Article.
The definitive Securities shall be photocopied, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the Officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 202. Form of Face of Security.
(If the Security is an Original Issue Discount Security, insert--FOR
PURPOSES OF SECTION 1272 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), THE AMOUNT OF ORIGINAL ISSUE DISCOUNT (AS DEFINED IN SECTION 1273(a)(1)
OF THE CODE AND TREASURY REGULATION SECTION 1.1273-l(a) WITH RESPECT TO THIS
SECURITY IS , THE ISSUE PRICE (AS DEFINED IN TREASURY REGULATION SECTION
1.1273-2) OF THIS SECURITY IS , THE ISSUE DATE (AS DEFINED IN
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<PAGE> 17
SECTION 1275(a)(2) OF THE CODE AND TREASURY REGULATION SECTION 1.1273-2) OF THIS
SECURITY IS AND THE YIELD TO MATURITY OF THIS SECURITY IS ).
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<PAGE> 18
KAUFMAN AND BROAD HOME CORPORATION
........................
No. ________ ($)________
KAUFMAN AND BROAD HOME CORPORATION, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to , or registered assigns, the
principal sum of $ on . (If the Security is to bear interest
prior to Maturity, insert --, and to pay interest thereon from _______________
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, (semi-annually) (quarterly) (monthly) on and in each
year, commencing , at the rate of % per annum, until the principal
hereof is paid or made available for payment (If applicable insert--, and (to
the extent that the payment of such interest shall be legally enforceable) at
the rate of % per annum on any overdue principal and premium and on any
overdue installment of interest). The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the of (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.)
(If the Security is not to bear interest prior to Maturity,
insert--The principal of this Security shall not bear interest except in the
case of a default in payment of principal upon acceleration, upon redemption or
at Stated Maturity and in such case the overdue principal of this Security shall
bear interest at the rate of % per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal shall be payable on demand. Any
such interest on any overdue principal that is not so paid on demand shall bear
interest at the rate of % per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
demand for payment to the date payment of such interest has been made or duly
provided for, and such interest shall also be payable on demand.)
Payment of the principal of (and premium, if any) and (if applicable,
insert--any such) interest on this Security will be made at the office or agency
of the Company maintained for that purpose in , in Dollars (if
applicable, insert--; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register).
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE> 19
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
KAUFMAN AND BROAD HOME
CORPORATION
By:
----------------------------------
Attest:
- ----------------------------
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of , 1998 (herein called the
"Indenture"), between the Company and as Trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof
(limited in aggregate principal amount to $ ).
(If applicable, insert--The Securities of this series are subject to
redemption upon not less than 30 nor more than 60 days' notice by first class
mail, (if applicable, insert--(1) on in any year commencing with the
year and ending with the year through operation of the sinking
fund for this series at a Redemption Price equal to 100% of the principal
amount, and (2)) at any time (on or after ,), as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount):
If redeemed (on or before , %, and if redeemed) during the
12-month period beginning of the years indicated,
<TABLE>
<CAPTION>
Year Redemption Price Year Redemption Price
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to _______ of the principal amount,
together in the case of any such redemption (if applicable, insert -- (whether
through operation of the sinking fund or otherwise)) with accrued and unpaid
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.)
(If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 nor more than 60 days' notice by first class
mail, (1) on in any year commencing with the year and ending
with the year through operation of the sinking fund for this series at
the Redemption Prices for redemption through operation of the sinking fund
(expressed as percentages of the principal amount) set forth in the table below,
and (2) at any time (on or after ____________), as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below:
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<PAGE> 20
If redeemed during a 12-month period beginning of the years
indicated,
<TABLE>
<CAPTION>
Redemption Price for Redemption Price for
Redemption Through Redemption Otherwise
Operation of the Than Through Operation
Year Sinking Fund of the Sinking Fund
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to % of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued and unpaid interest to the Redemption
Date, but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.)
(Notwithstanding the foregoing, the Company may not, prior to
redeem any Securities of this series as contemplated by (clause (2) of) the
preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
interest cost to the Company (calculated in accordance with generally accepted
financial practice) of less than % per annum.)
(The sinking fund for this series provides for the redemption on in
each year beginning with the year and ending with the year of
(not less than) $ (("mandatory sinking fund") and not more than $
aggregate principal amount of Securities of this series.) (Securities of this
series acquired or redeemed by the Company otherwise than through (mandatory)
sinking fund payments may be credited against subsequent (mandatory) sinking
fund payments otherwise required to be made--in the (inverse) order in which
they become due.)
(In the event of redemption of this Security in part only a new Security
or Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.)
(If the Security is not an Original Issue Discount Security, insert -- If
any Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of and interest on the Securities of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture.) (If the Security is an Original Issue Discount Security, insert
- -- If an Event of Default with respect to Securities of this series shall occur
and be continuing, an amount of principal of the Securities of this series may
be declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal -- insert formula for determining the
amount.) Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, overdue premium, if any, and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of, premium, if any, and interest, if any, on the
Securities of this series shall terminate.
This Security is a senior unsecured obligation of the Company and will
rank pari passu in right of payment with all other senior unsecured obligations
of the Company.
This Security is subject to Defeasance as described in the Indenture.
The Indenture may be modified by the Company and the Trustee without
consent of any Holder with respect to certain matters as described in the
Indenture. In addition, the Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under
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<PAGE> 21
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall bind such Holder and all future Holders of this Security
and of any Security issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of ($1,000) and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of different authorized denominations, as requested
by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture imposes certain limitations on the ability of the Company
to, among other things, merge or consolidate with any other Person or sell,
assign, transfer or lease all or substantially all of its properties or assets
(If other covenants are applicable pursuant to the provisions of Section 301,
insert here). All such covenants and limitations are subject to a number of
important qualifications and exceptions. The Company must report periodically to
the Trustee on compliance with the covenants in the Indenture.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under this
Security or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder, by accepting a Security,
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of this Security.
(If applicable, insert -- Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures ("CUSIP"), the Company
has caused CUSIP numbers to be printed on the Securities of this series as a
convenience to the Holders of the Securities of this series. No representation
is made as to the correctness or accuracy of such numbers as printed on the
Securities of this series and reliance may be placed only on the other
identification numbers printed hereon.)
All capitalized terms used in this Security without definition which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
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<PAGE> 22
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:________________ Your Signature:__________________________________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guaranty:_____________________________________________
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Transfer Agent, which
requirements will include membership or
participation in STAMP or such other
"signature guarantee program" as may be
determined by the Transfer Agent in addition
to, or in substitution for, STAMP all in
accordance with the Exchange Act.)
Social Security Number or Taxpayer Identification Number:_______________________
SECTION 204. Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication shall be in substantially the following
form:
This is one of the [Title] of the series of [Title] described in the
within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By:___________________________________
Authorized Signatory
SECTION 205. Securities in Global Form.
If Securities of a series are issuable in global form, as contemplated by
Section 301, then, notwithstanding the provisions of Section 302, any such
Security shall represent such of the Outstanding Securities of such series as
shall be specified therein and may provide that it shall represent the aggregate
amount of Outstanding Securities from
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time to time endorsed thereon and that the aggregate amount of Outstanding
Securities represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a Security in global form to reflect the amount,
or any increase or decrease in the amount, of Outstanding Securities represented
thereby shall be made in such manner and upon instructions given by such Person
or Persons as shall be specified therein or in the Company Order to be delivered
to the Trustee pursuant to Section 303 or Section 304. Subject to the provisions
of Section 303 and, if applicable, Section 304, the Trustee shall deliver and
redeliver any Security in permanent global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 303 or 304 has
been, or simultaneously is, delivered, any instructions by the Company with
respect to endorsement or delivery or redelivery of a Security in global form
shall be in writing but need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel.
The provisions of Section 309 shall apply to any Security represented by a
Security in global form if such Security was never issued and sold by the
Company and the Company delivers to the Trustee the Security in global form
together with written instructions (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) with regard to the reduction
in the principal amount of Securities represented thereby.
Notwithstanding the provisions of Sections 201 and 307, unless otherwise
specified as contemplated by Section 301, payment of principal of, premium, if
any, and interest on any Security in permanent global form shall be made to the
Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as provided in
the preceding paragraph, the Company, the Trustee and any agent of the Company
and the Trustee shall treat a Person as the Holder of such principal amount of
Outstanding Securities represented by a permanent global Security as shall be
specified in a written statement of the Holder of such permanent global
Security.
SECTION 206. CUSIP Number.
The Company in issuing Securities of any series may use a "CUSIP" number,
and, if so, the Trustee may use the CUSIP number in notices of redemption or
exchange as a convenience to Holders of such series; provided, that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed on the notice or on the Securities of such
series, and that reliance may be placed only on the other identification numbers
printed on the Securities, and any such redemption shall not be affected by any
defect in or omission of such numbers. The Company will promptly notify the
Trustee of any change in the CUSIP number of any series of Securities.
SECTION 207. Form of Legend for the Securities in Global Form.
Unless otherwise specified pursuant to Section 201 or 301 with respect to
the Securities of any series, any Security in global form authenticated and
delivered hereunder shall bear a legend in substantially the following form
and/or such other legends as may be required by the applicable U.S. Depositary
or Common Depositary:
"This Security is in global form within the meaning of the Indenture
hereinafter referred to and is registered in the name of a [Common Depositary]
[U.S. Depositary]. Unless and until it is exchanged in whole or in part for
Securities in certificated form, this Security may not be transferred except as
a whole by the [Common Depositary] [U.S. Depositary] or by a nominee of the
[Common Depositary] [U.S. Depositary] as the case may be."
ARTICLE 3
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.
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The Securities may be issued from time to time in one or more series.
There shall be established in or pursuant to a Board Resolution, and set forth
in an Officer's 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 all other Securities);
(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 Sections
304, 305, 306, 906 or 1107);
(3) whether any Securities of the series are to be issuable, in whole or
in part, in permanent global form with or without coupons and, if so, (i)
whether beneficial owners of interests in any such permanent global security may
exchange such interests for Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in Section 305, and
(ii) the name of the Common Depositary or the U.S. Depositary, as the case may
be, with respect to any global security;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall bear
interest, if any, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest shall be payable and the Regular
Record Date for the interest payable on any Interest Payment Date and, if
applicable to such series of Securities, the basis points and United States
Treasury rate(s) and any other rates to be used in calculating the reset rate;
(6) the place or places where the principal of (and premium, if any) and
interest on Securities of the series shall be payable;
(7) the right of the Company, if any, to defer any payment of principal of
or interest on the Securities of the series, and the maximum length of any such
deferral period;
(8) 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, pursuant to any sinking fund or
otherwise;
(9) 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, and, where applicable, the obligation of the Company to select the
Securities to be redeemed;
(10) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be issuable;
(11) 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;
(12) additional Events of Default with respect to Securities of the
series, if any, other than those set forth herein;
(13) if either or both of Section 1302 and Section 1303 shall be
inapplicable to the Securities of the series (provided that if no such
inapplicability shall be specified, then both Section 1302 and Section 1303
shall be applicable to the Securities of the series);
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(14) if other than U.S. dollars, the currency or currencies or units based
on or related to currencies in which the Securities of such series shall be
denominated and in which payments or principal of, and any premium and interest
on, such Securities shall or may by payable;
(15) additional covenants with respect to Securities of the series, if
any, other than those set forth herein;
(16) if other than the Trustee, the identity of the Registrar and any
Paying Agent; and
(17) any other terms of the series (which terms may be inconsistent with
the provisions of this Indenture) and any deletions from or changes in the terms
of this Indenture with respect to such series.
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided in or pursuant to
such Board Resolution and set forth in such Officer's 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 Officer's
Certificate setting forth, or providing the manner for determining, the terms of
the Securities of such 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
$1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security that has been duly authenticated and delivered by the Trustee.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and make such Securities available for
delivery. If the form or terms of the Securities of the series have been
established 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 be entitled to receive, and (subject to Sections 315(a)
through (d) of the Trust Indenture Act) 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;
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<PAGE> 26
(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;
(c) that such Securities, when authenticated and delivered by the Trustee
and issued by the Company in the manner and subject to any conditions specified
in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms, except
to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law); and
(d) that no consent, approval, authorization, order, registration or
qualification of or with any court or any governmental agency or body having
jurisdiction over the Company is required for the execution and delivery of such
Securities by the Company, except such as have been obtained (except that no
opinion need be expressed as to state securities or Blue Sky laws).
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee, or in the written opinion of
counsel to the Trustee (which counsel may be an employee of the Trustee) such
authentication may not lawfully be made or would involve the Trustee in personal
liability.
Notwithstanding the provisions of Section 301 and of the immediately
preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officer's
Certificate otherwise required pursuant to Section 301 or the Company Order and
Opinion of Counsel otherwise required pursuant to the immediately preceding
paragraph at or prior to the time of authentication of each security of such
series if such documents are delivered at or prior to the authentication upon
original issuance of the first Security of such series to be issued.
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 this Section and the Company Order with respect to the
authentication and delivery of such series, authenticate and deliver one or more
global Securities that (i) shall be in an aggregate amount equal to the
aggregate principal amount specified in such Company Order, (ii) shall be
registered in the name of the Common Depositary or U.S. Depositary, as the case
may be, therefor or its nominee, and (iii) shall be made available for delivery
by the Trustee to such depositary or pursuant to such depositary's instruction.
Each depositary designated pursuant to Section 301 must, at the time of
its designation and at all times while it serves as depositary, be a clearing
agency registered under the Exchange Act and any other applicable statute or
regulation.
Unless otherwise provided for in the form of security, each security shall
be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, 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 shall authenticate and
make available for delivery, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
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substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
In the case of Securities of any series, such temporary Securities may be
in global form, representing all or a portion of the Outstanding Securities of
such series.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with the provisions of Section 305), 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 of
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 make
available for delivery in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations and of like
tenor. 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.
If temporary Securities of any series are issued, in whole or in part, in
global form, any such temporary global Security shall, unless otherwise provided
therein, be delivered to the office of a U.S. Depositary or common depositary
(the "Common Depositary") for credit to the respective accounts of the
beneficial owners of such Securities (or to such other accounts as they may
direct).
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of 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 and of registration of transfers of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series
at the office or agency of the Company in Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and make available for
delivery, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of a like
aggregate principal amount and Stated Maturity.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series, of any authorized denominations and of a
like aggregate principal amount and Stated Maturity, upon surrender of the
Securities to be exchanged at such office or agency. Whenever any Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities which the Holder
making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be exchangeable
only as provided in this paragraph. If the beneficial owners of interests in a
permanent global security are entitled to exchange such interests for Securities
of such series and of like tenor and principal amount of another authorized form
and denomination, as specified and as subject to the conditions contemplated by
Section 301, then without unnecessary delay but in any event not later than the
earliest date on which such interests may be so exchanged, the Company shall
deliver to the Trustee definitive Securities of that series in aggregate
principal amount equal to the principal amount of such permanent global
Security, executed by the Company. On or after the earliest date on which such
interests may be so exchanged, such permanent global Security shall be
surrendered from time to time by the Common Depositary or the U.S. Depositary,
as the case may be, and in accordance with instructions given to the Trustee and
the Common Depositary or the U.S. Depositary, as the case may be (which
instructions shall be in writing but need not comply with Section 102 or be
accompanied by an Opinion of Counsel), as shall be specified in the Company
Order with respect thereto to the Trustee, as the Company's agent for such
purpose, to be exchanged, in whole or in part, for definitive Securities of the
same series without charge.
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The Trustee shall authenticate and make available for delivery, in exchange for
each portion of such surrendered permanent global Security, a like aggregate
principal amount of definitive Securities of the same series of authorized
denominations and of like tenor as the portion of such permanent global Security
to be exchanged which shall be in the form of the Securities of such series.
Promptly following any such exchange in part, such permanent global Security
shall be returned by the Trustee to the Common Depositary or the U.S.
Depositary, as the case may be, or such other Common Depositary or U.S.
Depositary referred to above in accordance with the written instructions of the
Company referred to above. If a Security in the form specified for such series
is issued in exchange for any portion of a permanent global Security after the
close of business at the office or agency where such exchange occurs on (i) any
Regular Record Date and before the opening of business at such office or agency
on the relevant Interest Payment Date, or (ii) any Special Record Date and
before the opening of business at such office or agency on the related proposed
date for payment of interest or Defaulted Interest, as the case may be, such
interest or Defaulted Interest will not be payable on such Interest Payment Date
or proposed date for payment, as the case may be, in respect of such definitive
Security, but will be payable on such Interest Payment Date or proposed date for
payment, as the case may be, only to the Person to whom interest in respect of
such portion of such permanent global Security is payable in accordance with the
provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligation, 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
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
Unless otherwise provided in the Securities to be transferred or
exchanged, 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 transfer tax or similar 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 the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such Security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, make payment with respect to such Security.
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Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any transfer tax or similar
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new 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.
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 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 Section
307 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 its address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date 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 Section
307, 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.
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SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest of a
Security in global form, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest. Notwithstanding the
foregoing, with respect to any Security in global form, nothing herein shall
prevent the Company or the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by any Common Depositary (or its nominee), as a Holder, with respect
to such Security in global form or impair, as between such Common Depositary and
owners of beneficial interests in such Security in global form, the operation of
customary practices governing the exercise of the right of such Common
Depositary (or its nominee) as holder of such Security in global form.
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 held by the Trustee and may
be destroyed (and, if so destroyed, certification of their destruction shall be
delivered to the Company), unless, by a Company Order, the Company shall direct
that 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 consisting of twelve 30-day months.
SECTION 311. Ranking.
The Company hereby confirms that the Securities issued pursuant to this
Indenture are senior unsecured obligations of the Company and will rank pari
passu in right of payment with all other senior unsecured obligations of the
Company.
ARTICLE 4
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for or in the form of security for such series and except as
provided in the last paragraph of this Section 401), when the Trustee, upon
Company Request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306 and (ii) Securities for whose
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payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1009) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one
year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited with the
Trustee as trust funds in trust for the purpose an amount in cash sufficient to
pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Securities which have
become due and payable) or the Stated Maturity or Redemption Date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided for
herein relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1009 shall survive, and, in addition, the provisions of
Sections 302, 303, 304, 305, 306, 1002, 1008 and 1009 and, if any Securities
have been or are to be called for redemption as contemplated by subclause
(B)(iii) of clause (1) of this Section, Article Eleven shall also survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1009, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent (other
than the Company acting as its own Paying Agent) as the Trustee may determine,
to the Persons entitled thereto, of the principal (and premium, if any) and
interest for whose payment such money has been deposited with or received by the
Trustee.
ARTICLE 5
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 to 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 or otherwise):
(1) the Company defaults in the payment of interest (including Compound
Interest, if any) on any Security of that series when such interest becomes due
and payable and the default continues for a period of 30 days; provided,
however, that if the Company is permitted by the terms of the Securities of such
series to defer the payment in
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question, the date on which such payment is due and payable shall be the date on
which the Company is required to make payment following such deferral, if such
deferral has been elected pursuant to the terms of the Securities of such
series; or
(2) the Company defaults in the payment of the principal of (or premium,
if any, on) any Security of that series when the same becomes due and payable at
Maturity, upon redemption (including redemptions under Article 11), upon a "put"
of any such Security to the Company at the option of the Holder, or otherwise;
provided, however, that if the Company is permitted by the terms of the
Securities of such series to defer the payment in question, the date on which
such payment is due and payable shall be the date on which the Company is
required to make payment following such deferral, if such deferral has been
elected pursuant to the terms of the Securities of such series; or
(3) the Company fails to observe or perform any of its covenants,
warranties or agreements in the Securities of that series or this Indenture
(other than a covenant, agreement or warranty 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 the failure to observe or perform
continues for the period and after the notice specified in the last paragraph of
this Section; or
(4) the Company pursuant to or within the meaning of any Bankruptcy Law
(A) commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any Bankruptcy Law,
(C) consents to or acquiesces in the institution of bankruptcy or insolvency
proceedings against it, (D) applies for, consents to or acquiesces in the
appointment of or taking possession by a Custodian of the Company or for any
material part of its property, (E) makes a general assignment for the benefit of
its creditors or (F) takes any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing; or
(5) (i) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any Bankruptcy Law which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in respect of the
Company, (B) appoint a Custodian of the Company or for any material part of its
property, or (C) order the winding-up or liquidation of its affairs, and such
judgment, decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (ii) any bankruptcy or insolvency petition or application
is filed, or any bankruptcy or insolvency proceeding is commenced, against the
Company and such petition, application or proceeding is not dismissed within 60
days; or (iii) a warrant of attachment is issued against any material portion of
the property of the Company which is not released within 60 days of service; or
(6) any other Event of Default provided with respect to Securities of that
series.
A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series notify the Company of the Default and the
Company does not cure the Default within 90 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." When a Default under clause (3) above is
cured within such 90-day period, it ceases.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series (other
than an Event of Default specified in clause (4) or (5) of Section 501) occurs
and is continuing, the Trustee by notice in writing to the Company, or the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series by notice in writing to the Company and the Trustee,
may declare the unpaid principal of and accrued interest (including Compound
Interest, if any, and expenses and taxes of the applicable Trust, if any) to the
date of acceleration (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) on all the Outstanding Securities of that series to be
due and payable immediately and, upon any such declaration, the principal of and
accrued interest on the Outstanding Securities of that series (or specified
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principal amount) (including Compound Interest, if any, and expenses and taxes
of the applicable Trust, if any) shall become and be immediately due and
payable.
If an Event of Default specified in clause (4) or (5) of Section 501
occurs, all unpaid principal of and accrued interest on the Outstanding
Securities of that series (or specified principal amount) (including Compound
Interest, if any, and expenses and taxes of the applicable Trust, if any) shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder of any Security of that
series.
Upon payment of all such principal and interest (including Compound
Interest, if any, and expenses and taxes of the applicable Trust, if any), all
of the Company's obligations under the Securities of that series and (upon
payment of the Securities of all series) this Indenture shall terminate, except
obligations under Section 607.
The Holders of a majority in principal amount of the Outstanding
Securities of that series by notice to the Trustee may rescind and annul
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the accelerated principal and interest of the Securities
of that series (including Compound Interest, if any, and expenses and taxes of
the applicable Trust, if any) that has become due solely by such declaration of
acceleration, have been cured or waived, (ii) to the extent the payment of such
interest is lawful, interest (at the rate prescribed therefor in such Securities
or, if no such rate is prescribed, at the rate of interest otherwise borne by
such Securities) on overdue installments of interest (including Compound
Interest, if any, and expenses and taxes of the applicable Trust, if any) and
overdue principal and premium, if any, that has become due otherwise than by
such declaration of acceleration have been paid, (iii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction and
(iv) all payments due to the Trustee and any predecessor Trustee under Section
607 have been made.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) the Company defaults in the payment of interest (including Compound
Interest, if any) on any Security of any series when such interest becomes due
and payable and the default continues for a period of 30 days; provided,
however, that if the Company is permitted by the terms of the Securities of such
series to defer the payment in question, the date on which such payment is due
and payable shall be the date on which the Company is required to make payment
following such deferral, if such deferral has been elected pursuant to the terms
of the Securities of such series, or
(2) the Company defaults in the payment of the principal of (or premium,
if any, on) any Security of any series when the same becomes due and payable at
Maturity, upon redemption (including redemptions under Article 11), upon a "put"
of any such Security to the Company at the option of the Holder thereof, or
otherwise; provided, however, that if the Company is permitted by the terms of
the Securities of such series to defer the payment in question, the date on
which such payment is due and payable shall be the date on which the Company is
required to make payment following such deferral, if such deferral has been
elected pursuant to the terms of the Securities of such series,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest (including Compound
Interest, if any, and expenses and taxes of the applicable Trust, if any) 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 (including Compound Interest, if any, and expenses and taxes of the
applicable Trust, if any), at the rate or rates prescribed therefor in such
Securities or, if no such rate is prescribed, at the rate of interest otherwise
borne by such Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the reasonable 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
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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 secure 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 or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceedings, 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 in respect of
the Securities of any series 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 in respect of which moneys have been collected
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
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First: To the payment of all amounts due the Trustee under Section 607
applicable to such series;
Second: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Securities of such series 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 of such series for principal (and premium, if any)
and interest, respectively; and
Third: To the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 506. At least fifteen days before such record
date, the Trustee shall mail to each Holder and the Company a notice that states
the record date, the payment date and the amount to be paid.
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) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
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 Holders of Securities of
any series 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 of such Holders, or to obtain or to seek to obtain priority
or preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all Holders of Securities of the affected 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 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.
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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 has 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 Securities 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; and
(3) subject to Section 601, the Trustee need not take any action which
might involve the Trustee in personal liability or be unduly prejudicial to the
Holders not joining therein.
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 by written notice to the Trustee on
behalf of the Holders of all the Securities of such series waive any Default or
Event of Default with respect to such series and its consequences, except a
Default or Event of Default
(1) in respect of the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or other 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 or Event of Default shall cease to
exist and shall be deemed to have been cured, for every purpose of this
Indenture and the Securities of such series; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
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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,
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 6
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities of the Trustee.
(a) Except during the continuance of an Event of Default, the Trustee's
duties and responsibilities under this Indenture shall be governed by Section
315(a) of the Trust Indenture Act.
(b) In case an Event of Default has occurred and is continuing and is
known to the Trustee, the Trustee shall exercise the rights and powers vested in
it by this Indenture, and shall 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) None of the provisions of Section 315(d) of the Trust Indenture Act
shall be excluded from this Indenture.
SECTION 602. Notice of Defaults.
Within 30 days after the occurrence of any Default or Event of Default
with respect to the Securities of any series, the Trustee shall give to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such Default or Event of Default known to the
Trustee, unless such Default or Event of Default shall have been cured or
waived; provided, however, that, except in the case of a Default or Event of
Default in the payment of the principal of (or premium, if any) or interest on
any Security of such series or in the payment of any sinking fund installment
with respect to Securities of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or directors or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the Holders
of Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of the Trust Indenture Act:
(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;
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(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's 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 security or indemnity to its reasonable satisfaction against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default which may have occurred, 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, approval or other paper or document, or the books and records of the
Company, unless requested in writing to do so by the Holders of a majority in
principal amount of the Outstanding Securities of any series; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is not, in the opinion of the Trustee, reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such costs, expenses or
liabilities as a condition to so proceeding; the reasonable expense of every
such investigation shall be paid by the Company or, if paid by the Trustee,
shall be repaid by the Company upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be required 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 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.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee or any Authenticating Agent assumes no 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, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
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 in trust hereunder (including amounts held by
the Trustee as Paying Agent) need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed upon in writing
with the Company.
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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 for, and to hold it harmless against, any
loss, liability, damage, claim or expense, including taxes (other than taxes
based upon or determined or measured by the income or gross receipts of the
Trustee), incurred without gross negligence or bad faith on its 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 itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(4) or Section 501(5), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 607 shall survive this Indenture.
SECTION 608. Disqualification; Conflicting Interests.
The Trustee shall be disqualified only where such disqualification is
required by Section 310(b) of the Trust Indenture Act. Nothing shall prevent the
Trustee from filing with the Commission the application referred to in the
second to last paragraph of Section 310(b) of the Trust Indenture Act.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under Section 310(a)(1) of the Trust Indenture Act having a
combined capital and surplus of at least $50,000,000 subject to supervision or
examination by federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of 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. Neither the Company nor any Person directly or indirectly
controlling, controlled by, or under common control with the Company may serve
as Trustee. 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 pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee 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.
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(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:
(1) the Trustee shall fail to comply with Section 310(b) of the
Trust Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six months; or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by any
such Holder of a Security who has been a bona fide Holder of a Security for at
least six months; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the
Trust Indenture Act, any Holder who has been a bona fide Holder of a security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee 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 Securities. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner 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.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to 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 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, execute and deliver an instrument transferring to such
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successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental Indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring 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 those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all 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
the Trust Indenture Act.
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.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship listed in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent indicated therein.
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, and subject to the
direction of, the Trustee to authenticate Securities of such series issued upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 306, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder.
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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 corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by federal or State 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 at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be 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 Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in substantially the following form:
Form of Authenticating Agent's
Certificate of Authentication
This is one of the [Title] of the series of [Title] described in the
within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO
As Trustee
By:
----------------------------------
As Authenticating Agent
By:
----------------------------------
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Authorized Signatory
ARTICLE 7
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:
(a) semi-annually, not later than January 1 and July 1 in each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of the preceding December 15 or June 15, as the case
may be; and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
provided, however, that so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
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. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants") apply in
writing to the Trustee, and furnish to the Trustee reasonable proof that each
such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Indenture or under the Securities and is accompanied by a copy of the
form of proxy or other communication which such applicants propose to transmit
then the Trustee shall, within five Business Days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information preserved at
the time by the Trustee in accordance with Section 702(a); or
(ii)inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time by the
Trustee in accordance with Section 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 whose name and address appears 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
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 objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail
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copies of such material to all such Holders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 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 May 15 of each year commencing with the year
1999, the Trustee shall transmit by mail to all Holders of Securities as
provided in Section 313(c) of the Trust Indenture Act, a brief report dated as
of May 15, if required by and in compliance with Section 313(a) of the Trust
Indenture Act.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall:
(1) file with the Trustee, within 30 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 Exchange Act; 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 Exchange Act 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;
(3) transmit by mail to all Holders, as their names and addresses appear
in the Security Register, (a) concurrently with furnishing the same to its
shareholders, the Company's annual report to shareholders, containing certified
financial statements, and any other financial reports which the Company
generally furnishes to its shareholders, and (b) within 30 days after the filing
thereof with the Trustee, such summaries of any other 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; and
(4) furnish to the Trustee, on or before May 1 of each year, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer of the Company as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture. For
purposes of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under this Indenture.
Such certificate need not comply with Section 102.
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ARTICLE 8
CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER
SECTION 801. When Company May Merge, Etc.
The Company shall not consolidate with, or merge with or into, any other
Person (whether or not the Company shall be the surviving corporation), or sell,
assign, convey, transfer or lease all or substantially all of its properties and
assets as an entirety or substantially as an entirety to any Person or group of
affiliated Persons, in one transaction or a series of related transactions,
unless:
(1) either the Company shall be the continuing Person or the Person (if
other than the Company) formed by such consolidation or with which or into which
the Company is merged or the Person (or group of affiliated Persons) to which
all or substantially all the properties and assets of the Company as an entirety
or substantially as an entirety are sold, assigned, transferred or leased shall
be a corporation (or constitute corporations) organized and existing under the
laws of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Securities and this Indenture; and
(2) immediately after giving effect to such transaction or series of
related transactions, no Event of Default and no Default shall have occurred and
be continuing.
SECTION 802. Opinion of Counsel.
The Company shall deliver to the Trustee prior to the proposed
transaction(s) covered by Section 801 an Officer's Certificate and an Opinion of
Counsel stating that the transaction(s) and such supplemental indenture comply
with this Indenture and that all conditions precedent to the consummation of the
transaction(s) under this Indenture have been met.
SECTION 803. Successor Corporation Substituted.
Upon any consolidation by the Company with or merger by the Company into
another corporation or any lease, sale, assignment, or transfer of all or
substantially all of the property and assets of the Company in accordance with
Section 801, the successor corporation formed by such consolidation or into
which the Company is merged or the successor corporation or affiliated group of
corporations to which such lease, sale, assignment, or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
corporation or corporations had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor corporation or
corporations shall be relieved of all obligations and covenants under this
Indenture and the Securities and in the event of such conveyance or transfer,
except in the case of a lease, any such predecessor corporation may be dissolved
and liquidated.
ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without notice to or the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company and
the assumption by any such successor of the covenants of the Company herein and
in the Securities; or
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(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 series) or to surrender any
right or power herein conferred upon the Company; or
(3) to add any additional Events of Default with respect to all or any
series of Securities; or
(4) to add or change any of the provisions of this Indenture to such
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; 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, defect or inconsistency or to correct or
supplement any provision herein which may be inconsistent with any other
provision herein; or
(10) to make any change that does not materially adversely affect the
interests of the Holders of Securities of any series.
Upon request of the Company, accompanied by a Board Resolution authorizing
the execution of any such supplemental indenture, and upon receipt by the
Trustee of the documents described in (and subject to the last sentence of)
Section 903, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the written consent of the Holders of a majority in principal amount
of the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee shall, subject
to Section 903, 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 extend the time for payment thereof, 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);
(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
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any waiver of compliance with certain provisions of this Indenture or Defaults
or Events of Default hereunder and their consequences provided for in this
Indenture; or
(3) change the redemption provisions (including Article Eleven) hereof in
a manner adverse to such Holder; or
(4) modify any of the provisions of this Section or Section 513 or Section
1010, 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, 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
provisions of this Indenture which as expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
The Trustee shall sign any supplemental indenture authorized pursuant to
this Article, subject to the last sentence of this Section 903. 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 Officer's Certificate and an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 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 Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
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ARTICLE 10
COVENANTS
SECTION 1001. Payments of Securities.
With respect to each series of Securities, the Company will duly and
punctually pay the principal of (and premium, if any) and interest on such
Securities in accordance with their terms and this Indenture, and will duly
comply with all the other terms, agreements and conditions contained in, or made
in the Indenture for the benefit of, the Securities of such series.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain an office or agency in each Place of Payment for
the Securities of any series where Securities of such series may be surrendered
for registration of transfer or exchange or for presentation for payment, and
where notices and demands to or upon the Company in respect of the Securities of
such series and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change ln location, of
such office or agency. 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 address of the Trustee as set forth in Section 105 hereof and
the Company hereby appoints the Trustee as its agent to receive all
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
Unless otherwise provided in or pursuant to this Indenture with respect to the
Securities of any series, the Company hereby designates as Places of Payment for
each series of Securities the Borough of Manhattan, The City of New York and
Chicago, Illinois.
SECTION 1003. Corporate Existence.
Subject to Article 8 hereof, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and that of each of its Subsidiaries and the material rights (charter
and statutory) of the Company and its Subsidiaries; provided, however, that (a)
the Company shall not be required to preserve any such right or the existence
(corporate or other) of any of its Subsidiaries if the Board of Directors, or
the board of directors of the Subsidiary concerned, as the case may be, shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company or any of its Subsidiaries and that the loss thereof
is not materially disadvantageous to the Holders, and (b) nothing herein
contained shall prevent any Subsidiary of the Company from liquidating or
dissolving, or merging into, or consolidating with the Company (provided that
the Company shall be the continuing or surviving corporation) or with any one or
more Subsidiaries if the Board of Directors or the board of directors of the
Subsidiary concerned, as the case may be, shall so determine.
SECTION 1004. Payment of Taxes and Other Claims.
The Company will pay or discharge, or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a material lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which adequate provision has been made.
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SECTION 1005. Maintenance of Properties.
The Company will cause all material properties used or useful in the
conduct of its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order (normal wear and
tear and casualty loss excepted) and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties, or disposing of any of them,
if such discontinuance or disposal is, in the judgment of the Board of Directors
or of the board of directors of the Subsidiary concerned, as the case may be,
desirable in the conduct of the business of the Company or any Subsidiary of the
Company and not materially disadvantageous to the Holders.
SECTION 1006. Compliance Certificates.
(a) The Company shall deliver to the Trustee within 90 days after the end
of each fiscal year of the Company (which fiscal year currently ends on November
30), an Officer's Certificate stating whether or not the signer knows of any
Default or Event of Default by the Company that occurred prior to the end of the
fiscal year and is then continuing. If the signer does know of such a Default or
Event of Default, the certificate shall describe each such Default or Event of
Default and its status and the specific section or sections of this Indenture in
connection with which such Default or Event of Default has occurred. The Company
shall also promptly notify the Trustee in writing should the Company's fiscal
year be changed so that the end thereof is on any date other than the date on
which the Company's fiscal year currently ends. The certificate need not comply
with Section 102 hereof.
(b) The Company shall deliver to the Trustee forthwith upon becoming aware
of a Default or Event of Default (but in no event later than 10 days after the
occurrence of each Default or Event of Default that is continuing), an Officer's
Certificate setting forth the details of such Default or Event of Default and
the action that the Company is taking or proposes to take with respect thereto
and the specific section or sections of this Indenture in connection with which
such Default or Event of Default has occurred.
SECTION 1007. Commission Reports.
(a) The Company shall file with the Trustee, within 30 days after it files
them with the Commission, copies of the quarterly and annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. If the Company is not subject to the requirement of
such Section 13 or 15(d) of the Exchange Act, the Company shall file with the
Trustee, within 30 days after it would have been required to file such
information with the Commission, financial statements, including any notes
thereto and, with respect to annual reports, an auditors' report by an
accounting firm of established national reputation and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
comparable to that which the Company would have been required to include in such
annual reports, information, documents or other reports if the Company had been
subject to the requirements of such Sections 13 or 15(d) of the Exchange Act.
The Company also shall comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
(b) So long as the Securities remain outstanding, the Company shall cause
its annual report to shareholders and any other financial reports furnished by
it to shareholders generally, to be mailed to the Holders at their addresses
appearing in the register of Securities maintained by the Security Registrar in
each case at the time of such mailing or furnishing to shareholders. If the
Company is not required to furnish annual or quarterly reports to its
shareholders pursuant to the Exchange Act, the Company shall cause its financial
statements, including any notes thereto and, with respect to annual reports, an
auditors' report by an accounting firm of established national reputation and a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," to be so filed with the Trustee and mailed to the Holders within 90
days after the end of each of the Company's fiscal years and within 45 days
after the end of each of the first three quarters of each fiscal year.
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(c) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Company may
be required to deliver to the Holders under this Section 1007.
SECTION 1008. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim,
and will actively resist any and all efforts to be compelled to take the benefit
or advantage of, any stay or extension law or any usury law or other law, which
would prohibit or forgive the Company from paying all or any portion of the
principal of and/or premium, if any, or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 1009. 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 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
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, prior to each due date of the principal of (and premium,
if any) or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure to so act.
The Company will cause each Paying Agent for any series of Securities
(other than the Trustee) to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest 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;
(ii) 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 on the Securities of that series;
and
(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Security of any series and remaining unclaimed for two years
after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof,
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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 New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 1010. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1004 or 1005 hereof, if before or
after the time for such compliance the Holders of not less than a majority in
principal amount of the Securities at the time Outstanding of each series which
is affected thereby, shall, by consent in writing 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 conditions except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE 11
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 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities 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 Officer's 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 not more than 90 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, substantially pro rata, by lot
or by any other method as the Trustee considers fair and appropriate and that
complies with the requirements of the principal national securities exchange, if
any, on which such Securities are listed, 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; provided that
in case the Securities of such series have different terms and maturities, the
Securities to be redeemed shall be selected by the Company and the Company shall
give notice thereof to the Trustee.
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.
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For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of the Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 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 this 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) that on the Redemption Date the Redemption Price will be come 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;
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price;
(6) that the redemption is for a sinking fund, if such is the case; and
(7) the CUSIP number, if any, of the Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1009) 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 (unless
otherwise specified in or pursuant to this Indenture) accrued and unpaid
interest thereon to the Redemption Date (subject to the proviso to the next
succeeding sentence)) 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 or Special Record Dates 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 such
Security or, if no such rate of interest is prescribed as aforesaid, at the rate
of interest borne by such Security.
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SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at
an office or agency of the Company 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 and Stated Maturity, 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.
ARTICLE 12
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 redemption 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 (1) may deliver Securities of a series (other than any
Securities previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; 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 45 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officer's
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 will also deliver to the Trustee any Securities to
be so delivered. 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.
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ARTICLE 13
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance.
Unless pursuant to Section 301 provision is made for the inapplicability
of either or both of (a) Defeasance of the Securities of a series under Section
1302 or (b) Covenant Defeasance of the Securities of a series under Section
1303, then the provisions of such Section or Sections, as the case may be,
together with the other provisions of this Article, shall be applicable to the
Securities of such series, and the Company may at its option by Board
Resolution, at any time, with respect to the Securities of such series, elect to
have either Section 1302 (unless inapplicable) or Section 1303 (unless
inapplicable) be applied to the Outstanding Securities of such series upon
compliance with the applicable conditions set forth below in this Article.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 1301 to
defease the Outstanding Securities of a particular series, the Company shall be
discharged (except as provided below) from its obligations with respect to the
Outstanding Securities of such series on the date the applicable conditions set
forth in Section 1304 are satisfied (hereinafter, "Defeasance"). Defeasance
shall mean that the Company shall be deemed to have paid and discharged the
entire indebtedness represented by the Outstanding Securities of such series and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same); provided, however, that the following rights, obligations, powers,
trusts, duties and immunities shall survive until otherwise terminated or
discharged hereunder: (A) the rights of Holders of Outstanding Securities of
such series to receive, solely from the trust fund provided for in Section 1304,
payments in respect of the principal of (and premium, if any) and interest on
such Securities when such payments are due, (B) the provisions of Sections 302,
303, 304, 305, 306, 1002, 1008 and 1009 hereof, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article. Subject to
compliance with this Article, the Company may exercise its option with respect
to Defeasance under this Section 1302 notwithstanding the prior exercise of its
option with respect to Covenant Defeasance under Section 1303 in regard to the
Securities of such series.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 1301 to
obtain a Covenant Defeasance with respect to the Outstanding Securities of a
particular series, the Company shall be released from its obligations under
Sections 1004 and 1005 of this Indenture with respect to the Outstanding
Securities of such series on and after the date the applicable conditions set
forth in Section 1304 are satisfied (hereinafter, "Covenant Defeasance").
Covenant Defeasance shall mean that, with respect to the Outstanding Securities
of such series, the Company may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in Sections 1004 and
1005 of this Indenture, whether directly or indirectly by reason of any
reference elsewhere herein or by reason of any reference to any other provision
herein or in any other document, and such omission to comply shall not
constitute an Event of Default under Section 501(3) with respect to Outstanding
Securities of such series, and the remainder of this Indenture and of the
Securities of such series shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to Defeasance under Section 1302 and
Covenant Defeasance under Section 1303 with respect to the Outstanding
Securities of a particular series:
(1) the Company shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 609
who shall agree to comply with the provisions of this Article applicable to it),
under the terms of an irrevocable trust agreement in form and substance
reasonably satisfactory to such Trustee, as trust funds in trust for the purpose
of making the following payments, specifically pledged as security
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for, and dedicated solely to, the benefit of the Holders of such Securities, (A)
Dollars in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than the due date of any payment, money
in an amount, or (C) a combination thereof, in each case sufficient, after
payment of all federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge, (i) the principal of (and premium, if any, on) and each installment
of principal of (and premium, if any) and interest on the Outstanding Securities
of such series on the Stated Maturity of such principal or installment of
principal or interest and (ii) any mandatory sinking fund payments or analogous
payments applicable to the Outstanding Securities of such series on the day on
which such payments are due and payable in accordance with the terms of this
Indenture and of such Securities.
(2) No Default or Event of Default with respect to the Securities of such
series shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit, and no Default or Event of Default
under clause (4) or (5) of Section 501 hereof shall occur and be continuing at
any time during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied until the
expiration of such period).
(3) Such deposit, Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(4) Such Defeasance or Covenant Defeasance shall not cause any Securities
of such series then listed on any national securities exchange registered under
the Exchange Act to be delisted.
(5) In the case of an election with respect to Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture there has been a change
in applicable federal income tax law, in either case to the effect that, and
based thereon such opinion shall confirm that, the Holders of the Outstanding
Securities of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Defeasance had not occurred.
(6) In the case of an election with respect to Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel or a ruling directed
to the Trustee received from the Internal Revenue Service to the effect that the
Holders of the Outstanding Securities of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred.
(7) Such Defeasance or Covenant Defeasance shall be effected in compliance
with any additional terms, conditions or limitations which may be imposed on the
Company in connection therewith pursuant to Section 301.
(8) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Defeasance under Section 1302 or
the Covenant Defeasance under Section 1303 (as the case may be) have been
complied with.
SECTION 1305. Deposited Money and Government Obligations To Be Held In
Trust.
Subject to the provisions of the last paragraph of Section 1009, all money
and Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee--collectively for purposes of this Section
1305, the "Trustee") pursuant to Section 1304 in respect of the Outstanding
Securities of a particular series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (other
than the Company acting as its own
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Paying Agent) as the Trustee may determine, to the Holders of such Securities of
all sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof, other than any such tax, fee or other charge which by law is
for the account of the Holders of the Outstanding Securities of such series.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver to pay to the Company from time to time upon Company Request any
money or Government Obligations held by it as provided ln Section 1304 which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited for
the purpose of effecting Defeasance or Covenant Defeasance, as the case may be,
of the Securities of the applicable series.
SECTION 1306. Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations deposited pursuant to Section 1304 in accordance with
this Indenture or the Securities of the applicable series by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1304 until such time as the Trustee or Paying Agent is permitted to
apply such money in accordance with this Indenture and the Securities of such
series; provided, however, that if the Company makes any payment of principal
of, premium, if any, or interest on any Security of such series following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the cash and U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 14
MISCELLANEOUS
SECTION 1401. Miscellaneous.
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.
49
<PAGE> 57
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.
KAUFMAN AND BROAD HOME
CORPORATION
By /s/ Dennis Welsch
----------------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
Attest:
/s/ Kimberly N. King
- ----------------------------------
Name: Kimberly N. King
Title: Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By /s/ Mark J. Frye
----------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
Attest:
/s/ Steve M. Wagner
- ----------------------------------
Name: Steve M. Wagner
Title: Vice President
<PAGE> 1
Exhibit 4.14
-----------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 7, 1998
between
KAUFMAN AND BROAD HOME CORPORATION
AS ISSUER
and
THE FIRST NATIONAL BANK OF CHICAGO
AS TRUSTEE
-----------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS....................................................................1
SECTION 1.1. Definition of Terms...............................................1
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES.................................3
SECTION 2.1. Designation and Principal Amount..................................3
SECTION 2.2. Maturity..........................................................3
SECTION 2.3. Form and Payment..................................................3
SECTION 2.4. Global Debenture..................................................3
SECTION 2.5. Interest..........................................................4
ARTICLE III
REDEMPTION OF THE DEBENTURES...................................................5
SECTION 3.1. Tax Event Redemption..............................................5
SECTION 3.2. Redemption Procedure for Debentures...............................5
SECTION 3.3. No Sinking Fund...................................................6
SECTION 3.4. Option to Put Debentures upon a Failed Remarketing................6
SECTION 3.5. Repurchase Procedure for Debentures...............................6
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD...........................................6
SECTION 4.1. Extension of Interest Payment Period..............................6
SECTION 4.2. Notice of Extension...............................................7
ARTICLE V
EXPENSES.......................................................................8
SECTION 5.1. Payment of Expenses...............................................8
SECTION 5.2. Payment Upon Resignation or Removal...............................8
ARTICLE VI
NOTICE.........................................................................8
SECTION 6.1. Notice by the Company.............................................8
i
<PAGE> 3
Page
----
ARTICLE VII
FORM OF DEBENTURE..............................................................9
SECTION 7.1. Form of Debenture.................................................9
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES..................................................17
SECTION 8.1. Original Issue of Debentures.....................................17
ARTICLE IX
MISCELLANEOUS.................................................................17
SECTION 9.1. Ratification of Indenture........................................17
SECTION 9.2. Trustee Not Responsible for Recitals.............................17
SECTION 9.3. Governing Law....................................................17
SECTION 9.4. Separability.....................................................17
SECTION 9.5. Counterparts.....................................................17
SECTION 9.6. Guarantee and Declaration........................................18
ARTICLE X
REMARKETING...................................................................18
SECTION 10.1. Effectiveness of this Article...................................18
SECTION 10.2. Remarketing Procedures..........................................18
ii
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE, dated as of July 7, 1998 (the "First
Supplemental Indenture"), between Kaufman and Broad Home Corporation, a
corporation duly organized and existing under the laws of the State of Delaware
(the "Company"), and The First National Bank of Chicago, as trustee (the
"Trustee").
WHEREAS, the Company executed and delivered the Indenture dated as of July
7,1998 (the "Base Indenture") to the Trustee to provide for the issuance of the
Company's senior unsecured debentures, notes or other evidence of indebtedness
(the "Securities"), to be issued from time to time in one or more series as
might be determined by the Company under the Base Indenture;
WHEREAS, pursuant to the terms of the Base Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its 8% Debentures due August 16, 2003 (the "Debentures"), the form and terms
of such Debentures and the terms, provisions and conditions thereof to be set
forth as provided in the Base Indenture and this First Supplemental Indenture
(together, the "Indenture");
WHEREAS, KBHC Financing I, a Delaware statutory business trust (the
"Trust"), is issuing its 8 % Capital Securities (the "Capital Securities"),
representing, undivided beneficial ownership interests in the assets of the
Trust, and proposes to invest the proceeds from such issuance, together with the
proceeds of the issuance and sale by the Trust to the Company of its 8% Common
Securities (the "Common Securities" and together with the Capital Securities,
the "Trust Securities"), in the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture and all requirements necessary to make this
First Supplemental Indenture a valid, binding and enforceable instrument in
accordance with its terms, and to make the Debentures, when executed by the
Company and authenticated and delivered by the Trustee, the valid, binding and
enforceable obligations of the Company, have been done and performed, and the
execution and delivery of this First Supplemental Indenture has been duly
authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Base Indenture, the form and terms of the Debentures, the
Company covenants and agrees with the Trustee as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Base Indenture has the same meaning when used in
this First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) headings are for convenience of reference only and do not affect
interpretation;
(e) the following terms have the meanings given to them in the
Declaration: (i) Applicable Principal Amount; (ii) Authorized Newspaper; (iii)
Clearing Agency; (iv) Delaware Trustee; (v) DTC; (vi) FELINE PRIDES; (vii)
Growth PRIDES; (viii) Income PRIDES; (ix) Institutional Trustee; (x) Investment
Company Event; (xi) Capital Security
<PAGE> 5
Certificate; (xii) Distributions; (xiii) Purchase Contract Agreement; (xiv)
Quotation Agent; (xv) Regular Trustees; (xvi) Redemption Amount, (xvii) Reset
Agent; (xviii) Reset Announcement Date; (xix) Reset Rate (xx) Reset Spread;(xxi)
Tax Event; (xxii) Tax Event Redemption Date; (xxiii) Treasury Portfolio Purchase
Price; (xxiv) Treasury Portfolio; (xxv) Treasury Securities, (xxvi) Two-Year
Benchmark Treasury; (xxvii) Guarantee; and (xxviii) Underwriting Agreement.
The terms "Cash Settlement" and "Purchase Contract Agent" shall have the
respective meanings in the Purchase Contract Agreement.
(f) the following terms have the meanings given to them in this Section
1.1(f):
"Compound Interest" shall have the meaning set forth in Section 4.1.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Custodial Agent" means The Bank of New York, as Custodial Agent.
"Debentures" shall have the meaning specified in Section 2.1.
"Debenture Repayment Price" shall have the meaning set forth in Section
3.4.
"Declaration" means the Amended and Restated Declaration of Trust of KBHC
Financing I, a Delaware statutory business trust, dated as of July 7, 1998.
"Deferred Interest" shall have the meaning set forth in Section 4.1
hereof.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Tax Event, an Investment Company Event or otherwise, the Trust
is to be dissolved in accordance with the Declaration, and, except in the case
of a Tax Event Redemption, the Debentures held by the Institutional Trustee are
to be distributed to the holders of the Trust Securities issued by the Trust pro
rata in accordance with the Declaration.
"Exchange Agent" means the Institutional Trustee.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Failed Remarketing" shall have the meaning set forth in Section 10.2(h).
"Global Debentures" shall have the meaning set forth in Section 2.4.
"Maturity Date" shall have the meaning specified in Section 2.2.
"Non Book-Entry Capital Securities" shall have the meaning set forth in
Section 2.4.
"Pledge Agreement" means the Pledge Agreement dated as of July 7, 1998,
among the Company, the Trust, The Bank of New York, as collateral agent (the
"Collateral Agent"), custodial agent and securities intermediary and The First
National Bank of Chicago, as purchase contract agent and attorney-in-fact.
"Purchase Contract" shall have the meaning set forth in the Purchase
Contract Agreement.
"Purchase Contract Settlement Date" means August 16, 2001.
2
<PAGE> 6
"Put-Option" shall have the meaning set forth in Section 3.4.
"Put-Option Exercise Date" shall have the meaning set forth in Section
3.4.
"Regular Record Date" means, with respect to any Interest Payment Date for
the Debentures, the close of business on the Business Day next preceding such
Interest Payment Date; provided, however, if the Debentures shall not continue
to remain in book-entry only form or are not in book-entry only form at
issuance, the Regular Record Dates for the Debentures shall conform to the rules
of any securities exchange on which the Debentures are listed and, if none,
shall be one Business Day before the relevant Interest Payment Dates, which
payment dates shall correspond to the distribution payment dates on the Capital
Securities.
"Remarketing Agent" means Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated or any successor thereto or replacement Remarketing
Agent under the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement, dated as of July
7, 1998, among the Company, the Trust, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as remarketing agent and The First National
Bank of Chicago, as purchase contract agent and attorney-in-fact.
"Remarketing" and "Remarketing Date" shall have the meanings set forth in
the Remarketing Agreement.
The terms "First Supplemental Indenture," "Base Indenture," "Debentures,"
"Trust," "Capital Securities," "Common Securities" and "Trust Securities" shall
have the respective meanings set forth in the recitals to this First
Supplemental Indenture and the paragraph preceding such recitals.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Securities designated the 8%
Debentures due August 16, 2003, (the "Debentures") limited (except as otherwise
provided in Section 301(2) of the Indenture) in aggregate principal amount to
$195,618,560. The Debentures may be issued from time to time upon written order
of the Company for the authentication and delivery of Debentures pursuant to
Section 303 of the Base Indenture.
SECTION 2.2. Maturity. The date upon which the Debentures shall become due and
payable at final maturity is August 16, 2003 (the "Maturity Date").
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Debentures shall be issued in fully
registered certificated form without interest coupons, bearing identical terms.
Principal of and premium, if any, and interest on the Debentures will be
payable, the transfer of such Debentures will be registrable and such Debentures
will be exchangeable for Debentures bearing identical terms and provisions at
the office or agency of the Company maintained for such purpose as described
below; provided, however, that payment of interest may be made at the option of
the Company by check mailed to the Holder at such address as shall appear in the
Security Register. Notwithstanding the foregoing, so long as the Holder of any
Debentures is the Institutional Trustee, the payment of the principal of and
premium, if any, and interest (including Compound Interest and expenses and
taxes of the Trust set forth in Section 4.1 hereof, if any) on such Debentures
held by the Institutional Trustee will be made at such place and to such account
as may be designated by the Institutional Trustee.
3
<PAGE> 7
The Company hereby designates each of Chicago, Illinois and the Borough of
Manhattan, The City of New York as a Place of Payment for the Debentures, and
the office or agency maintained by the Company in each such Place of Payment for
the purposes contemplated by Section 1002 of the Base Indenture and this Section
2.3 shall initially be the office of the Trustee located at c/o First Chicago
Trust Company of New York, 14 Wall Street, 8th Floor, New York, New York 10005,
and the Corporate Trust Office of the Trustee in Chicago, Illinois.
The Debentures shall be issuable in denominations of $10 and integral
multiples of $10 in excess thereof.
The Debentures may be issued, in whole or in part, in permanent global
form and, if issued in permanent global form, the U.S. Depositary shall be The
Depository Trust Company or such other depositary as any officer of the Company
may from time to time designate.
The Registrar and the Paying Agent and transfer agent for the Debentures
shall be the Trustee.
SECTION 2.4. Global Debenture.
(a) In connection with a Dissolution Event,
(i) Debentures in certificated form may be presented to the Trustee
by the Institutional Trustee in exchange for a global Debenture in an aggregate
principal amount equal to the aggregate principal amount of all outstanding
Debentures (a "Global Debenture"), to be registered in the name of the Clearing
Agency, or its nominee, for crediting to the accounts of its participants
pursuant to the instructions of the Regular Trustees. The Company upon any such
presentation shall execute a Global Debenture in such aggregate principal amount
and deliver the same to the Trustee for authentication and delivery in
accordance with the Indenture. Payments on the Debentures issued as a Global
Debenture will be made to the Clearing Agency; and
(ii) if any Capital Securities are held in non book-entry
certificated form, the Debentures in certificated form may be presented to the
Trustee by the Institutional Trustee and any Capital Security Certificate which
represents Capital Securities other than Capital Securities held by the Clearing
Agency or its nominee ("Non Book-Entry Capital Securities") will be deemed to
represent beneficial interests in the Debentures presented to the Trustee by the
Institutional Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non Book-Entry Capital Securities until such
Capital Security Certificates are presented to the Security Registrar for
transfer or reissuance at which time such Capital Security Certificates will be
cancelled and a Debenture, registered in the name of the holder of the Capital
Security Certificate or the transferee of the holder of such Capital Security
Certificate, as the case may be, with an aggregate principal amount equal to the
aggregate liquidation amount of the Capital Security Certificate cancelled, will
be executed by the Company and delivered to the Trustee for authentication and
delivery in accordance with the Indenture to such holder. On issue of such
Debentures, Debentures with an equivalent aggregate principal amount that were
presented by the Institutional Trustee to the Trustee will be deemed to have
been cancelled.
(b) Unless and until it is exchanged for the Debentures in registered
form, a Global Debenture may be transferred, in whole but not in part, only to
the Clearing Agency or a nominee of the Clearing Agency, or to a successor
Clearing Agency selected or approved by the Company or to a nominee of such
successor Clearing Agency.
(c) If at any (i) time the Clearing Agency notifies the Company that it is
unwilling or unable to continue as a Clearing Agency for the Global Debentures
and no successor Clearing Agency shall have been appointed within 90 days after
such notification, (ii) the Clearing Agency at any time ceases to be a clearing
agency registered under the Securities Exchange Act of 1934 at any time the
Clearing Agency is required to be so registered to act as such Clearing Agency
and no successor Clearing Agency shall have been appointed within 90 days after
the Trust or the Company becoming aware of the Clearing Agency's ceasing to be
so registered, (iii) the Company, in its sole discretion, determines that the
Global Debentures shall be so exchangeable or (iv) there shall have occurred and
be continuing an
4
<PAGE> 8
Event of Default, the Company will execute, and, subject to Article III of the
Base Indenture, the Trustee, upon written notice from the Company, will
authenticate and deliver the Debentures in definitive registered form without
coupons, in authorized denominations, and in an aggregate principal amount equal
to the principal amount of the Global Debenture in exchange for such Global
Debenture. Upon the exchange of the Global Debenture for such Debentures in
definitive registered form without coupons, in authorized denominations, the
Global Debenture shall be cancelled by the Trustee. Such Debentures in
definitive registered form issued in exchange for the Global Debenture shall be
registered in such names and in such authorized denominations as the Clearing
Agency, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities
to the Clearing Agency for delivery to the Persons in whose names such
Securities are so registered.
SECTION 2.5. Interest.
(a) Each Debenture will bear interest initially at the rate of 8 % per
annum (the "Coupon Rate") from the original date of issuance through and
including August 15, 2001 and at the Reset Rate thereafter until the principal
thereof is paid or duly made available for payment and, shall bear interest, to
the extent permitted by law, compounded quarterly, on any overdue principal and
premium, if any, and on any overdue installment of interest at the Coupon Rate
through and including August 15, 2001 and at the Reset Rate thereafter, payable
(subject to the provisions of Article IV herein) quarterly in arrears on
February 16, May 16, August 16 and November 16 of each year (each, an "Interest
Payment Date") commencing on August 16, 1998, to the Person in whose name such
Debenture, or any predecessor Debenture, is registered at the close of business
on the Regular Record Date for such interest installment.
(b) The interest rate on the Debentures will be reset on the third
Business Day immediately preceding the Purchase Contract Settlement Date to the
Reset Rate (which Reset Rate will become effective on and after the Purchase
Contract Settlement Date); provided that the Reset Rate shall not exceed the
maximum amount permitted by applicable law. On the Reset Announcement Date, the
Reset Spread and the relevant Two-Year Benchmark Treasury will be announced by
the Company. On the Business Day immediately following such Reset Announcement
Date, the Holders of Debentures will be notified of such Reset Spread and
Two-Year Benchmark Treasury by the Company. Such notice shall be sufficiently
given to such Holders of Debentures if published in an Authorized Newspaper.
(c) Not later than seven calendar days nor more than 15 calendar days
immediately preceding the Reset Announcement Date, the Company will request that
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee) or the Institutional Trustee, notify the Holders of Debentures of such
Reset Announcement Date and the procedures to be followed by such holders of
Debentures wishing to settle the related Purchase Contracts with separate cash
on the Business Day immediately preceding the Purchase Contract Settlement Date.
(d) The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Except as provided
in the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed on
the basis of the actual number of days elapsed in such a 90-day period. In the
event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
5
<PAGE> 9
ARTICLE III
REDEMPTION OF THE DEBENTURES
SECTION 3.1. Tax Event Redemption.
If a Tax Event shall occur and be continuing, the Company may, at its
option, redeem the Debentures in whole (but not in part) at any time at a
Redemption Price per Debenture equal to the Redemption Amount plus accrued and
unpaid interest thereon, including Compound Interest and the expenses and taxes
of the Trust set forth in Section 4.1 hereof, if any, to the date of such
redemption (the "Tax Event Redemption Date"). If, following the occurrence of a
Tax Event, the Company exercises its option to redeem the Debentures, then the
proceeds of such redemption, if distributed to the Institutional Trustee as the
sole Holder of such Debentures, will be applied by the Institutional Trustee to
redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so redeemed at the Redemption
Price. If, following the occurrence of a Tax Event prior to the Purchase
Contract Settlement Date, the Company exercises its option to redeem the
Debentures, the Company shall appoint the Quotation Agent to assemble the
Treasury Portfolio in consultation with the Company. Notice of any redemption
will be mailed at least 30 days but not more than 60 days before the Tax Event
Redemption Date to each registered Holder of the Debentures to be prepaid at its
registered address. Unless the Company defaults in payment of the Redemption
Price, on and after the Tax Event Redemption Date interest shall cease to accrue
on such Debentures.
SECTION 3.2. Redemption Procedure for Debentures.
Payment of the Redemption Price to each Holder of Debentures shall be made
by the Company, no later than 12:00 noon, New York City time, on the Tax Event
Redemption Date, by check or wire transfer in immediately available funds at
such place and to such account as may be designated by each such Holder of
Debentures, including the Institutional Trustee or the Collateral Agent, as the
case may be. If the Trustee holds immediately available funds sufficient to pay
the Redemption Price of the Debentures, then, on such Tax Event Redemption Date,
such Debentures will cease to be outstanding and interest thereon will cease to
accrue, whether or not such Debentures have been received by the Company, and
all other rights of the Holder in respect of the Debentures shall terminate and
lapse (other than the right to receive the Redemption Price upon delivery of
such Debentures but without interest on such Redemption Price).
SECTION 3.3. No Sinking Fund.
The Debentures are not entitled to the benefit of any sinking fund.
SECTION 3.4. Option to Put Debentures upon a Failed Remarketing.
If a Failed Remarketing (as described in Section 5.4(b) of the Purchase
Contract Agreement and incorporated herein by reference) has occurred, each
holder of Trust Securities who holds such Trust Securities on the day
immediately following the Purchase Contract Settlement Date, or, if the Trust
Securities shall have been exchanged for Debentures, each holder of Debentures
who holds such Debentures on the day immediately following the Purchase Contract
Settlement Date shall have the right (the "Put Option") on the Business Day
immediately following August 16, 2001, to require, in the case of Trust
Securities, the Trust to distribute their pro rata share of Debentures to the
Exchange Agent and, in either case, to require the Exchange Agent to put such
Debentures to the Company, on behalf of such holders on September 1, 2001 (the
"Put Option Exercise Date"), upon at least three Business Days prior notice, at
a repayment price of $10 per Debenture plus an amount equal to the accrued and
unpaid interest (including deferred interest, if any) thereon to the date of
payment (the "Debenture Repayment Price").
SECTION 3.5. Repurchase Procedure for Debentures.
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<PAGE> 10
(a) In order for the Debentures to be repurchased on the Put Option
Exercise Date, the Trustee must receive on or prior to 5:00 p.m. New York City
time on the third Business Day immediately preceding the Put Option Exercise
Date, at its Corporate Trust Office in Chicago, Illinois or at an office or
agency maintained by the Company in the Borough of Manhattan, The City of New
York as contemplated by Section 2.3 hereof, the Debentures to be repurchased
with the form entitled "Option to Elect Repayment" on the reverse of or
otherwise accompanying such Debentures duly completed. Any such notice received
by the Trustee shall be irrevocable. All questions as to the validity,
eligibility (including time of receipt) and acceptance of the Debentures for
repayment shall be determined by the Company, whose determination shall be final
and binding.
(b) Payment of the Debenture Repayment Price to the Exchange Agent
shall be made through the Trustee, subject to the Trustee's receipt of payment
from the Company in accordance with the terms of the Indenture, no later than
12:00 noon, New York City time, on the Put Option Exercise Date, and to such
account as may be desig nated by the Exchange Agent. If the Trustee holds
immediately available funds sufficient to pay the Debenture Repayment Price of
the Debentures presented for repayment, then, immediately prior to the close of
business on the Put Option Exercise Date, such Debentures will cease to be
outstanding and interest thereon will cease to accrue, whether or not such
Debentures have been received by the Company, and all other rights of the Holder
in respect of the Debentures, including the Holder's right to require the
Company to repay such Debentures, shall terminate and lapse (other than the
right to receive the Debenture Repayment Price upon delivery of such Debentures
but without interest on such Debenture Repayment Price). Neither the Trustee nor
the Company will be required to register or cause to be registered the transfer
of any Debenture for which repayment has been elected.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
The Company shall have the right at any time, and from time to time,
during the term of the Debentures to defer payments of interest by extending the
interest payment period of such Debentures for a period not extending, in the
aggregate, beyond the Maturity Date of the Debentures (the "Extended Interest
Payment Period"), during which Extended Interest Payment Period no interest
shall be due and payable; provided that each Extended Interest Payment period
must end on an Interest Payment Date. To the extent permitted by applicable law,
interest, the payment of which has been deferred because of the extension of the
interest payment period pursuant to this Section 4.1, will bear interest thereon
at the rate of 8% per annum through and including August 15, 2001, and at the
Reset Rate thereafter, compounded quarterly on each Interest Payment Date of the
Extended Interest Payment Period ("Compound Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all interest accrued and
unpaid on the Debentures, including any expenses and taxes of the Trust set
forth in Section 5.1 hereof and Compound Interest (together, "Deferred
Interest") that shall be payable to the Holders of the Debentures in whose names
the Debentures are registered in the Security Register at the close of business
on the Regular Record Date next preceding the Interest Payment Date on which
such Extended Interest Payment Period ends; provided, however, that during any
such Extended Interest Payment Period, (a) the Company shall not declare or pay
dividends on, or make any distribution with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of capital stock of the Company in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security outstanding on the date of such event
requiring the Company to purchase capital stock of the Company, (ii) as a result
of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (iv) dividends or distributions in capital stock of the Company (or
rights to acquire capital stock) or repurchases or redemptions of capital stock
solely from the issuance or exchange of capital stock or (v) redemptions or
repurchases of any rights outstanding under a
7
<PAGE> 11
shareholder rights plan or the declaration thereunder of a dividend of rights in
the future), and (b) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Guarantee). Prior
to the termination of any Extended Interest Payment Period, the Company may
further extend such period, provided that such period together with all such
previous and further extensions thereof shall not extend beyond the Maturity
Date of the Debentures or end other than on an Interest Payment Date for the
Debentures. Upon the termination of any Extended Interest Payment Period and the
payment of all Deferred Interest then due, the Company may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company, at its option, may prepay on any
Interest Payment Date all or any portion of the Deferred Interest accrued during
the then elapsed portion of an Extended Interest Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Institutional Trustee is the only registered Holder of the
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Regular Trustees, the Institutional
Trustee and the Trustee of its selection of such Extended Interest Payment
Period one Business Day before the earlier of (i) the next succeeding date on
which Distributions on the Trust Securities issued by the Trust are payable, or
(ii) the date the Trust is required to give notice of the record date, or the
date such Distributions are payable, to The New York Stock Exchange, Inc. (the
"NYSE") or other applicable self-regulatory organization or to holders of the
Capital Securities issued by the Trust, but in any event at least one Business
Day before such record date.
(b) If the Institutional Trustee is not the only Holder of the Debentures
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the Holders of the Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to the NYSE or other applicable self-regulatory
organization or to Holders of the Debentures.
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Debentures to
the Institutional Trustee and in connection with the sale of the Trust
Securities by the Trust, the Company, in its capacity as borrower with respect
to the Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale and issuance
of the Debentures, including commissions to the underwriters payable pursuant to
the Underwriting Agreement and compensation of the Trustee under the Indenture
in accordance with the provisions of Section 607 of the Base Indenture;
(b) be responsible for and pay all debts and obligations (other than with
respect to the Trust Securities) and all costs and expenses of the Trust and any
and all other amounts specified in Section 4.4(b) of the Declaration including,
but not limited to, costs and expenses relating to the organization of the
Trust, the offering, sale and issuance of the Trust Securities (including
commissions to the underwriters in connection therewith), the fees and expenses
of the Institutional Trustee and the Delaware Trustee, the costs and expenses
relating to the operation of the Trust, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses incurred
in connection with the acquisition, financing, and disposition of Trust assets)
to which the Trust might become subject;
8
<PAGE> 12
(c) be primarily liable for any indemnification obligations arising with
respect to the Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
SECTION 5.2. Payment Upon Resignation or Removal.
Upon termination of this First Supplemental Indenture or the Base
Indenture or the removal or resignation of the Trustee, the Company shall pay to
the Trustee all amounts accrued to the date of such termination, removal or
resignation. Upon termination of the Declaration or the removal or resignation
of the Delaware Trustee or the Institutional Trustee, as the case may be, the
Company shall pay to the Delaware Trustee or the Institutional Trustee, as the
case may be, all amounts accrued to the date of such termination, removal or
resignation.
ARTICLE VI
NOTICE
SECTION 6.1. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company that would prohibit the making of
any payment of monies to or by the Trustee in respect of the Debentures.
Notwithstanding any of the provisions of the Base Indenture and this First
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Debentures; provided, however, that if
the Trustee shall not have received the notice provided for in this Article VI
at least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (or premium, if any) or interest on any Debenture),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days prior
to such date.
ARTICLE VII
FORM OF DEBENTURE
SECTION 7.1. Form of Debenture.
The Debentures and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms, with such
changes therein as the officers of the Company executing the Debentures (by
manual or facsimile signature) may approve, such approval to be conclusively
evidenced by their execution thereof:
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - THIS DEBENTURE IS
A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF THE CLEARING AGENCY OR A NOMINEE OF THE
CLEARING AGENCY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE CLEARING
AGENCY TO A NOMINEE
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<PAGE> 13
OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING
AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.]
UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY DEBENTURE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]
No.__________________________
$____________________________
KAUFMAN AND BROAD HOME CORPORATION
8% DEBENTURE
DUE AUGUST 16, 2003
KAUFMAN AND BROAD HOME CORPORATION, a Delaware corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ____________, as
Institutional Trustee or registered assigns, the principal sum of ____________
Dollars ($______________) on August 16, 2003 (such date is hereinafter referred
to as the "Maturity Date"), and to pay interest on said principal sum from July
7, 1998, or from the most recent date to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
February 16, May 16, August 16 and November 16 of each year (each such date, an
"Interest Payment Date"), commencing on August 16, 1998, initially at the rate
of 8% per annum through and including August 15, 2001 and at the Reset Rate
thereafter until the principal hereof shall have been paid or duly made
available for payment and, to the extent permitted by law, to pay interest,
compounded quarterly, on any overdue principal and premium, if any, and on any
overdue installment of interest at the rate per annum of 8% through and
including August 15, 2001 and at the Reset Date thereafter. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year consisting of twelve 30-day months and, except as provided in the
Indenture (as defined below), the amount of interest payable for any period
shorter than a full quarterly period for which interest is computed will be
computed on the basis of the actual number of days elapsed in such 90-day
period. In the event that any date on which interest is payable on this
Debenture is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such Interest Payment Date. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the person in whose name this
Debenture (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest installment which shall be
the close of business on the business day next preceding such Interest Payment
Date or, if the Debentures shall not continue to remain in book-entry only form
or are not in book-entry only form at issuance, the Regular Record Dates for the
Debentures shall conform to the rules of any securities exchange on which the
Debentures are listed and, if none, shall be one Business Day before the
relevant Interest Payment Dates. Any such interest installment not punctually
paid or duly provided for on any Interest Payment Date shall forthwith cease to
be payable to the registered Holders at the close of business on such Regular
Record Date and may be paid to the Person in whose name this
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<PAGE> 14
Debenture (or one or more Predecessor Securities) is registered at the close of
business on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered Holders
of this series of Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The principal of (and premium, if any) and the
interest on this Debenture shall be payable at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York and in Chicago, Illinois, in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered Holder at such address
as shall appear in the Security Register or by wire transfer to an account
appropriately designated by the Holder entitled thereto. Notwithstanding the
foregoing, so long as the Holder of this Debenture is the Institutional Trustee
or the Collateral Agent, the payment of the principal of (and premium, if any)
and interest on this Debenture will be made at such place and to such account as
may be designated in writing by the Institutional Trustee or the Collateral
Agent.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, senior and unsecured and will rank in right of payment on parity
with all other senior unsecured obligations of the Company.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to or be valid or obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.
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<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated:________, 1998
KAUFMAN AND BROAD HOME CORPORATION
By:
--------------------------------
Name:
Title:
Attest:
By:
--------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in the
within-mentioned Indenture.
Dated________________
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By:
--------------------------
Authorized Signatory
<PAGE> 16
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Securities of the
Company (herein sometimes referred to as the "Debentures"), issued and to be
issued in one or more series under and pursuant to an Indenture dated as of July
7, 1998 (the "Base Indenture") between the Company and The First National Bank
of Chicago, as Trustee (the "Trustee," which term includes any successor trustee
under the Indenture), as supplemented by a First Supplemental Indenture, dated
as of July 7, 1998 (the "First Supplemental Indenture") between the Company and
the Trustee (the Base Indenture as so supplemented, the "Indenture"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Debentures. By the terms of the Indenture, the Securities are issuable in series
that may vary as to amount, date of maturity, rate of interest and in other
respects as provided in the Indenture. This series of Securities is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
If a Tax Event shall occur and be continuing, the Company may, at its
option, redeem the Debentures in whole (but not in part) at any time at a
Redemption Price per Debenture equal to the Redemption Amount plus accrued and
unpaid interest thereon, including Compound Interest and expenses and taxes of
the Trust to the Tax Event Redemption Date. The Redemption Price shall be paid
to each Holder of the Debentures by the Company, no later than 12:00 noon, New
York City time, on the Tax Event Redemption Date, by check or wire transfer in
immediately available funds, at such place and to such account as may be
designated by each such Holder.
The Debentures are not entitled to the benefit of any sinking fund.
If a Failed Remarketing (as described in Section 5.4(b) of the Purchase
Contract Agreement and incorporated herein by reference) has occurred, each
holder of Trust Securities who holds such Trust Securities on the day
immediately following the Purchase Contract Settlement Date, or, if the Trust
Securities shall have been exchanged for Debentures, each holder of Debentures
who holds such Debentures on the day immediately following the Purchase Contract
Settlement Date shall have the right (the "Put Option") on the Business Day
immediately following August 16, 2001, to require, in the case of Trust
Securities, the Trust to distribute their pro rata share of Debentures to the
Exchange Agent and, in either case, to require the Exchange Agent to put such
Debentures to the Company, on behalf of such holders on September 1, 2001 (the
"Put Option Exercise Date"), upon at least three Business Days prior notice), at
a repayment price of $10 per Debenture plus an amount equal to the accrued and
unpaid interest (including deferred interest, if any) thereon to the date of
payment (the "Debenture Repayment Price").
In order for the Debentures to be so repurchased, the Trustee must
receive, on or prior to 5:00 p.m. New York City Time on the third Business Day
immediately preceding the Put Option Exercise Date, at its Corporate Trust
Office in Chicago, Illinois or at an office or agency maintained by the Company
in the Borough of Manhattan, The City of New York as contemplated by Section 2.3
of the First Supplemental Indenture, the Debentures to be repurchased with the
form entitled "Option to Elect Repayment" on the reverse of or otherwise
accompanying such Debentures duly completed. Any such notice received by the
Trustee shall be irrevocable. All questions as to the validity, eligibility
(including time of receipt) and acceptance of the Debentures for repayment shall
be determined by the Company, whose determination shall be final and binding.
The payment of the Debenture Repayment Price in respect of such Debentures shall
be made no later than 12:00 noon, New York City time, on the Put Option Exercise
Date.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable (or, in
certain circumstances shall ipso facto become due and payable), in the manner,
with the effect and subject to the conditions provided in the Indenture.
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<PAGE> 17
The Indenture contains provisions permitting, with certain exceptions
therein provided, the Company and the Trustee, with the consent of the Holders
of not less than a majority in aggregate principal amount of the Outstanding
Securities of each series affected to execute supplemental indentures for the
purpose of, among other things, adding any provisions to or changing or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying the rights of the Holders of the Securities. The
Indenture also contains provisions permitting the Holders of a majority in
aggregate principal amount of the Securities of any series at the time
Outstanding, on behalf of all of the Holders of all Securities of such series,
to waive a Default or Event of Default with respect to such series and its
consequences, except a Default or Event of Default in the payment of the
principal of or premium, if any, or interest on any of the Securities of such
series or in respect of a covenant or other provision which, under the terms of
the Indenture, cannot be modified or amended without the consent of the Holder
of each Outstanding Security of such series affected. Any such consent or waiver
by the registered Holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders of this Debenture and of any Debenture issued in exchange for or in
place hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the time and place and at the rate and in the
money herein prescribed.
So long as the Company is not in default in the payment of interest on the
Debentures, the Company shall have the right at any time, and from time to time
during the term of the Debentures to extend the interest payment period of the
Debentures for a period not extending, in the aggregate, beyond the Maturity
Date of the Debentures (an "Extended Interest Payment Period"); provided that
each Extended Interest Payment Period must end on an Interest Payment Date. To
the extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
this paragraph, will bear interest at the rate of 8% per annum through and
including August 15, 2001 and at the Reset Rate thereafter, compounded quarterly
on each Interest Payment Date of the Extended Interest Payment Period ("Compound
Interest"). At the end of an Extended Interest Payment Period, the Company shall
pay all interest then accrued and unpaid on the Debentures, including any
expense and taxes of the Trust set forth in Section 5.1 of the First
Supplemental Indenture and Compound Interest (together, "Deferred Interest"),
that shall be payable to the Holders of the Debentures in whose names the
Debentures are registered in the Security Register at the close of business on
the Regular Record Date next preceding the Interest Payment Date on which such
Extended Interest Payment Period ends. In the event that the Company exercises
this right, then (a) the Company shall not declare or pay dividends on, or make
any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding on the date of such event requiring the Company to
purchase capital stock of the Company, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) dividends
or distributions in capital stock of the Company (or rights to acquire capital
stock) or repurchases or redemptions of capital stock solely from the issuance
or exchange of capital stock or (v) redemptions or purchases of any rights
outstanding under a shareholder rights plan or the declaration thereunder of a
dividend of rights in the future) and (b) the Company shall not make any
guarantee payments with respect to the foregoing (other than payments pursuant
to the Guarantee). Prior to the termination of any such Extended Interest
Payment Period, the Company may further extend the interest payment period;
provided, that such Extended Interest Payment Period, together with all such
previous and further extensions thereof, may not extend beyond the Maturity Date
of the Debenture or end other than on an Interest Payment Date for the
Debentures. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid Deferred Interest and any additional
amount then due, the Company may commence a new Extended Interest Payment
Period, subject to the above requirements.
14
<PAGE> 18
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered Holder hereof on the
Security Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Company maintained for
such purpose in the Borough of Manhattan, The City of New York and Chicago,
Illinois, accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Debentures of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees. No
service charge will be made for any such transfer, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture,
the Company, the Trustee, any Paying Agent and the Security Registrar may deem
and treat the registered Holder hereof as the absolute owner hereof (whether or
not this Debenture shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any Paying Agent nor any Security Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, shareholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Indenture imposes certain limitations on the ability of the Company
to, among other things, merge or consolidate with any other Person or sell,
assign, transfer or lease all or substantially all of its properties or assets,
and requires that the Company comply with certain further covenants. All such
covenants and limitations are subject to a number of important qualifications
and exceptions. The Company must report periodically to the Trustee on
compliance with the covenants in the Indenture.
The Debentures of this series are issuable only in registered form without
coupons in denominations of $10 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Debentures are exchangeable for a like aggregate principal amount of Debentures
of a different authorized denomination, as requested by the Holder surrendering
the same.
All terms used in this Debenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
The Debentures are subject to Defeasance and Covenant Defeasance upon the
terms and subject to the conditions set forth in the Indenture.
This Debenture shall be governed by and construed in accordance with the
internal laws of the State of New York.
15
<PAGE> 19
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Company to
repay $_____ principal amount of the within Debenture, pursuant to its terms, on
the "Put Option Exercise Date," together with any interest thereon accrued but
unpaid to the date of repayment, to the undersigned at:
(Please print or type name and address of the undersigned)
and to issue to the undersigned, pursuant to the terms of the Indenture, a new
Debenture or Debentures representing the remaining aggregate principal amount of
this Debenture.
For this Option to Elect Repayment to be effective, this Debenture with the
Option to Elect Repayment duly completed must be received by the Trustee at
either c/o First Chicago Trust Company of New York, 14 Wall Street, 8th Floor,
New York, New York 10005, or its Corporate Trust Office at One First National
Plaza, Suite 0126, Chicago, Illinois, 60670-0126, Attention: Corporate Trust
Administration, no later than 5:00 p.m. on the third Business Day immediately
preceding September 1, 2001.
Dated:________________ Signature:___________________________________
Signature Guarantee: _______________________
Note: The signature to this Option to Elect Repayment must correspond with the
name as written upon the face of the within Debenture without alternation or
enlargement or any change whatsoever.
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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<PAGE> 20
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Debenture to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Debenture on the books of the Company. The agent may
substitute another to act for him or her.
Date: ____________________________________
Signature:_________________________________
Signature Guarantee:_______________________
(Sign exactly as your name appears on the other side of this Debenture)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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<PAGE> 21
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES
SECTION 8.1. Original Issue of Debentures.
Debentures in the aggregate principal amount of $195,618,560 may from time
to time, upon execution of this First Supplemental Indenture, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Debentures to or upon the written order
of the Company pursuant to Section 303 of the Base Indenture without any further
action by the Company.
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on Outstanding
Securities as of the end of the year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Ratification of Indenture.
The Indenture as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture shall
be deemed part of the Indenture in the manner and to the extent herein and
therein provided.
SECTION 9.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 9.3. Governing Law.
This First Supplemental Indenture and each Debenture shall be deemed to be
a contract made under the internal laws of the State of New York, and for all
purposes shall be governed by and construed in accordance with the laws of said
State.
SECTION 9.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, then, to the extent permitted
by law, such invalidity, illegality or unenforceability shall not affect any
other provisions of this First Supplemental Indenture or of the Debentures, but
this First Supplemental Indenture and the Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 9.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
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<PAGE> 22
SECTION 9.6. Guarantee and Declaration
The Guarantee and the Declaration shall be deemed to be specifically
described in this First Supplemental Indenture for purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE X
REMARKETING
SECTION 10.1. Effectiveness of this Article.
This Article Ten shall only become effective upon a Dissolution
Event which occurs prior to the Remarketing of the Capital Securities pursuant
to the Remarketing Agreement. Until such Dissolution Event, this Article Ten
shall have no effect.
SECTION 10.2. Remarketing Procedures.
(a) The Company will request, not later than 7 nor more than 15
calendar days prior to the Remarketing Date that the Clearing Agency notify the
Holders of the Debentures and the holders of Income PRIDES and Growth PRIDES of
the Remarketing and of the procedures that must be followed if a Holder of
Debentures wishes to exercise such Holder's rights with respect to the Put
Option if there is a Failed Remarketing.
(b) Not later than 5:00 P.M., New York City time, on the fifth
Business Day immediately preceding the Purchase Contract Settlement Date, each
Holder of the Debentures may elect to have Debentures held by such Holder
remarketed. Under Section 5.4 of the Purchase Contract Agreement, Holders of
Income PRIDES that do not give notice of intention to make a Cash Settlement of
their related Purchase Contracts shall be deemed to have consented to the
disposition of the Debentures comprising a component of such Income PRIDES.
Holders of Debentures that are not a component of Income PRIDES shall give
notice of their election to have such Debentures remarketed to the Custodial
Agent pursuant to the Pledge Agreement. Any such notice shall be irrevocable
after 5:00 P.M., New York City time, on the fifth Business Day immediately
preceding the Purchase Contract Settlement Date and may not be conditioned upon
the level at which the Reset Rate is established. Promptly after 5:30 P.M., New
York City time, on such fifth Business Day, the Institutional Trustee, based on
the notices received by it prior to such time (including notices from the
Purchase Contract Agent as to Purchase Contracts for which Cash Settlement has
been elected), shall notify the Trust, the Company and the Remarketing Agent of
the number of Debentures to be tendered for Remarketing.
(c) If any Holder of Income PRIDES does not give a notice of its
intention to make a Cash Settlement or gives a notice of election to tender
Debentures as described in Section 10.2(b), the Debentures of such Holder shall
be deemed tendered, notwithstanding any failure by such Holder to deliver or
properly deliver such Debentures to the Remarketing Agent for purchase.
(d) The right of each Holder to have Debentures tendered for
purchase shall be limited to the extent that (i) the Remarketing Agent conducts
a remarketing pursuant to the terms of the Remarketing Agreement, (ii)
Debentures tendered have not been called for redemption, (iii) the Remarketing
Agent is able to find a purchaser or purchasers for tendered Debentures at a
price of not less than 100% of the principal amount thereof, plus accrued and
unpaid interest thereon, and (iv) such purchaser or purchasers deliver the
purchase price therefor to the Remarketing Agent as and when required.
(e) On the Remarketing Date, the Remarketing Agent shall use
reasonable efforts to remarket at a price equal to approximately 100.75% of the
aggregate principal amount thereof, Debentures tendered or deemed tendered for
purchase.
19
<PAGE> 23
(f) If none of the Holders elect to have Debentures held by them
remarketed, the Reset Rate shall be the rate determined by the Remarketing
Agent, subject to the terms of the Remarketing Agreement, as the rate that would
have been established had a remarketing been held on the Remarketing Date.
(g) If the Remarketing Agent has determined that it will be able to
remarket all Debentures tendered or deemed tendered prior to 4:00 P.M., New York
City time, on the Remarketing Date, the Remarketing Agent shall determine the
Reset Rate, which shall be the rate per annum (rounded to the nearest
one-thousandth (0.001) of one percent per annum) which the Remarketing Agent
determines, subject to the terms of the Remarketing Agreement, to be the lowest
rate per annum that will enable it to remarket all Debentures tendered or deemed
tendered for remarketing.
(h) If, by 4:00 P.M., New York City time, on the Remarketing Date,
the Remarketing Agent is unable to remarket all Debentures tendered or deemed
tendered for purchase or if the Remarketing shall not have occurred because a
condition precedent to the Remarketing shall not have been fulfilled, a failed
remarketing ("Failed Remarketing") shall be deemed to have occurred and the
Remarketing Agent shall so advise by telephone the Collateral Agent, Company,
Institutional Trustee, Delaware Trustee and Clearing Agency.
(i) By approximately 4:30 P.M., New York City time, on the
Remarketing Date, provided that there has not been a Failed Remarketing, the
Remarketing Agent shall advise, by telephone (i) the Collateral Agent, Company,
Institutional Trustee, Delaware Trustee and Clearing Agency of the Reset Rate
determined in the Remarketing and the aggregate principal amount of Debentures
sold in the remarketing, (ii) each purchaser (or the Clearing Agency Participant
thereof) of the Reset Rate and the aggregate principal amount of Debentures such
purchaser is to purchase and (iii) each purchaser to give instructions to its
Clearing Agency Participant to pay the purchase price on the Purchase Contract
Settlement Date in same day funds against delivery of the Debentures purchased
through the facilities of the Clearing Agency.
(j) In accordance with the Clearing Agency's normal procedures, on
the Purchase Contract Settlement Date, the transactions described above with
respect to each Debenture tendered for purchase and sold in the remarketing
shall be executed through the Clearing Agency, and the accounts of the
respective Clearing Agency Participants shall be debited and credited and such
Debentures delivered by book entry as necessary to effect purchases and sales of
such Debentures. The Clearing Agency shall make payment in accordance with its
normal procedures.
(k) If any Holder selling Debentures in the Remarketing fails to
deliver such Debentures, the Clearing Agency Participant of such selling Holder
and of any other Person that was to have purchased Debentures in the Remarketing
may deliver to any such other Person an aggregate principal amount of Debentures
that is less than the aggregate principal amount of Debentures that otherwise
was to be purchased by such Person. In such event, the aggregate principal
amount of Debentures to be so delivered shall be determined by such Clearing
Agency Participant, and delivery of such lesser aggregate principal amount of
Debentures shall constitute good delivery.
(l) The Remarketing Agent is not obligated to purchase any
Debentures in a Remarketing or otherwise. Neither the Trust, any Trustee, the
Company nor the Remarketing Agent shall be obligated in any case to provide
funds to make payment upon tender of Debentures for remarketing.
(m) The tender and settlement procedures set in this Section 10.2,
including provisions for payment by purchasers of Debentures in the Remarketing,
shall be subject to modification, notwithstanding any provision to the contrary
set forth herein, to the extent required by the Clearing Agency or if the
book-entry system is no longer available for the Debentures at the time of the
Remarketing, to facilitate the tendering and Remarketing of Debentures in
certificated form. In addition, the Remarketing Agent may, notwithstanding any
provision to the contrary set forth herein, modify the settlement procedures set
forth herein in order to facilitate the settlement process.
20
<PAGE> 24
(n) Anything herein to the contrary notwithstanding, the Reset Rate
shall in no event exceed the maximum rate permitted by applicable law and, as
provided in the Remarketing Agreement, neither the Remarketing Agent nor the
Reset Agent (as defined in the Remarketing Agreement) shall have any obligation
to determine whether there is any limitation under applicable law on the Reset
Rate or, if there is any such limitation, the maximum permissible Reset Rate on
the Debentures and they shall rely solely upon written notice from the Company
(which the Company agrees to provide prior to the 10th Business Day before the
Purchase Contract Settlement Date) as to whether or not there is any such
limitation and, if so, the maximum permissible Reset Rate.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized, on the date or dates indicated in the acknowledgments and as of the
day and year first above written.
KAUFMAN AND BROAD HOME CORPORATION,
as Issuer
By: /s/ Michael F. Henn
-------------------------------
Name: Michael F. Henn
Title: Sr. Vice President and Chief
Financial Officer
By: /s/ Dennis Welsch
-------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By: /s/ Mark J. Frye
-------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
<PAGE> 1
Exhibit 4.15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KAUFMAN AND BROAD HOME CORPORATION
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS PURCHASE CONTRACT AGENT
-----------------
PURCHASE CONTRACT AGREEMENT
-----------------
DATED AS OF JULY 7, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS.................................................................... 1
ARTICLE I
Definitions and Other Provisions
of General Applications..................................................... 1
Section 1.1. Definitions.................................................. 1
Section 1.2. Compliance Certificates and Opinions......................... 12
Section 1.3. Form of Documents Delivered to Agent......................... 13
Section 1.4. Acts of Holders; Record Dates................................ 13
Section 1.5. Notices...................................................... 15
Section 1.6. Notice to Holders; Waiver.................................... 16
Section 1.7. Effect of Headings and Table of Contents..................... 17
Section 1.8. Successors and Assigns....................................... 17
Section 1.9. Separability Clause.......................................... 17
Section 1.10. Benefits of Agreement........................................ 17
Section 1.11. Governing Law................................................ 17
Section 1.12. Legal Holidays............................................... 18
Section 1.13. Counterparts................................................. 18
Section 1.14. Inspection of Agreement...................................... 18
ARTICLE II
Certificate Forms........................................................... 19
Section 2.1. Forms of Certificates Generally.............................. 19
Section 2.2. Form of Agent's Certificate of Authentication................ 20
ARTICLE III
The Securities.............................................................. 20
Section 3.1. Title and Terms; Denominations............................... 20
Section 3.2. Rights and Obligations Evidenced by the Certificates......... 21
Section 3.3. Execution, Authentication, Delivery and Dating............... 21
i
<PAGE> 3
Page
----
Section 3.4. Temporary Certificates....................................... 22
Section 3.5. Registration; Registration of Transfer and Exchange.......... 23
Section 3.6. Book-Entry Interests......................................... 25
Section 3.7. Notices to Holders........................................... 25
Section 3.8. Appointment of Successor Clearing Agency..................... 26
Section 3.9. Definitive Certificates...................................... 26
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates........... 26
Section 3.11. Persons Deemed Owners........................................ 28
Section 3.12. Cancellation................................................. 28
Section 3.14. Establishment or Reestablishment of Income PRIDES............ 31
Section 3.15. Transfer of Collateral upon Occurrence of Termination Event.. 32
Section 3.16. No Consent to Assumption..................................... 33
ARTICLE IV
The Capital Securities...................................................... 34
Section 4.1. Payment of Distribution; Rights to Distributions Preserved;
Distribution Rate Reset; Notice.............................. 34
Section 4.2. Notice and Voting............................................ 35
Section 4.3. Distribution of Debentures; Tax Event Redemption............. 36
ARTICLE V
The Purchase Contracts...................................................... 37
Section 5.1. Purchase of Shares of Common Stock........................... 37
Section 5.2. Contract Adjustment Payments................................. 39
Section 5.3. Deferral of Payment Dates For Contract Adjustment Payments... 40
Section 5.4. Payment of Purchase Price.................................... 42
Section 5.5. Issuance of Shares of Common Stock........................... 47
Section 5.6. Adjustment of Settlement Rate................................ 48
Section 5.7. Notice of Adjustments and Certain Other Events............... 54
Section 5.8. Termination Event; Notice.................................... 55
Section 5.9. Early Settlement............................................. 55
ii
<PAGE> 4
Page
----
Section 5.10. No Fractional Shares......................................... 58
Section 5.11. Charges and Taxes............................................ 58
ARTICLE VI
Remedies.................................................................... 59
Section 6.1. Unconditional Right of Holders to Receive Contract
Adjustment Payments and to Purchase Common Stock............. 59
Section 6.2. Restoration of Rights and Remedies........................... 59
Section 6.3. Rights and Remedies Cumulative............................... 59
Section 6.4. Delay or Omission Not Waiver................................. 60
Section 6.5. Undertaking for Costs........................................ 60
Section 6.6. Waiver of Stay or Extension Laws............................. 60
ARTICLE VII
The Agent................................................................... 61
Section 7.1. Certain Duties and Responsibilities.......................... 61
Section 7.2. Notice of Default............................................ 62
Section 7.3. Certain Rights of Agent...................................... 62
Section 7.4. Not Responsible for Recitals or Issuance of Securities....... 63
Section 7.5. May Hold Securities.......................................... 63
Section 7.6. Money Held in Custody........................................ 63
Section 7.7. Compensation and Reimbursement............................... 64
Section 7.8. Corporate Agent Required; Eligibility........................ 64
Section 7.9. Resignation and Removal; Appointment of Successor............ 65
Section 7.10. Acceptance of Appointment by Successor....................... 66
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business..................................................... 67
Section 7.12. Preservation of Information; Communications to Holders....... 67
Section 7.13. No Obligations of Agent...................................... 68
Section 7.14. Tax Compliance............................................... 68
ARTICLE VIII
Supplemental Agreements..................................................... 69
iii
<PAGE> 5
Page
----
Section 8.1. Supplemental Agreements Without Consent of Holders........... 69
Section 8.2. Supplemental Agreements with Consent of Holders.............. 69
Section 8.3. Execution of Supplemental Agreements......................... 71
Section 8.4. Effect of Supplemental Agreements............................ 71
Section 8.5. Reference to Supplemental Agreements......................... 71
ARTICLE IX
Consolidation, Merger, Sale or Conveyance................................... 72
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey
Property Except Under Certain Conditions..................... 72
Section 9.2. Rights and Duties of Successor Corporation................... 72
Section 9.3. Opinion of Counsel Given to Agent............................ 73
ARTICLE X
Covenants................................................................... 73
Section 10.1. Performance Under Purchase Contracts......................... 73
Section 10.2. Maintenance of Office or Agency.............................. 73
Section 10.3. Company to Reserve Common Stock.............................. 74
Section 10.4. Covenants as to Common Stock................................. 74
EXHIBIT A Form of Income PRIDES Certificate
EXHIBIT B Form of Growth PRIDES Certificate
EXHIBIT C Instruction to Collateral Agent
EXHIBIT D Instruction to Purchase Contract Agent
EXHIBIT E Notice to Settle with Separate Cash
iv
<PAGE> 6
PURCHASE CONTRACT AGREEMENT, dated as of July 7, 1998 between Kaufman and
Broad Home Corporation, a Delaware corporation (the "Company"), and The First
National Bank of Chicago, a national banking association, acting as purchase
contract agent for the Holders of Securities from time to time (the "Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Certificates evidencing the Securities.
All things necessary to make the Purchase Contracts, when the Certificates
are executed by the Company and authenticated, executed on behalf of the Holders
and delivered by the Agent, as provided in this Agreement, the valid obligations
of the Company, and to constitute these presents a valid agreement of the
Company, in accordance with its terms, have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed as follows:
ARTICLE I
Definitions and Other Provisions
of General Applications
Section 1.1. Definitions.
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular; and nouns and
pronouns of the masculine gender include the feminine and neuter genders;
<PAGE> 7
(b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States;
(c) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(d) the following terms have the meanings given to them in the
Declaration: (i) Applicable Ownership Interest; (ii) Applicable Principal
Amount; (iii) Authorized Newspaper; (iv) Indenture, (v) Investment Company
Event; (vi) Liquidation Distribution; (vii) Guarantee; (viii) Primary Treasury
Dealer; (ix) Quotation Agent; (x) Redemption Amount; (xi) Redemption Price;
(xii) Reset Agent; (xiii) Reset Announcement Date; (xiv) Reset Rate; (xv) Reset
Spread; (xvi) Tax Event; (xvii) Tax Event Redemption; (xviii) Tax Event
Redemption Date; (xix) Two-Year Benchmark Treasury; (xx) Treasury Portfolio;
(xxi) Treasury Portfolio Purchase Price; (xxii) Debentures; and (xxiii)
Remarketing Underwriting Agreement.
(e) the following terms have the meanings given to them in this Section
1.1(e).
"Act" when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1993, as amended, as is in effect on the date hereof.
"Agent" means the Person named as the "Agent" in the first paragraph of
this instrument until a successor Agent shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter "Agent" shall mean such
Person.
"Agreement" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more agreements supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Applicable Market Value" has the meaning specified in Section 5.1.
2
<PAGE> 8
"Bankruptcy Code" means title 11 of the United States Code, or any other
law of the United States that from time to time provides a uniform system of
bankruptcy laws.
"Beneficial Owner" means, with respect to a Book-Entry Interest, a Person
who is the owner of such Book-Entry Interest as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing
Agency).
"Board of Directors" means the board of directors of the Company or a duly
authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been 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 Agent.
"Book-Entry Interest" means a beneficial interest in a Global Certificate,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 3.6.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in New York City (in the State of New York)
are permitted or required by any applicable law to close.
"Capital Securities" means the 8% Capital Securities of the Trust, each
having a stated liquidation amount of $10, representing undivided beneficial
interests in the assets of the Trust.
"Cash Settlement" has the meaning set forth in Section 5.4(a)(i).
"Certificate" means an Income PRIDES Certificate or a Growth PRIDES
Certificate.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as a depositary for
the Securities and in whose name, or in the name of a nominee of that
organization, shall
3
<PAGE> 9
be registered a Global Certificate and which shall undertake to effect book
entry transfers and pledges of the Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Price" has the meaning specified in Section 5.1.
"Collateral" has the meaning specified in Section 2.1 of the Pledge
Agreement.
"Collateral Agent" means The Bank of New York, as Collateral Agent under
the Pledge Agreement until a successor Collateral Agent shall have become such
pursuant to the applicable provisions of the Pledge Agreement, and thereafter
"Collateral Agent" shall mean the Person who is then the Collateral Agent
thereunder.
"Collateral Substitution" has the meaning specified in Section 3.13.
"Common Stock" means the Common Stock, $1.00 par value, of the Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor shall have become such pursuant to the
applicable provision of this Agreement, and thereafter "Company" shall mean such
successor.
"Contract Adjustment Payments" means (i) in the case of Income PRIDES, the
amount payable by the Company in respect of each Purchase Contract initially
constituting a part of an Income PRIDES, equal to .25% per annum of the Stated
Amount and (ii) in the case of Growth PRIDES, the amount payable by the Company
in respect of each Purchase Contract initially constituting a part of a Growth
PRIDES, equal to .75% per annum of the Stated Amount, in each case computed on
the basis of a 360 day year of twelve 30 day months, plus any Deferred Contract
Adjustment Payments accrued pursuant to Section 5.2 or 5.3.
"Corporate Trust Office" means the principal corporate trust office of the
Agent at which, at any particular time, its corporate trust business shall be
adminis-
4
<PAGE> 10
tered, which office at the date hereof is located at One First National Plaza,
Suite 0126, Chicago, IL 60670-0126, Attention: Corporate Trust Services
Division.
"Coupon Rate" means the percentage rate per annum at which each Debenture
will bear interest initially.
"Current Market Price" has the meaning specified in Section 5.6(a)(8).
"Debentures" means the series of debentures of the Company designated the
8% Debentures due August 16, 2003, to be issued under the Indenture as of the
date hereof.
"Declaration" means the Amended and Restated Declaration of Trust of KBHC
Financing I, dated as of July 7, 1998, among the Company, as the sponsor, the
trustees named therein and the holders from time to time of the securities
representing undivided beneficial interests in the assets of the Trust.
"Deferred Contract Adjustment Payments" has the meaning specified in
Section 5.3.
"Depositary" means, initially, DTC until another Clearing Agency becomes
its successor.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Early Settlement" has the meaning specified in Section 5.9(a).
"Early Settlement Amount" has the meaning specified in Section 5.9(a).
"Early Settlement Date" has the meaning specified in Section 5.9(a).
"Early Settlement Rate" has the meaning specified in Section 5.9(b).
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time, and the rules and
regulations promulgated thereunder.
"Expiration Date" has the meaning specified in Section 1.4.
5
<PAGE> 11
"Expiration Time" has the meaning specified in Section 5.6(a)(6).
"Failed Remarketing" has the meaning specified in Section 5.4(b).
"Global Capital Security Certificate" means a certificate evidencing the
respective rights and obligations of Holders in respect of the number of Capital
Securities specified on such certificate and which is registered in the name of
a Clearing Agency or a nominee thereof.
"Global Certificate" means a Certificate that evidences all or part of the
Securities and is registered in the name of a Depositary or a nominee thereof.
"Growth PRIDES" means the collective rights and obligations of a Holder of
a Growth PRIDES Certificate in respect of the Treasury Securities, subject to
the Pledge thereof, and the related Purchase Contract.
"Growth PRIDES Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Growth PRIDES specified on
such certificate.
"Growth PRIDES Register" and "Growth PRIDES Registrar" have the respective
meanings specified in Section 3.5.
"Holder," when used with respect to a Security, means the Person in whose
name the Security evidenced by an Income PRIDES Certificate and/or a Growth
PRIDES Certificate is registered in the related Income PRIDES Register and/or
the Growth PRIDES Register, as the case may be.
"Income PRIDES" means the collective rights and obligations of a Holder of
an Income PRIDES Certificate in respect of a Capital Security or an appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
subject in each case to the Pledge thereof, and the related Purchase Contract.
"Income PRIDES Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Income PRIDES specified on
such certificate.
"Income PRIDES Register" and "Income PRIDES Registrar" have the respective
meanings specified in Section 3.5.
6
<PAGE> 12
"Indenture Trustee" means The First National Bank of Chicago, a national
banking association, as trustee under the Indenture, or any successor thereto.
"Institutional Trustee" means The First National Bank of Chicago, as
institutional trustee under the Declaration, or any successor thereto that is a
financial institution unaffiliated with the Company.
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Company by its Chairman of the Board, its President or a Vice
President and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Agent.
"NYSE" has the meaning specified in Section 5.1.
"New York Office" shall have the meaning set forth in Section 10.2
"Officer's Certificate" means a certificate of the Company signed on its
behalf by the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Agent.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
who may be an employee of or counsel to the Company or an Affiliate and who
shall be reasonably acceptable to the Agent.
"Outstanding Securities," with respect to the Income PRIDES or Growth
PRIDES, means, as of the date of determination, all Income PRIDES or Growth
PRIDES, as the case may be, evidenced by Certificates theretofore authenticated,
executed and delivered under this Agreement, except:
(i) If a Termination Event has occurred, (A) Growth PRIDES for which
the Stated Amount of Treasury Securities has been theretofore deposited
with the Agent in trust for the Holders of such Growth PRIDES and (B)
Income PRIDES for which the Stated Amount of the related Capital Security
or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, or a Liquidation Distribution in respect of such Capital
Security, as the case may be, has been theretofore deposited with the
Agent in trust for the Holders of such Income PRIDES;
7
<PAGE> 13
(ii) Income PRIDES and Growth PRIDES evidenced by Certificates
theretofore cancelled by the Agent or delivered to the Agent for
cancellation or deemed cancelled pursuant to the provisions of this
Agreement; and
(iii) Income PRIDES and Growth PRIDES evidenced by Certificates in
exchange for or in lieu of which other Certificates have been
authenticated, executed on behalf of the Holder and delivered pursuant to
this Agreement, other than any such Certificate in respect of which there
shall have been presented to the Agent proof satisfactory to it that such
Certificate is held by a bona fide purchaser in whose hands the Income
PRIDES or Growth PRIDES evidenced by such Certificate are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
number of the Income PRIDES or Growth PRIDES have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Income PRIDES or
Growth PRIDES owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Agent shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Income PRIDES or
Growth PRIDES which a Responsible Officer of the Agent knows to be so owned
shall be so disregarded. Income PRIDES or Growth PRIDES so owned which have been
pledged in good faith may be regarded as Outstanding Securities if the pledgee
establishes to the satisfaction of the Agent the pledgee's right so to act with
respect to such Income PRIDES or Growth PRIDES and that the pledgee is not the
Company or any Affiliate of the Company.
"Payment Date" means each February 16, May 16, August 16 and November 16,
commencing August 16, 1998.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, limited
liability company, trust, unincorporated association or government or any
agency or political subdivision thereof or any other entity of whatever nature.
"Permitted Investments" has the meaning set forth in Section 1 of the
Pledge Agreement.
8
<PAGE> 14
"Pledge" means the pledge under the Pledge Agreement of the Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, and of the Treasury Securities, in each case
constituting a part of the Securities.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, by and among the Company, the Collateral Agent and the Agent, on its own
behalf and as attorney-in-fact for the Holders from time to time of the
Securities, as the same may hereafter be amended in accordance with the terms
thereof.
"Predecessor Certificate" means a Predecessor Income PRIDES Certificate or
a Predecessor Growth PRIDES Certificate.
"Predecessor Growth PRIDES Certificate" of any particular Growth PRIDES
Certificate means every previous Growth PRIDES Certificate evidencing all or a
portion of the rights and obligations of the Company and the Holder under the
Growth PRIDES evidenced thereby; and, for the purposes of this definition, any
Growth PRIDES Certificate authenticated and delivered under Section 3.10 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Growth PRIDES
Certificate shall be deemed to evidence the same rights and obligations of the
Company and the Holder as the mutilated, destroyed, lost or stolen Growth PRIDES
Certificate.
"Predecessor Income PRIDES Certificate" of any particular Income PRIDES
Certificate means every previous Income PRIDES Certificate evidencing all or a
portion of the rights and obligations of the Company and the Holder under the
Income PRIDES evidenced thereby; and, for the purposes of this definition, any
Income PRIDES Certificate authenticated and delivered under Section 3.10 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Income PRIDES
Certificate shall be deemed to evidence the same rights and obligations of the
Company and the Holder as the mutilated, destroyed, lost or stolen Income PRIDES
Certificate.
"Proceeds" has the meaning set forth in Section 1 of the Pledge Agreement.
"Purchase Contract," when used with respect to any Security, means the
contract forming a part of such Security and obligating the Company to (i) sell
and the Holder of such Security to purchase Common Stock and (ii) pay the Holder
9
<PAGE> 15
Contract Adjustment Payments, if any, on the terms and subject to the conditions
set forth in Article Five hereof.
"Purchase Contract Settlement Date" means August 16, 2001.
"Purchase Contract Settlement Fund" has the meaning specified in Section
5.5.
"Purchase Price" has the meaning specified in Section 5.1.
"Purchased Shares" has the meaning specified in Section 5.6(a)(6).
"Record Date" for the distribution payable in respect of the Capital
Securities and Contract Adjustment Payments, if any, payable on any Payment Date
means the Business Day next preceding such Payment Date.
"Register" means the Income PRIDES Register and the Growth PRIDES
Register.
"Registrar" means the Income PRIDES Registrar and the Growth PRIDES
Registrar.
"Remarketing Agent" has the meaning specified in Section 5.4.
"Remarketing Agreement" means the Remarketing Agreement dated as of July
7, 1998 by and among the Company, the Trust, the Remarketing Agent and the
Purchase Contract Agent.
"Remarketing Fee" has the meaning specified in Section 5.4.
"Reorganization Event" has the meaning specified in Section 5.6(b).
"Responsible Officer," when used with respect to the Agent, means any
officer of the Agent assigned by the Agent to administer its corporate trust
matters.
"Security" means an Income PRIDES or a Growth PRIDES.
"Senior Indebtedness" means indebtedness of any kind of the Company unless
the instrument under which such indebtedness is incurred expressly provides
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that it is on a parity in right of payment with or subordinate in right of
payment to the Contract Adjustment Payments.
"Settlement Rate" has the meaning specified in Section 5.1.
"Stated Amount" means $10.
"Termination Date" means the date, if any, on which a Termination Event
occurs.
"Termination Event" means the occurrence of any of the following events:
(i) at any time on or prior to the Purchase Contract Settlement Date, a
judgment, decree or court order shall have been entered granting relief under
the Bankruptcy Code, adjudicating the Company to be insolvent, or approving as
properly filed a petition seeking reorganization or liquidation of the Company
or any other similar applicable Federal or State law, and, unless such judgment,
decree or order shall have been entered within 60 days prior to the Purchase
Contract Settlement Date, such decree or order shall have continued undischarged
and unstayed for a period of 60 days; or (ii) at any time on or prior to the
Purchase Contract Settlement Date, a judgment, decree or court order for the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of its property, or for the winding up or
liquidation of its affairs, shall have been entered, and, unless such judgment,
decree or order shall have been entered within 60 days prior to the Purchase
Contract Settlement Date, such judgment, decree or order shall have continued
undischarged and unstayed for a period of 60 days, or (iii) at any time on or
prior to the Purchase Contract Settlement Date the Company shall file a petition
for relief under the Bankruptcy Code, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization or liquidation under the Bankruptcy Code or any other
similar applicable Federal or State law, or shall consent to the filing of any
such petition, or shall consent to the appointment of a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of it or of its property, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due.
"Threshold Appreciation Price" has the meaning specified in Section 5.1.
"TIA" means the Trust Indenture Act of 1939, as amended, or any successor
statute.
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"Trading Day" has the meaning specified in Section 5.1.
"Treasury Security" means zero-coupon U.S. Treasury Securities (CUSIP
Number 912820 BB 2) which are the principal strip of the U.S. Treasury
Securities which mature on August 15, 2001.
"Trust" means KBHC Financing I, a statutory business trust formed under
the laws of the State of Delaware, or any successor thereto by merger or
consolidation.
"Underwriting Agreement" means the Underwriting Agreement dated June 30,
1998 among the Company, the Trust, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation.
"Vice President" 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 1.2. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Agreement, upon any
application or request by the Company to the Agent to take any action under any
provision of this Agreement, the Company shall furnish to the Agent an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Agreement relating to the proposed action have been complied with and, if
reasonably requested by the Agent, 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 Agreement 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 Agreement shall include:
(1) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
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(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 Person, he or she
or it has made such examination or investigation as is necessary to enable
such individual to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Agent.
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 the Company may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless the Company 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, the
Company stating that the information with respect to such factual matters is in
the possession of the Company unless the Person giving such certificate or
Opinion of Counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
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Section 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Agent 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 Agreement
and (subject to Section 7.1) conclusive in favor of the Agent and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Agent deems
sufficient.
(c) The ownership of Securities shall be proved by the Income PRIDES
Register or the Growth PRIDES Register, as the case may be.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Certificate shall bind every future Holder of
the same Certificate and the Holder of every Certificate 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 Agent or the
Company in reliance thereon, whether or not notation of such action is made upon
such Certificate.
(e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Agreement to be given, made or taken by
Holders of Securities. If any record date is set pursuant to this paragraph, the
Holders of the Outstanding Income PRIDES and the Outstanding Growth PRIDES, as
the case may be, on such record date, and no other Holders, shall be entitled to
take the relevant action with respect to the Income PRIDES or the Growth PRIDES,
as the case may be, whether or not such Holders remain Holders after such record
date; provided that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite number of
Outstanding Securities on
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such record date. Nothing in this paragraph shall be construed to prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite number of Outstanding
Securities on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Company, at its own expense, shall cause
notice of such record date, the pro posed action by Holders and the applicable
Expiration Date to be given to the Agent in writing and to each Holder of
Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the Company
may designate any date as the "Expiration Date" and from time to time may change
the Expiration Date to any earlier or later day; provided that no such change
shall be effective unless notice of the proposed new Expiration Date is given to
the Agent in writing, and to each Holder of Securities in the manner set forth
in Section 1.6, on or prior to the existing Expiration Date. If an Expiration
Date is not designated with respect to any record date set pursuant to this
Section, the Company shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect thereto, subject to
its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
Section 1.5. Notices.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Agreement to be
made upon, given or furnished to, or filed with,
(1) the Agent by any Holder or by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, to the Agent at The First National
Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL
60670-0126, Attention: Corporate Trust Services Division, or at any other
address previously furnished in writing by the Agent to the Holders and
the Company; or
(2) the Company by the Agent or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if
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made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, to the Company at Kaufman and Broad
Home Corporation, 10990 Wilshire Blvd., Los Angeles, CA 90024,Attention:
Chief Financial Officer, or at any other address previously furnished in
writing to the Agent by the Company; or
(3) the Collateral Agent by the Agent, the Company or any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
person ally delivered or mailed, first-class postage prepaid, addressed to
the Collateral Agent at The Bank of New York, One Wall Street, New York,
New York 10286, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing by the Collateral Agent to the
Agent, the Company and the Holders; or
(4) the Institutional Trustee by the Company shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if
made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, addressed to the Institutional
Trustee at The First National Bank of Chicago, One First National Plaza,
Suite 0126, Chicago, IL 60670-0126, Attention: Corporate Trust Services
Division, or at any other address previously furnished in writing by the
Institutional Trustee to the Company; or
(5) the Indenture Trustee by the Company shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if
made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, addressed to the Indenture Trustee at
The First National Bank of Chicago, One First National Plaza, Suite 0126,
Chicago, IL 60670-0126, Attention: Corporate Trust Services Division, or
at any other address previously furnished in writing by the Indenture
Trustee to the Company.
Section 1.6. Notice to Holders; Waiver.
Where this Agreement 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 its address as it appears in the applicable Register, not
later than the latest
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date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement 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 Agent, 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 Agent shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.8. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.9. Separability Clause.
In case any provision in this Agreement or in the Securities shall be
invalid, illegal or unenforceable, then, to the extent permitted by law, the
validity, legality and enforceability of the remaining provisions hereof and
thereof shall not in any way be affected or impaired thereby.
Section 1.10. Benefits of Agreement.
Nothing in this Agreement or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and, to the extent provided hereby, the Holders, any benefits or any legal or
equitable right, remedy or claim under this Agreement. The Holders from time to
time shall be beneficiaries of this Agreement and shall be bound by all of the
applicable terms and
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conditions hereof and of the Securities evidenced by their Certificates by their
acceptance of delivery of such Certificates.
Section 1.11. Governing Law.
THIS AGREEMENT AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 1.12. Legal Holidays.
In any case where any Payment Date shall not be a Business Day, then
(notwithstanding any other provision of this Agreement or the Income PRIDES
Certificates or the Growth PRIDES Certificates) payment of the Contract
Adjustment Payments, if any, shall not be made on such date, but such payments
shall be made on the next succeeding Business Day with the same force and effect
as if made on such Payment Date, provided that no interest shall accrue or be
payable by the Company or any Holder for the period from and after any such
Payment Date unless there shall be a default in the payment due on such next
succeeding Business Day, except that, if such next succeeding Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day with the same force and effect as if made on such Payment
Date.
In any case where any Purchase Contract Settlement Date shall not be a
Business Day, then (notwithstanding any other provision of this Agreement, the
Income PRIDES Certificates or the Growth PRIDES Certificates), the Purchase
Contracts shall not be performed on such date, but the Purchase Contracts shall
be performed on the immediately following Business Day with the same force and
effect as if performed on the Purchase Contract Settlement Date.
Section 1.13. Counterparts.
This Agreement may be executed in any number of counterparts by the
parties hereto on separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
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Section 1.14. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times during
normal business hours at the Corporate Trust Office for inspection by any
Holder.
ARTICLE II
Certificate Forms
Section 2.1. Forms of Certificates Generally.
The Income PRIDES Certificates (including the form of Purchase Contract
forming part of the Income PRIDES evidenced thereby) shall be in substantially
the form set forth in Exhibit A hereto, with such letters, numbers or other
marks of identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Income PRIDES are listed or any depositary
therefor, or as may, consistently herewith, be determined by the officers of
the Company executing such Income PRIDES Certificates, as evidenced by their
execution of the Income PRIDES Certificates.
The definitive Income PRIDES Certificates shall be printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers of the Company executing such Income PRIDES
Certificates, consistent with the provisions of this Agreement, as evidenced by
their execution thereof.
The Growth PRIDES Certificates (including the form of Purchase Contract
forming part of the Growth PRIDES evidenced thereby) shall be in substantially
the form set forth in Exhibit B hereto, with such letters, numbers or other
marks of identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Growth PRIDES are listed or any depositary
therefor, or as may, consistently herewith, be determined by the officers of
the Company executing such Growth PRIDES Certificates, as evidenced by their
execution of the Growth PRIDES Certificates.
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The definitive Growth PRIDES Certificates shall be printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers of the Company executing such Growth PRIDES
Certificates, consistent with the provisions of this Agreement, as evidenced by
their execution thereof.
Every Global Certificate authenticated, executed on behalf of the Holders
and delivered hereunder shall bear a legend in substantially the following form:
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN
THE NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND
NO TRANSFER OF THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN
THE NAME OF ANY PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE
CONTRACT AGREEMENT.
Section 2.2. Form of Agent's Certificate of Authentication.
The form of the Agent's certificate of authentication of the Income PRIDES
shall be in substantially the form set forth on the form of the Income PRIDES
Certificates.
The form of the Agent's certificate of authentication of the Growth PRIDES
shall be in substantially the form set forth on the form of the Growth PRIDES
Certificates.
ARTICLE III
The Securities
Section 3.1. Title and Terms; Denominations.
The aggregate number of Income PRIDES and Growth PRIDES evidenced by
Certificates authenticated, executed on behalf of the Holders and delivered
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hereunder is limited to 18,975,000 except for Certificates authenticated,
executed and delivered upon registration of transfer of, in exchange for, or in
lieu of, other Certificates pursuant to Section 3.4, 3.5, 3.9, 3.10, 3.13, 3.14,
5.9 or 8.5.
The Certificates shall be issuable only in registered form and only in
denominations of a single Income PRIDES or Growth PRIDES and any integral
multiple thereof.
Section 3.2. Rights and Obligations Evidenced by the Certificates.
Each Income PRIDES Certificate shall evidence the number of Income PRIDES
specified therein, with each such Income PRIDES representing the owner ship by
the Holder thereof of a beneficial interest in a Capital Security or the
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
subject to the Pledge of such Capital Security or the Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, by such Holder pursuant
to the Pledge Agreement, and the rights and obligations of the Holder thereof
and the Company under one Purchase Contract. The Agent as attorney-in-fact for,
and on behalf of, the Holder of each Income PRIDES shall pledge, pursuant to the
Pledge Agreement, the Capital Security or the Applicable Ownership Interest of
the Treasury Portfolio, as the case may be, forming a part of such Income
PRIDES, to the Collateral Agent and grant to the Collateral Agent a security
interest in the right, title, and interest of such Holder in such Capital
Security or the Applicable Ownership Interest of the Treasury Portfolio, as the
case may be, for the benefit of the Company, to secure the obligation of the
Holder under each Purchase Contract to purchase the Common Stock of the Company.
Each Growth PRIDES Certificate shall evidence the number of Growth PRIDES
specified therein, with each such Growth PRIDES representing the owner ship by
the Holder thereof of a 1/100 undivided beneficial interest in a Treasury
Security with a principal amount at maturity equal to $1,000, subject to the
Pledge of such Treasury Security by such Holder pursuant to the Pledge
Agreement, and the rights and obligations of the Holder thereof and the Company
under one Purchase Contract. The Agent as attorney-in-fact for, and on behalf
of, the Holder of each Growth PRIDES shall pledge, pursuant to the Pledge
Agreement, the Treasury Security to the Collateral Agent and grant to the
Collateral Agent a security interest in the right, title and interest of such
Holder in such Treasury Security, for the benefit of the Company, to secure the
obligation of the Holder under each Purchase Contract to purchase the Common
Stock of the Company.
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Section 3.3. Execution, Authentication, Delivery and Dating.
Subject to the provisions of Sections 3.13 and 3.14 hereof, upon the
execution and delivery of this Agreement, and at any time and from time to time
thereafter, the Company may deliver Certificates executed by the Company to the
Agent for authentication, execution on behalf of the Holders and delivery,
together with its Issuer Order for authentication of such Certificates, and the
Agent in accordance with such Issuer Order shall authenticate, execute on behalf
of the Holders and deliver such Certificates.
The Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents and its
Treasurer or one of its Assistant Treasurers or its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the
Certificates may be manual or facsimile.
Certificates 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 Certificates or did not
hold such offices at the date of such Certificates.
No Purchase Contract evidenced by a Certificate shall be valid until such
Certificate has been executed on behalf of the Holder by the manual signature of
an authorized signatory of the Agent, as such Holder's attorney-in-fact. Such
signature by an authorized signatory of the Agent shall be conclusive evidence
that the Holder of such Certificate has entered into the Purchase Contracts
evidenced by such Certificate.
Each Certificate shall be dated the date of its authentication.
No Certificate shall be entitled to any benefit under this Agreement or be
valid or obligatory for any purpose unless there appears on such Certificate a
certificate of authentication substantially in the form provided for herein
executed by an authorized signatory of the Agent by manual signature, and such
certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder.
Section 3.4. Temporary Certificates.
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Pending the preparation of definitive Certificates, the Company shall
execute and deliver to the Agent, and the Agent shall authenticate, execute on
behalf of the Holders, and deliver, in lieu of such definitive Certificates,
temporary Certificates which are in substantially the form set forth in Exhibit
A or Exhibit B hereto, as the case may be, with such letters, numbers or other
marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Income PRIDES or Growth PRIDES are listed, or
as may, consistently herewith, be deter mined by the officers of the Company
executing such Certificates, as evidenced by their execution of the
Certificates.
If temporary Certificates are issued, the Company will cause definitive
Certificates to be prepared without unreasonable delay. After the preparation of
definitive Certificates, the temporary Certificates shall be exchangeable for
definitive Certificates upon surrender of the temporary Certificates at the
Corporate Trust Office or the New York office, at the expense of the Company and
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Company shall execute and deliver to the Agent, and
the Agent shall authenticate, execute on behalf of the Holder, and deliver in
exchange therefor, one or more definitive Certificates of like tenor and
denominations and evidencing a like number of Income PRIDES or Growth PRIDES, as
the case may be, as the temporary Certificate or Certificates so surrendered.
Until so exchanged, the temporary Certificates shall in all respects evidence
the same benefits and the same obligations with respect to the Income PRIDES or
Growth PRIDES, as the case may be, evidenced thereby as definitive
Certificates.
Section 3.5. Registration; Registration of Transfer and Exchange.
The Agent shall keep at the Corporate Trust Office a Register (the "Income
PRIDES Register") in which, subject to such reasonable regulations as it may
prescribe, the Agent shall provide for the registration of Income PRIDES
Certificates and of transfers of Income PRIDES Certificates (the Agent, in such
capacity, the "Income PRIDES Registrar") and a Register (the "Growth PRIDES
Register") in which, subject to such reasonable regulations as it may prescribe,
the Agent shall provide for the registration of the Growth PRIDES Certificates
and transfers of Growth PRIDES Certificates (the Agent, in such capacity, the
"Growth PRIDES Registrar").
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Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office or the New York Office, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf of the
designated transferee or transferees, and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of any
authorized denominations, like tenor, and evidencing a like number of Income
PRIDES or Growth PRIDES, as the case may be.
At the option of the Holder, Certificates may be exchanged for other
Certificates, of any authorized denominations and evidencing a like number of
Income PRIDES or Growth PRIDES, as the case may be, upon surrender of the
Certificates to be exchanged at the Corporate Trust Office or the New York
Office. Whenever any Certificates are so surrendered for exchange, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holder, and deliver the Certificates which the Holder
making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or exchange of a
Certificate shall evidence the ownership of the same number of Income PRIDES or
Growth PRIDES, as the case may be, and be entitled to the same benefits and
subject to the same obligations, under this Agreement as the Income PRIDES or
Growth PRIDES, as the case may be, evidenced by the Certificate surrendered upon
such registration of transfer or exchange.
Every Certificate presented or surrendered for registration of transfer or
for exchange shall (if so required by the Agent) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Agent duly executed, by the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of a Certificate, but the Company and the Agent may require payment
from the Holder 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 Certificates, other than any exchanges pursuant to Sections 3.4,
3.6, 3.9 and 8.5 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder and deliver, any Certificate
presented or
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surrendered for registration of transfer or for exchange on or after the
Business Day immediately preceding the earlier of the Purchase Contract
Settlement Date or the Termination Date. In lieu of delivery of a new
Certificate, upon satisfaction of the applicable conditions specified above in
this Section and receipt of appropriate registration or transfer instructions
from such Holder, the Agent shall (i) if the Purchase Contract Settlement Date
has occurred, deliver the shares of Common Stock issuable in respect of the
Purchase Contracts forming a part of the Securities evidenced by such
Certificate (together with any cash or other property to which the Holder is
entitled), or (ii) if a Termination Event shall have occurred prior to the
Purchase Contract Settlement Date, transfer the Capital Securities, the
appropriate Applicable Ownership Interest of the Treasury Portfolio or the
Treasury Securities, as the case may be, evidenced thereby, in each case subject
to the applicable conditions and in accordance with the applicable provisions
of Article Five hereof.
Section 3.6. Book-Entry Interests.
The Certificates, on original issuance, will be issued in the form of one
or more fully registered Global Certificates, to be delivered to the Depositary
by, or on behalf of, the Company. Such Global Certificate shall initially be
registered on the books and records of the Company in the name of Cede & Co.,
the nominee of the Depositary, and no Beneficial Owner will receive a definitive
Certificate representing such Beneficial Owner's interest in such Global
Certificate, except as provided in Section 3.9. The Agent shall enter into an
agreement with the Depositary if so requested by the Company. Unless and until
definitive, fully registered Certificates have been issued to Beneficial Owners
pursuant to Section 3.9:
(a) the provisions of this Section 3.6 shall be in full force and
effect;
(b) the Company shall be entitled to deal with the Clearing Agency
for all purposes of this Agreement (including the payment of Contract Adjustment
Payments, if any, and receiving approvals, votes or consents hereunder) as the
Holder of the Securities and the sole holder of the Global Certificate(s) and
shall have no obligation to the Beneficial Owners;
(c) to the extent that the provisions of this Section 3.6 conflict
with any other provisions of this Agreement, the provisions of this Section 3.6
shall control; and
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(d) the rights of the Beneficial Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law and
agreements between such Beneficial Owners and the Clearing Agency and/or the
Clearing Agency Participants. The Clearing Agency will make book entry transfers
among Clearing Agency Participants and receive and transmit payments of Contract
Adjustment Payments, if any, to such Clearing Agency Participants.
Section 3.7. Notices to Holders.
Whenever a notice or other communication to the Holders is required to be
given under this Agreement, the Company or the Company's agent shall give such
notices and communications to the Holders and, with respect to any Securities
registered in the name of a Clearing Agency or the nominee of a Clearing Agency,
the Company or the Company's agent shall, except as set forth herein, have no
obligations to the Beneficial Owners.
Section 3.8. Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Securities, the Company may, in its sole
discretion, appoint a successor Clearing Agency with respect to the Securities.
Section 3.9. Definitive Certificates.
If (i) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Securities and a successor Clearing Agency is not
appointed within 90 days after such discontinuance pursuant to Section 3.8, (ii)
the Company elects to terminate the book-entry system through the Clearing
Agency with respect to the Securities, or (iii) there shall have occurred and be
continuing a default by the Company in respect of its obligations under one or
more Purchase Contracts, or one or more Capital Securities or Debentures, then
upon surrender of the Global Certificates representing the Book-Entry Interests
with respect to the Securities by the Clearing Agency, accompanied by
registration instructions, the Company shall cause definitive Certificates to be
delivered to Beneficial Owners in accordance with the instructions of the
Clearing Agency. The Company shall not be liable for any delay in delivery of
such instructions and may conclusively rely on and shall be protected in relying
on, such instructions.
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates.
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If any mutilated Certificate is surrendered to the Agent, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holder, and deliver in exchange therefor, a new
Certificate at the cost of the Holder, evidencing the same number of Income
PRIDES or Growth PRIDES, as the case may be, and bearing a Certificate number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i) evidence to
their satisfaction of the destruction, loss or theft of any Certificate, and
(ii) such security or indemnity at the cost of the Holder as may be required by
them to hold each of them and any agent of any of them harmless, then, in the
absence of notice to the Company or the Agent that such Certificate has been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the Holder, and
deliver to the Holder, in lieu of any such destroyed, lost or stolen
Certificate, a new Certificate, evidencing the same number of Income PRIDES or
Growth PRIDES, as the case may be, and bearing a Certificate number not
contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder, and deliver to the Holder, a
Certificate on or after the Business Day immediately preceding the earlier of
the Purchase Contract Settlement Date or the Termination Date. In lieu of
delivery of a new Certificate, upon satisfaction of the applicable conditions
specified above in this Section and receipt of appropriate registration or
transfer instructions from such Holder, the Agent shall (i) if the Purchase
Contract Settlement Date has occurred, deliver the shares of Common Stock
issuable in respect of the Purchase Contracts forming a part of the Securities
evidenced by such Certificate (together with any cash or other property to which
the Holder is entitled), or (ii) if a Termination Event shall have occurred
prior to the Purchase Contract Settlement Date, transfer the Capital Securities,
the appropriate Applicable Ownership Interest of the Treasury Portfolio or the
Treasury Securities, as the case may be, evidenced thereby, in each case subject
to the applicable conditions and in accordance with the applicable provisions of
Article Five hereof.
Upon the issuance of any new Certificate under this Section, the Company
and the Agent may require the payment by the Holder 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 reasonable fees and expenses of the Agent)
connected therewith.
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Every new Certificate issued pursuant to this Section in lieu of any
destroyed, lost or stolen Certificate shall constitute an original additional
contractual obligation of the Company and of the Holder in respect of the
Security evidenced thereby, whether or not the destroyed, lost or stolen
Certificate (and the Securities evidenced thereby) shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of this Agreement equally and proportionately with any
and all other Certificates delivered 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 Certificates.
Section 3.11. Persons Deemed Owners.
Prior to due presentment of a Certificate for registration of transfer,
the Company and the Agent, and any agent of the Company or the Agent, may treat
the Person in whose name such Certificate is registered as the owner of the
Income PRIDES or Growth PRIDES evidenced thereby, for the purpose of receiving
distributions on the Capital Securities or on the maturing quarterly interest
strips of the Treasury Portfolio, as applicable, receiving payments of Contract
Adjustment Payments, if any, performance of the Purchase Contracts and for all
other purposes whatsoever, whether or not any distributions on the Capital
Securities or the Contract Adjustment Payments, if any, payable in respect of
the Purchase Contracts constituting a part of the Income PRIDES or Growth PRIDES
evidenced thereby shall be overdue and notwithstanding any notice to the
contrary, and neither the Company nor the Agent, nor any agent of the Company or
the Agent, shall be affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global Certificate,
nothing herein shall prevent the Company, the Agent or any agent of the Company
or the Agent, from giving effect to any written certification, proxy or other
authorization furnished by any Clearing Agency (or its nominee), as a Holder,
with respect to such Global Certificate or impair, as between such Clearing
Agency and owners of beneficial interests in such Global Certificate, the
operation of customary practices governing the exercise of rights of such
Clearing Agency (or its nominee) as Holder of such Global Certificate.
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Section 3.12. Cancellation.
All Certificates surrendered for delivery of shares of Common Stock on or
after the Purchase Contract Settlement Date, upon the transfer of Capital
Securities, the appropriate Applicable Ownership Interest of the Treasury
Portfolio or Treasury Securities, as the case may be, after the occurrence of a
Termination Event or pursuant to an Early Settlement, or upon the registration
of a transfer or exchange of a Security, or a Collateral Substitution or the
re-establishment of an Income PRIDES or a Growth PRIDES shall, if surrendered to
any Person other than the Agent, be delivered to the Agent and, if not already
cancelled, shall be promptly cancelled by it. The Company may at any time
deliver to the Agent for cancellation any Certificates previously authenticated,
executed and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Certificates so delivered shall, upon Issuer Order,
be promptly cancelled by the Agent. No Certificates shall be authenticated,
executed on behalf of the Holder and delivered in lieu of or in exchange for any
Certificates cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by the Agent shall
upon written request be returned to the Company.
If the Company or any Affiliate of the Company shall acquire any
Certificate, such acquisition shall not operate as a cancellation of such
Certificate unless and until such Certificate is delivered to the Agent
cancelled or for cancellation.
Section 3.13. Establishment or Reestablishment of Growth PRIDES.
A Holder may separate the Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as applicable, from the related
Purchase Contracts in respect of an Income PRIDES by substituting for such
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, Treasury Securities in an aggregate
principal amount equal to the aggregate Stated Amount of such Capital Securities
or the appropriate Applicable Ownership Interest (as specified in clause (A) of
the definition of such term) of the Treasury Portfolio, as applicable (a
"Collateral Substitution"), at any time from and after the date of this
Agreement and on or prior to the fifth Business Day immediately preceding the
Purchase Contract Settlement Date in the case of the Capital Securities and on
or prior to the second Business Day immediately preceding the Purchase Contract
Settlement Date in the case of the appropriate Applicable Ownership Interest of
the Treasury Portfolio, in each case by (a) depositing with the Collateral Agent
Treasury Securities having an aggregate principal amount equal to
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the aggregate Stated Amount of the Capital Securities comprising part of such
Income PRIDES or for the appropriate Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio
comprising part of such Income PRIDES, as the case may be, and (b) (i)
delivering cash in an amount equal to the excess of the Contract Adjustment
Payments that would have accrued since the last date that Contract Adjustment
Payments were made to the date of substitution on the Growth PRIDES being
created by the holder, over the Contract Adjustment Payments that have accrued
over the same time period on the related Income PRIDES, which amount the Agent
shall promptly remit to the Company, and (ii) transferring the related Income
PRIDES to the Agent accompanied by a notice to the Agent, substantially in the
form of Exhibit D hereto, stating that the Holder has transferred the relevant
amount of Treasury Securities to the Collateral Agent and requesting that the
Agent instruct the Collateral Agent to release the Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be, underlying such Income PRIDES, whereupon the Agent shall promptly give
such instruction to the Collateral Agent, substantially in the form of Exhibit C
hereto. Upon receipt of the Treasury Securities described in clause (a) above
and the instruction described in clause (b) above, in accordance with the terms
of the Pledge Agreement, the Collateral Agent will release to the Agent, on
behalf of the Holder, Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, having the appropriate
aggregate Stated Amount in the case of such Capital Securities or the
appropriate Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio, as the case may be, from the
Pledge, free and clear of the Company's security interest therein, and upon
receipt thereof the Agent shall promptly:
(i) cancel the related Income PRIDES;
(ii) transfer the Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, to the
Holder; and
(iii) authenticate, execute on behalf of such Holder and deliver a
Growth PRIDES Certificate executed by the Company in accordance with
Section 3.3 evidencing the same number of Purchase Contracts as were
evidenced by the cancelled Income PRIDES.
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Holders who elect to separate the Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
from the related Purchase Contract and to substitute Treasury Securities for
such Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, shall be responsible for any fees or
expenses payable to the Collateral Agent for its services as Collateral Agent in
respect of the substitution, and the Company shall not be responsible for any
such fees or expenses.
Holders may make Collateral Substitutions (i) only in integral multiples
of 100 Income PRIDES if Capital Securities are being substituted by Treasury
Securities, or (ii) only in integral multiples of 40,000 Income PRIDES if the
appropriate Applicable Ownership Interests of the Treasury Portfolio are being
substituted by Treasury Securities.
In the event a Holder making a Collateral Substitution pursuant to this
Section 3.13 fails to effect a book-entry transfer of the Income PRIDES or fails
to deliver an Income PRIDES Certificate(s) to the Agent after depositing
Treasury Securities with the Collateral Agent, the Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be, constituting a part of such Income PRIDES, and any distributions on such
Capital Security or the Applicable Ownership Interest of the Treasury Portfolio,
as the case may be, shall be held in the name of the Agent or its nominee in
trust for the benefit of such Holder, until such Income PRIDES is so transferred
or the Income PRIDES Certificate is so delivered, as the case may be, or, with
respect to an Income PRIDES Certificate, such Holder provides evidence
satisfactory to the Company and the Agent that such Income PRIDES Certificate
has been destroyed, lost or stolen, together with any indemnity that may be
required by the Agent and the Company.
Except as described in this Section 3.13, for so long as the Purchase
Contract underlying an Income PRIDES remains in effect, such Income PRIDES shall
not be separable into its constituent parts, and the rights and obligations of
the Holder in respect of the Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, and Purchase
Contract comprising such Income PRIDES may be acquired, and may be transferred
and exchanged, only as an Income PRIDES.
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Section 3.14. Establishment or Reestablishment of Income PRIDES.
A Holder of a Growth PRIDES may create or recreate Income PRIDES at any
time (i) on or prior to the fifth Business Day immediately preceding the
Purchase Contract Settlement Date, if a Tax Event Redemption has not occurred,
and (ii) on or prior to the second Business Day immediately preceding the
Purchase Contract Settlement Date, if a Tax Event Redemption has occurred and an
Applicable Ownership Interest in the Treasury Portfolio has become a component
of the Income PRIDES, in each case by (a) depositing with the Collateral Agent
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, having an aggregate Stated Amount in the
case of the Capital Securities, or an appropriate Applicable Ownership Interest
(as defined in clause (A) of the definition of such term) of the Treasury
Portfolio, as the case may be, equal to the aggregate principal amount of the
Treasury Securities comprising part of the Growth PRIDES and (b) transferring
the related Growth PRIDES to the Agent accompanied by a notice to the Agent,
substantially in the form of Exhibit D hereto, stating that the Holder has
transferred the relevant amount of Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be, to
the Collateral Agent and requesting that the Agent instruct the Collateral Agent
to release the Treasury Securities underlying such Growth PRIDES, whereupon the
Agent shall promptly give such instruction to the Collateral Agent,
substantially in the form of Exhibit C hereto. Upon receipt of the Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, described in clause (a) above and the instruction
described in clause (b) above, in accordance with the terms of the Pledge
Agreement, the Collateral Agent will release to the Agent, on behalf of the
Holder, of the Treasury Securities having a corresponding aggregate principal
amount from the Pledge, free and clear of the Company's security interest
therein, and upon receipt thereof the Agent shall promptly:
(i) cancel the related Growth PRIDES;
(ii) transfer the Treasury Securities to the Holder; and
(iii) authenticate, execute on behalf of such Holder and deliver an
Income PRIDES Certificate executed by the Company in accordance with
Section 3.3 evidencing the same number of Purchase Contracts as were
evidenced by the cancelled Growth PRIDES.
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Holders of Growth PRIDES may establish or reestablish Income PRIDES in
integral multiples of 100 Growth PRIDES for 100 Income PRIDES if a Tax Event
Redemption has not occurred, and in integral multiples of 40,000 Growth PRIDES
for 40,000 Income PRIDES if a Tax Event Redemption has occurred.
In the event a Holder establishing or re-establishing Income PRIDES
pursuant to this Section 3.14 fails to effect a book-entry transfer of the
Growth PRIDES or fails to deliver a Growth PRIDES Certificate(s) to the Agent
after depositing Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, with the Collateral
Agent, the Treasury Securities constituting a part of such Growth PRIDES shall
be held in the name of the Agent or its nominee in trust for the benefit of such
Holder, until such Growth PRIDES is so transferred or the Growth PRIDES
Certificate is so delivered, as the case may be, or, with respect to a Growth
PRIDES Certificate, such Holder provides evidence satisfactory to the Company
and the Agent that such Growth PRIDES Certificate has been destroyed, lost or
stolen, together with any indemnity that may be required by the Agent and the
Company.
Except as provided in this Section 3.14, for so long as the Purchase
Contract underlying a Growth PRIDES remains in effect, such Growth PRIDES shall
not be separable into its constituent parts and the rights and obligations of
the Holder of such Growth PRIDES in respect of the Treasury Security and
Purchase Contract comprising such Growth PRIDES may be acquired, and may be
transferred and exchanged, only as a Growth PRIDES.
Section 3.15. Transfer of Collateral upon Occurrence of Termination Event.
Upon the occurrence of a Termination Event and the transfer to the Agent
of the Capital Securities, the appropriate Applicable Ownership Interest of the
Treasury Portfolio or the Treasury Securities, as the case may be, underlying
the Income PRIDES and the Growth PRIDES pursuant to the terms of the Pledge
Agreement, the Agent shall request transfer instructions with respect to such
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio or Treasury Securities, as the case may be, from each Holder
by written request mailed to such Holder at its address as it appears in the
Income PRIDES Register or the Growth PRIDES Register, as the case may be. Upon
book-entry transfer of the Income PRIDES or Growth PRIDES or delivery of an
Income PRIDES Certificate or Growth PRIDES Certificate to the Agent with such
transfer instructions, the Agent shall transfer the Capital Securities, the
Applicable Ownership Interest of the Treasury
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Portfolio or Treasury Securities, as the case may be, underlying such Income
PRIDES or Growth PRIDES, as the case may be, to such Holder by book-entry
transfer, or other appropriate procedures, in accordance with such instructions;
provided, however, that, to the extent that a Holder of Income PRIDES or Growth
PRIDES would otherwise be entitled to receive less than $1,000 principal amount
at maturity of the Treasury Portfolio or the Treasury Securities, the Agent
shall dispose of such securities for cash, and transfer the appropriate amount
of such cash to such Holder in accordance with such Holder's instructions. In
the event a Holder of Income PRIDES or Growth PRIDES fails to effect such
transfer or delivery, the Capital Securities, the appropriate Applicable
Ownership Interest of the Treasury Portfolio or Treasury Securities, as the case
may be, underlying such Income PRIDES or Growth PRIDES, as the case may be, and
any distributions thereon, shall be held in the name of the Agent or its nominee
in trust for the benefit of such Holder, until such Income PRIDES or Growth
PRIDES are transferred or the Income PRIDES Certificate or Growth PRIDES
Certificate is surrendered or such Holder provides satisfactory evidence that
such Income PRIDES Certificate or Growth PRIDES Certificate has been destroyed,
lost or stolen, together with any indemnity that may be required by the Agent
and the Company.
Section 3.16. No Consent to Assumption.
Each Holder of a Security, by acceptance thereof, shall be deemed
expressly to have withheld any consent to the assumption under Section 365 of
the Bankruptcy Code or otherwise, of the Purchase Contract by the Company,
receiver, liquidator or a person or entity performing similar functions, its
trustee in the event that the Company becomes the debtor under the Bankruptcy
Code or subject to other similar state or federal law providing for
reorganization or liquidation.
ARTICLE IV
The Capital Securities
Section 4.1. Payment of Distribution; Rights to Distributions Preserved;
Distribution Rate Reset; Notice.
A distribution on any Capital Security or on the appropriate Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, which is paid
on any Payment Date shall, subject to receipt thereof by the Agent from the
Collateral
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Agent as provided by the terms of the Pledge Agreement, be paid to the Person in
whose name the Income PRIDES Certificate (or one or more Predecessor Income
PRIDES Certificates) of which such Capital Security or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be, is
a part is registered at the close of business on the Record Date for such
Payment Date.
Each Income PRIDES Certificate evidencing Capital Securities delivered
under this Agreement upon registration of transfer of or in exchange for or in
lieu of any other Income PRIDES Certificate shall carry the rights to
distributions accrued and unpaid, and distributions to accrue, which were or
will be carried by the Capital Securities underlying such other Income PRIDES
Certificate.
In the case of any Income PRIDES with respect to which Cash Settlement of
the underlying Purchase Contract is effected on the Business Day immediately
preceding the Purchase Contract Settlement Date pursuant to prior notice, or
with respect to which Early Settlement of the underlying Purchase Contract is
effected on an Early Settlement Date, or with respect to which a Collateral
Substitution is effected, in each case on a date that is after any Record Date
and on or prior to the next succeeding Payment Date, distributions on the
Capital Securities or on the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, underlying such Income PRIDES otherwise
payable on such Payment Date shall be payable on such Payment Date
notwithstanding such Cash Settlement or Early Settlement or Collateral
Substitution, and such distributions shall, subject to receipt thereof by the
Agent, be payable to the Person in whose name the Income PRIDES Certificate (or
one or more Predecessor Certificates) was registered at the close of business on
the Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Income PRIDES with respect to which Cash
Settlement or Early Settlement of the underlying Purchase Contract is effected
on the Business Day immediately preceding the Purchase Contract Settlement Date
or an Early Settlement Date, as the case may be, or with respect to which a
Collateral Substitution has been effected, distributions on the related Capital
Securities or on the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, that would otherwise be payable after the
Purchase Contract Settlement Date or Early Settlement Date shall not be payable
hereunder to the Holder of such Income PRIDES; provided, however, that to the
extent that such Holder continues to hold the separated Capital Securities that
formerly comprised a part of such Holder's Income PRIDES, such Holder shall be
entitled to receive the distributions on such separated Capital Securities.
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The applicable Coupon Rate on the Capital Securities on and after the
Purchase Contract Settlement Date will be reset on the third Business Day
immediately preceding the Purchase Contract Settlement Date to the Reset Rate
(such Reset Rate to be in effect on and after the Purchase Contract Settlement
Date). On the Reset Announcement Date the Reset Spread and the Two-Year
Benchmark Treasury to be used to determine the Reset Rate will be announced by
the Company. On the Business Day immediately following the Reset Announcement
Date, the Capital Securities Holders will be notified of such Reset Spread and
Two-Year Benchmark Treasury by the Company. Such notice shall be sufficiently
given to Holders of Capital Securities if published in an Authorized Newspaper
in The City of New York.
Not later than 7 calendar days nor more than 15 calendar days prior to the
Reset Announcement Date, the Company will notify the DTC or its nominee (or any
successor Clearing Agency or its nominee) by first-class mail, postage prepaid,
to notify the Beneficial Owners or Clearing Agency Participants holding Income
PRIDES or Growth PRIDES, of such Reset Announcement Date and the procedures to
be followed by such Holders of Income PRIDES who intend to settle their
obligation under the Purchase Contract with separate cash on the Purchase
Contract Settlement Date.
Section 4.2. Notice and Voting.
Under the terms of the Pledge Agreement, the Agent will be entitled to
exercise the voting and any other consensual rights pertaining to the Capital
Securities pledged with the Collateral Agent but only to the extent instructed
by the Holders as described below. Upon receipt of notice of any meeting at
which holders of Capital Securities are entitled to vote or upon any
solicitation of consents, waivers or proxies of holders of Capital Securities,
the Agent shall, as soon as practicable thereafter, mail to the Holders of
Income PRIDES a notice (a) containing such information as is contained in the
notice or solicitation, (b) stating that each Holder on the record date set by
the Agent therefor (which, to the extent possible, shall be the same date as the
record date for determining the holders of Capital Securities entitled to vote)
shall be entitled to instruct the Agent as to the exercise of the voting rights
pertaining to the Capital Securities underlying their Income PRIDES and (c)
stating the manner in which such instructions may be given. Upon the written
request of the Holders of Income PRIDES on such record date, the Agent shall
endeavor insofar as practicable to vote or cause to be voted, in accordance with
the instructions set forth in such requests, the maximum number of Capital
Securities as
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to which any particular voting instructions are received. In the absence of
specific instructions from the Holder of an Income PRIDES, the Agent shall
abstain from voting the Capital Security underlying such Income PRIDES. The
Company hereby agrees, if applicable, to solicit Holders of Income PRIDES to
timely instruct the Agent in order to enable the Agent to vote such Capital
Securities and the Trust shall covenant to such effect in the Declaration.
Section 4.3. Distribution of Debentures; Tax Event Redemption.
Upon the occurrence of an Investment Company Event or a liquidation of the
Trust in accordance with the Declaration, a principal amount of Debentures
constituting the assets of the Trust and underlying the Capital Securities equal
to the aggregate Stated Amount of the Pledged Capital Securities shall be
delivered to the Collateral Agent in exchange for the Pledged Capital
Securities. Thereafter, the Debentures will be substituted for the Pledged
Capital Securities, and will be held by the Collateral Agent in accordance with
the terms of the Pledge Agreement to secure the obligations of each Holder of an
Income PRIDES to purchase the Common Stock under the Purchase Contracts
constituting a part of such Income PRIDES. Following the occurrence of an
Investment Company Event or a liquidation of the Trust, the Holders and the
Collateral Agent shall have such security interests, rights and obligations with
respect to the Debentures as the Holders and the Collateral Agent had in respect
of the Capital Securities subject to the Pledge thereof as provided in Sections
2, 3, 4, 5 and 6 of the Pledge Agreement, and any reference herein or in the
Certificates to the Capital Securities shall be deemed to be a reference to such
Debentures and any references to distributions on the Capital Securities shall
be deemed to be a reference to interest on such Debentures. The Company may
cause to be made in any Income PRIDES Certificates thereafter to be issued such
change in phraseology and form (but not in substance) as may be appropriate to
reflect the liquidation of the Trust and the substitution of Debentures for
Capital Securities as Collateral.
Upon the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Redemption Price payable on the Tax Event
Redemption Date with respect to the Applicable Principal Amount of Debentures
shall be delivered to the Collateral Agent in exchange for the Pledged Capital
Securities. Thereafter, pursuant to the terms of the Pledge Agreement, the
Collateral Agent will apply an amount equal to the Redemption Amount of such
Redemption Price to purchase on behalf of the Holders of Income PRIDES the
Treasury Portfolio and promptly remit the remaining portion of such Redemption
Price to the Agent for
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payment to the Holders of such Income PRIDES. The Treasury Portfolio will be
substituted for the Pledged Capital Securities, and will be held by the
Collateral Agent in accordance with the terms of the Pledge Agreement to secure
the obligation of each Holder of an Income PRIDES to purchase the Common Stock
of the Company under the Purchase Contract constituting a part of such Income
PRIDES. Following the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Holders of Income PRIDES and the Collateral Agent
shall have such security interests, rights and obligations with respect to the
Treasury Portfolio as the Holder of Income PRIDES and the Collateral Agent had
in respect of the Capital Security or Debentures, as the case may be, subject to
the Pledge thereof as provided in Sections 2, 3, 4, 5 and 6 of the Pledge
Agreement, and any reference herein or in the Certificates to the Capital
Security or the Debenture shall be deemed to be reference to such Treasury
Portfolio and any reference herein or in the Certificates to distributions on
the Capital Securities or interest on the Debentures shall be deemed to be a
reference to corresponding distributions on the Treasury Portfolio. The Company
may cause to be made in any Income PRIDES Certificates thereafter to be issued
such change in phraseology and form (but not in substance) as may be appropriate
to reflect the liquidation of the Trust and the substitution of the Treasury
Portfolio for Capital Securities or Debentures as collateral.
ARTICLE V
The Purchase Contracts
Section 5.1. Purchase of Shares of Common Stock.
Each Purchase Contract shall, unless an Early Settlement has occurred in
accordance with Section 5.9 hereof, obligate the Holder of the related Security
to purchase, and the Company to sell, on the Purchase Contract Settlement Date
at a price equal to the Stated Amount (the "Purchase Price"), a number of newly
issued shares of Common Stock equal to the Settlement Rate unless, on or prior
to the Purchase Contract Settlement Date, there shall have occurred a
Termination Event with respect to the Security of which such Purchase Contract
is a part. The "Settlement Rate" is equal to (a) if the Applicable Market Value
(as defined below) is equal to or greater than $38.10 (the "Threshold
Appreciation Price"), .2625 shares of Common Stock per Purchase Contract, (b) if
the Applicable Market Value is less than the Threshold Appreciation Price but is
greater than $31.75, the number of shares of Common Stock per Purchase Contract
equal to the Stated Amount divided
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by the Applicable Market Value and (c) if the Applicable Market Value is less
than or equal to $31.75, .3150 shares of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in Section 5.6 (and in each case
rounded upward or downward to the nearest 1/10,000th of a share). As provided in
Section 5.10, no fractional shares of Common Stock will be issued upon
settlement of Purchase Contracts.
The "Applicable Market Value" means the average of the Closing Price per
share of Common Stock on each of the 20 consecutive Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date
or, for purposes of determining cash payable in lieu of fractional shares in
connection with an Early Settlement, the third Trading Day immediately preceding
the relevant Early Settlement Date. The "Closing Price" of the Common Stock on
any date of determination means the closing sale price (or, if no closing price
is reported, the last reported sale price) of the Common Stock on The New York
Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by the Nasdaq
National Market or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
Each Holder of an Income PRIDES or a Growth PRIDES, by its acceptance
thereof, irrevocably authorizes the Agent to enter into and perform the related
Purchase Contract on its behalf as its attorney-in-fact (including the execution
of Certificates on behalf of such Holder), agrees to be bound by the terms and
provisions thereof, covenants and agrees to perform its obligations under such
Purchase Contracts, and consents to the provisions hereof, irrevocably
authorizes the Agent as its attorney-in-fact to enter into and perform the
Pledge Agreement on its behalf as its attorney-in-fact, and consents to and
agrees to be bound by the Pledge of the
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Capital Securities, the Treasury Portfolio or the Treasury Securities pursuant
to the Pledge Agreement; provided that upon a Termination Event, the rights of
the Holder of such Security under the Purchase Contract may be enforced without
regard to any other rights or obligations. Each Holder of an Income PRIDES or a
Growth PRIDES, by its acceptance thereof, further covenants and agrees, that, to
the extent and in the manner provided in Section 5.4 and the Pledge Agreement,
but subject to the terms thereof, payments in respect of the Stated Amount of
the Capital Securities or the Proceeds of the Treasury Securities or the
Treasury Portfolio on the Purchase Contract Settlement Date shall be paid by the
Collateral Agent to the Company in satisfaction of such Holder's obligations
under such Purchase Contract and such Holder shall acquire no right, title or
interest in such payments.
Upon registration of transfer of a Certificate, the transferee shall be
bound (without the necessity of any other action on the part of such
transferee), under the terms of this Agreement, the Purchase Contracts
underlying such Certificate and the Pledge Agreement and the transferor shall be
released from the obligations under this Agreement, the Purchase Contracts
underlying the Certificates so transferred and the Pledge Agreement. The Company
covenants and agrees, and each Holder of a Certificate, by its acceptance
thereof, likewise covenants and agrees, to be bound by the provisions of this
paragraph.
Section 5.2. Contract Adjustment Payments.
Subject to Section 5.3 herein, the Company shall pay, on each Payment
Date, the Contract Adjustment Payments, if any, payable in respect of each
Purchase Contract to the Person in whose name a Certificate (or one or more
Predecessor Certificates) is registered at the close of business on the Record
Date next preceding such Payment Date. The Contract Adjustment Payments, if any,
will be payable at the New York Office maintained for that purpose or, at the
option of the Company, by check mailed to the address of the Person entitled
thereto at such Person's address as it appears on the Income PRIDES Register or
the Growth PRIDES Register.
Upon the occurrence of a Termination Event, the Company's obligation to
pay Contract Adjustment Payments (including any accrued or Deferred Contract
Adjustment Payments), if any, shall cease.
Each Certificate delivered under this Agreement upon registration of
transfer of or in exchange for or in lieu of (including as a result of a
Collateral Substitution or the re-establishment of an Income PRIDES) any other
Certificate shall carry the
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<PAGE> 46
rights to Contract Adjustment Payments, if any, accrued and unpaid, and to
accrue Contract Adjustment Payments, if any, which were carried by the Purchase
Contracts underlying such other Certificates.
Subject to Section 5.9, in the case of any Security with respect to which
Early Settlement of the underlying Purchase Contract is effected on an Early
Settlement Date, or in respect of which Cash Settlement of the underlying
Purchase Contract is effected on the Business Day immediately preceding the
Purchase Contract Settlement Date, or with respect to which a Collateral
Substitution or an establishment or re-establishment or Income PRIDES pursuant
to Section 3.14 is effected, in each case on a date that is after any Record
Date and on or prior to the next succeeding Payment Date, Contract Adjustment
Payments on the Purchase Contracts underlying such Securities otherwise payable
on such Payment Date shall be payable on such Payment Date notwithstanding such
Cash Settlement, Early Settlement, Collateral Substitution or establishment or
re-establishment of Income PRIDES, and such Contract Adjustment Payments shall
be paid to the Person in whose name the Certificate evidencing such Security (or
one or more Predecessor Certificates) is registered at the close of business on
such Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Security with respect to which Cash
Settlement or Early Settlement of the underlying Purchase Contract is effected
on the Business Day immediately preceding the Purchase Contract Settlement Date
or an Early Settlement Date, as the case may be, or with respect to which a
Collateral Substitution or an establishment or re-establishment of Income PRIDES
has been effected, Contract Adjustment Payments, if any, that would otherwise be
payable after the Purchase Contract Settlement Date or Early Settlement Date
with respect to such Purchase Contract shall not be payable.
The Company's obligations with respect to Contract Adjustment Payments, if
any, will be subordinated and junior in right of payment to the Company's
obligations under any Senior Indebtedness.
Section 5.3. Deferral of Payment Dates For Contract Adjustment Payments.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments, if any, otherwise payable on any Payment Date, but only if
the Company shall give the Holders and the Agent written notice of its election
to defer such payment (specifying the amount to be deferred) at least ten
Business Days prior to the earlier of (i) the next succeeding Payment Date or
(ii) the date the Company is
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<PAGE> 47
required to give notice of the Record Date or Payment Date with respect to
payment of such Contract Adjustment Payments, if any, to the NYSE or other
applicable self-regulatory organization or to Holders of the Securities, but in
any event not less than one Business Day prior to such Record Date. Any Contract
Adjustment Payments, if any, so deferred shall, to the extent permitted by law,
bear additional Contract Adjustment Payments thereon at the rate of 8.75% per
annum (computed on the basis of 360 day year of twelve 30 day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments, if any, together with the
additional Contract Adjustment Payments accrued thereon, being referred to
herein as the "Deferred Contract Adjustment Payments"). Deferred Contract
Adjustment Payments, if any, shall be due on the next succeeding Payment Date
except to the extent that payment is deferred pursuant to this Section. No
Contract Adjustment Payments, if any, may be deferred to a date that is after
the Purchase Contract Settlement Date and no such deferral period may end other
than on a Payment Date. If the Purchase Contracts are terminated upon the
occurrence of a Termination Event, the Holder's right to receive Contract
Adjustment Payments, if any, and Deferred Contract Adjustment Payments will
terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until a Payment Date
prior to the Purchase Contract Settlement Date, then all Deferred Contract
Adjustment Payments, if any, shall be payable to the registered Holders as of
the close of business on the Record Date immediately preceding such Payment
Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until the Purchase
Contract Settlement Date, each Holder will receive on the Purchase Contract
Settlement Date in lieu of a cash payment a number of shares of Common Stock (in
addition to a number of shares of Common Stock equal to the Settlement Rate)
equal to (x) the aggregate amount of Deferred Contract Adjustment Payments
payable to such Holder divided by (y) the Applicable Market Value.
No fractional shares of Common Stock will be issued by the Company with
respect to the payment of Deferred Contract Adjustment Payments on the Purchase
Contract Settlement Date. In lieu of fractional shares otherwise issuable with
respect to such payment of Deferred Contract Adjustment Payments, the Holder
will be entitled to receive an amount in cash as provided in Section 5.10.
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<PAGE> 48
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, if any, then, until the Deferred Contract
Adjustment Payments have been paid, the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
or make guarantee payments with respect to the foregoing (other than (i)
purchases or acquisitions of shares of capital stock of the Company in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security outstanding on the date of such event
requiring the Company to purchase capital stock of the Company, (ii) as a result
of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (iv) dividends or distributions in capital stock of the Company (or
rights to acquire capital stock) or repurchases or redemptions of capital stock
solely from the issuance or exchange of capital stock or (v) redemptions or
repurchases of any rights outstanding under a shareholder rights plan or the
declaration thereunder of a dividend of rights in the future).
Section 5.4. Payment of Purchase Price.
(a) (i) Unless a Tax Event Redemption has occurred or a Holder
settles the underlying Purchase Contract through the early delivery of
cash to the Purchase Contract Agent in the manner described in Section
5.9, each Holder of an Income PRIDES must notify the Agent by use of a
notice in substantially the form of Exhibit E hereto of its intention to
pay in cash ("Cash Settlement") the Purchase Price for the shares of
Common Stock to be purchased pursuant to a Purchase Contract. Such notice
shall be made on or prior to 5:00 p.m., New York City time, on the fifth
Business Day immediately preceding the Purchase Contract Settlement Date.
The Agent shall promptly notify the Collateral Agent of the receipt of
such a notice from a Holder intending to make a Cash Settlement.
(ii) A Holder of an Income PRIDES who has so notified the Agent of
its intention to make a Cash Settlement is required to pay the Purchase
Price to the Collateral Agent prior to 11:00 a.m., New York City time, on
the Business Day immediately preceding the Purchase Contract Settlement
Date
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<PAGE> 49
in lawful money of the United States by certified or cashiers' check or
wire transfer, in each case in immediately available funds payable to or
upon the order of the Company. Any cash received by the Collateral Agent
will be invested promptly by the Collateral Agent in Permitted Investments
and paid to the Company on the Purchase Contract Settlement Date in
settlement of the Purchase Contract in accordance with the terms of this
Agreement and the Pledge Agreement. Any funds received by the Collateral
Agent in respect of the investment earnings from the investment in such
Permitted Investments, will be distributed to the Agent when received for
payment to the Holder.
(iii) If a Holder of an Income PRIDES fails to notify the Agent of
its intention to make a Cash Settlement in accordance with paragraph
(a)(i) above, such failure shall constitute an event of default and the
Holder shall be deemed to have consented to the disposition of the pledged
Capital Securities pursuant to the remarketing as described in paragraph
(b) below. If a Holder of an Income PRIDES does notify the Agent as
provided in paragraph (a)(i) above of its intention to pay the Purchase
Price in cash, but fails to make such payment as required by paragraph
(a)(ii) above, such failure shall also constitute a default; however, the
Capital Securities of such a Holder will not be remarketed but instead the
Collateral Agent, for the benefit of the Company, will exercise its rights
as a secured party with respect to such Capital Securities, including but
not limited to those rights specified in paragraph (c) below.
(b) In order to dispose of the Capital Securities (or Debentures
exchanged for Capital Securities following an Investment Company Event or
other dissolution of the Trust) of Income PRIDES Holders who have not
notified the Agent of their intention to effect a Cash Settlement as
provided in paragraph (a)(i) above, the Company shall engage a nationally
recognized investment bank (the "Remarketing Agent") pursuant to the
Remarketing Agreement to sell such Capital Securities (or Debentures). In
order to facilitate the remarketing, the Agent shall notify, by 10:00
a.m., New York City time, on the fourth Business Day immediately preceding
the Purchase Contract Settlement Date, the Remarketing Agent of the
aggregate number of Capital Securities (or Debentures) to be remarketed.
Concurrently, the Collateral Agent, pursuant to the terms of the Pledge
Agreement, will present for remarketing such Capital Securities (or
Debentures) to the Remarketing Agent. Upon receipt of such notice from the
Agent and such Capital Securities (or Debentures) from the Collateral
Agent, the Remarketing Agent will,
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on the third Business Day immediately preceding the Purchase Contract
Settlement Date, use its reasonable efforts to remarket such Capital
Securities (or Debentures) on such date at a price of approximately
100.75% (but not less than 100%) of the aggregate stated liquidation
amount of such Capital Securities (or the aggregate principal amount of
Debentures), plus accrued and unpaid distributions (or, in the case of
Debentures, accrued and unpaid interest)(including in each case deferred
distributions or deferred interest, as the case may be), if any, thereon;
provided that the Company may limit the Reset Rate to be no higher than
the rate on the Two-Year Benchmark Treasury plus 300 basis points (3.00%)
and provided further that the Reset Rate shall in no event exceed (and the
Company shall limit the Reset Rate so that it does not exceed) the maximum
rate permitted by law. After deducting as the remarketing fee
("Remarketing Fee") an amount not exceeding 50 basis points (.50%) of the
aggregate stated liquidation amount of the remarketed Capital Securities
(or the aggregate principal amount of the remarketed Debentures) from any
amount of such proceeds in excess of the aggregate stated liquidation
amount of the remarketed Capital Securities (or the aggregate principal
amount of the remarketed Debentures) plus accrued and unpaid distributions
(or, in the case of Debentures, accrued and unpaid interest) (including in
each case deferred distributions or deferred interest, as the case may
be), if any, then the Remarketing Agent will remit the entire amount of
the proceeds from such remarketing to the Collateral Agent. Such portion
of the proceeds, equal to the aggregate stated liquidation amount of such
Capital Securities (or the aggregate principal amount of Debentures) will
automatically be applied by the Collateral Agent, in accordance with the
Pledge Agreement to satisfy in full such Income PRIDES holders'
obligations to pay the Purchase Price for the Common Stock under the
related Purchase Contracts on the Purchase Contract Settlement Date. Any
proceeds in excess of those required to pay the Purchase Price and the
Remarketing Fee will be remitted to the Agent for payment to the Holders
of the related Income PRIDES. Income PRIDES Holders whose Capital
Securities (or Debentures) are so remarketed will not otherwise be
responsible for the payment of any Remarketing Fee in connection
therewith. If, in spite of using its reasonable efforts, the Remarketing
Agent cannot remarket the related Capital Securities (or Debentures)
(other than to the Company) of such Holders of Income PRIDES at a price
not less than 100% of the aggregate stated liquidation amount of such
Capital Securities (or the aggregate principal amount of Debentures) plus
accrued and unpaid distributions (or, in the case of Debentures, accrued
and unpaid interest) (including in each case deferred distribu-
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tions or deferred interest, as the case may be), if any, the remarketing
will be deemed to have failed (a "Failed Remarketing") and in accordance
with the terms of the Pledge Agreement the Collateral Agent for the
benefit of the Company will exercise its rights as a secured party with
respect to such Capital Securities (or Debentures), including those
actions specified in paragraph (c) below; provided, that if upon a Failed
Remarketing the Collateral Agent exercises such rights for the benefit of
the Company with respect to such Capital Securities (or Debentures), any
accrued and unpaid distributions (or, in the case of Debentures, accrued
and unpaid interest) (including in each case deferred distributions or
deferred interest, as the case may be) on such Capital Securities (or
Debentures) will become payable and be paid in cash by the Company to the
Agent for payment to the Holder of the Income PRIDES to which such Capital
Securities (or Debentures) relates. Such payment will be made by the
Company on or prior to 11 a.m. New York City time on the Purchase Contract
Settlement Date in lawful money of the United States by certified or
cashiers' check or wire transfer in immediately available funds payable to
or upon the order of the Agent. The Company will cause a notice of such
Failed Remarketing to be published on the second Business Day immediately
preceding the Purchase Contract Settlement Date in a daily newspaper in
the English language of general circulation in The City of New York, which
is expected to be The Wall Street Journal.
(c) With respect to any Capital Securities beneficially owned by
Holders who have elected Cash Settlement but failed to deliver cash as
required in (a)(ii) above, or with respect to Capital Securities which are
subject to a Failed Remarketing, the Collateral Agent for the benefit of
the Company reserves all of its rights as a secured party with respect
thereto and, subject to applicable law and paragraph (h) below, may, among
other things, (i) retain the Capital Securities in full satisfaction of
the Holders obligations under the Purchase Contracts or (ii) sell the
Capital Securities in one or more public or private sales.
(d) (i) Unless a Holder of an Income PRIDES (if a Tax Event
Redemption has occurred) settles the underlying Purchase Contract
through the early delivery of cash to the Purchase Contract Agent in
the manner described in Section 5.9, each Holder of an Income PRIDES
(if a Tax Event Redemption has occurred) must notify the Agent by
use of a notice in substantially the form of Exhibit E hereto of its
intention to pay in cash the Purchase Price for the shares of
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<PAGE> 52
Common Stock to be purchased pursuant to a Purchase Contract on or
prior to 5:00 p.m., New York City time, on the second Business Day
immediately preceding the Purchase Contract Settlement Date. The
Agent shall promptly notify the Collateral Agent of the receipt of
such a notice from a Holder intending to make such a Cash
Settlement.
(ii) A Holder of an Income PRIDES (if a Tax Event Redemption
has occurred) who has so notified the Agent of its intention to make
a Cash Settlement in accordance with paragraph (d)(i) above is
required to pay the Purchase Price to the Collateral Agent prior to
11:00 a.m., New York City time, on the Business Day immediately
preceding the Purchase Contract Settlement Date in lawful money of
the United States by certified or cashiers' check or wire transfer,
in each case in immediately available funds payable to or upon the
order of the Company. Any cash received by the Collateral Agent will
be invested promptly by the Collateral Agent in Permitted
Investments and paid to the Company on the Purchase Contract
Settlement Date in settlement of the Purchase Contract in accordance
with the terms of this Agreement and the Pledge Agreement. Any funds
received by the Collateral Agent in respect of the investment
earnings from the investment in such Permitted Investments will be
distributed to the Agent when received for payment to the Holder.
(iii) If a Holder of an Income PRIDES (if a Tax Event
Redemption has occurred) fails to notify the Agent of its intention
to make a Cash Settlement in accordance with paragraph (d)(i) above,
or if a Holder of an Income PRIDES (if a Tax Event Redemption has
occurred) does notify the Agent as provided in paragraph (d)(i)
above its intention to pay the Purchase Price in cash, but fails to
make such payment as required by paragraph (d)(ii) above, then upon
the maturity of the appropriate Applicable Ownership Interest of the
Treasury Portfolio held by the Collateral Agent on the Business Day
immediately prior to the Purchase Contract Settlement Date, the
appropriate Applicable Ownership Interest of the Treasury Portfolio
received by the Collateral Agent will be invested promptly in
overnight Permitted Investments. On the Purchase Contract Settlement
Date an amount equal to the Purchase Price will be remitted to the
Company as payment thereof without receiving any instructions from
the Holder. In the event the sum of the proceeds from the related
appropriate Appli-
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cable Ownership Interest of the Treasury Portfolio and the
investment earnings earned from such investments is in excess of the
aggregate Purchase Price of the Purchase Contracts being settled
thereby, the Collateral Agent will distribute such excess to the
Agent for the benefit of the Holder of the related Income PRIDES
when received.
(e) Any distribution to Holders of excess funds and interest
described above, shall be payable at the New York Office maintained for
that purpose or, at the option of the Holder, by check mailed to the
address of the Person entitled thereto at such address as it appears on
the Register.
(f) Unless a Holder settles the underlying Purchase Contract through
the early delivery of cash to the Collateral Agent in the manner described
herein, the Company shall not be obligated to issue any shares of Common
Stock in respect of a Purchase Contract or deliver any certificate
therefor to the Holder unless it shall have received payment in full of
the Purchase Price for the shares of Common Stock to be purchased
thereunder in the manner herein set forth.
(g) Upon Cash Settlement of any Purchase Contract, (i) the
Collateral Agent will in accordance with the terms of the Pledge Agreement
cause the Pledged Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, or the
Pledged Treasury Securities underlying the relevant Security to be
released from the Pledge by the Collateral Agent free and clear of any
security interest of the Company and transferred to the Agent for delivery
to the Holder thereof or its designee as soon as practicable and (ii)
subject to the receipt thereof from the Collateral Agent, the Agent shall,
by book-entry transfer, or other appropriate procedures, in accordance
with instructions provided by the Holder thereof, transfer such Capital
Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, or such Treasury Securities (or,
if no such instructions are given to the Agent by the Holder, the Agent
shall hold such Capital Securities or the Treasury Portfolio, as the case
may be, or such Treasury Securities, and any distributions thereon, in the
name of the Agent or its nominee in trust for the benefit of such Holder).
(h) The obligations of the Holders to pay the Purchase Price are
non-recourse obligations and are payable solely out of any Cash Settlement
or the proceeds of any Collateral pledged to secure the obligations of the
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Holders and in no event will Holders be liable for any deficiency between
the proceeds of Collateral disposition and the Purchase Price.
Section 5.5. Issuance of Shares of Common Stock.
Unless a Termination Event or an Early Settlement shall have occurred, on
the Purchase Contract Settlement Date, upon its receipt of payment in full of
the Purchase Price for the shares of Common Stock purchased by the Holders
pursuant to the foregoing provisions of this Article and subject to Section
5.6(b), the Company shall issue and deposit with the Agent, for the benefit of
the Holders of the Outstanding Securities, one or more certificates representing
newly issued shares of Common Stock registered in the name of the Agent (or its
nominee) as custodian for the Holders (such certificates for shares of Common
Stock, together with any dividends or distributions for which both a record date
and payment date for such dividend or distribution has occurred on or after the
Purchase Contract Settlement Date, being hereinafter referred to as the
"Purchase Contract Settlement Fund") to which the Holders are entitled
hereunder. Subject to the foregoing, upon surrender of a Certificate to the
Agent on or after the Purchase Contract Settlement Date, together with
settlement instructions thereon duly completed and executed, the Holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Common Stock which such Holder is
entitled to receive pursuant to the provisions of this Article Five (after
taking into account all Securities then held by such Holder) together with cash
in lieu of fractional shares as provided in Section 5.10 and any dividends or
distributions with respect to such shares constituting part of the Purchase
Contract Settlement Fund, but without any interest thereon, and the Certificate
so surrendered shall forthwith be cancelled. Such shares shall be registered in
the name of the Holder or the Holder's designee as specified in the settlement
instructions provided by the Holder to the Agent. If any shares of Common Stock
issued in respect of a Purchase Contract are to be registered to a Person other
than the Person in whose name the Certificate evidencing such Purchase Contract
is registered, no such registration shall be made unless the Person requesting
such registration has paid any transfer and other taxes required by reason of
such registration in a name other than that of the registered Holder of the
Certificate evidencing such Purchase Contract or has established to the
satisfaction of the Company that such tax either has been paid or is not
payable.
Section 5.6. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
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(1) In case the Company shall pay or make a dividend or other
distribution on the Common Stock in Common Stock, the Settlement Rate, as in
effect at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by dividing such Settlement Rate by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include any shares issuable
in respect of any scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue rights, options or warrants to
all holders of its Common Stock (not being available on an equivalent basis to
Holders of the Securities upon settlement of the Purchase Contracts underlying
such Securities) entitling them, for a period expiring within 45 days after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants, to subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market Price per share of the Common
Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than pursuant to a dividend
reinvestment plan or share purchase plan), the Settlement Rate in effect at the
opening of business on the day following the date fixed for such determination
shall be increased by dividing such Settlement Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but
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shall include any shares issuable in respect of any scrip certificates issued in
lieu of fractions of shares of Common Stock. The Company shall not issue any
such rights, options or warrants in respect of shares of Common Stock held in
the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided
or split into a greater number of shares of Common Stock, the Settlement Rate in
effect at the opening of business on the day following the day upon which such
subdivision or split becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Settlement Rate in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such increase or
reduction, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision, split or
combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness, shares of
capital stock, securities, cash or other property (but excluding any rights or
warrants referred to in paragraph (2) of this Section, any dividend or
distribution paid exclusively in cash and any dividend or distribution referred
to in paragraph (1) of this Section), the Settlement Rate shall be increased so
that the same shall equal the rate determined by dividing the Settlement Rate in
effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price per share of
the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution filed with the Agent) on such
date of the portion of the evidences of indebtedness, shares of capital stock,
securities, cash or other property so distributed applicable to one share of
Common Stock and the denominator shall be such Current Market Price per share of
the Common Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. In any case in which this
paragraph (4) is applicable, paragraph (2) of this Section shall not be
applicable.
(5) In case the Company shall, (I) by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (i) regular
quarterly
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cash distributions, (ii) any cash that is distributed in a Reorganization Event
to which Section 5.6(b) applies or (iii) cash that is distributed as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (II) the aggregate amount of any other
distributions to all holders of its Common Stock (other than regular quarterly
cash distributions) made exclusively in cash within the 12 months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to this paragraph (5) or paragraph (6) of this Section has been made
and (III) the aggregate of any cash plus the fair market value, as of the
expiration of the applicable tender or exchange offer referred to below (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution), of consideration payable in respect of any
tender or exchange offer (other than consideration payable in respect of any
odd-lot tender offer) by the Company or any of its subsidiaries for all or any
portion of the Common Stock concluded within the 12 months preceding the date of
payment of the distribution described in clause (I) above and in respect of
which no adjustment pursuant to this paragraph (5) or paragraph (6) of this
Section has been made, exceeds 15% of the product of the Current Market Price
per share of the Common Stock on the date for the determination of holders of
shares of Common Stock entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date for determination, the
Settlement Rate shall be increased so that the same shall equal the rate
determined by dividing the Settlement Rate in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the Current Market Price per share of the Common Stock on the
date fixed for such determination less an amount equal to the quotient of (x)
the combined amount distributed or payable in the transactions described in
clauses (I), (II) and (III) above and (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the Current Market Price per share of the Common Stock on such
date for determination.
(6) In case (I) a tender or exchange offer made by the Company or
any subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
Purchased Shares) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a
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Board Resolution) that combined together with (II) the aggregate of the cash
plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution), as of
the expiration of such tender or exchange offer, of consideration payable in
respect of any other tender or exchange offer (other than consideration payable
in respect of any odd-lot tender offer) by the Company or any subsidiary of the
Company for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender or exchange offer and in respect of
which no adjustment pursuant to paragraph (5) of this Section or this paragraph
(6) has been made and (III) the aggregate amount of any distributions (other
than regular quarterly cash distributions) to all holders of the Company's
Common Stock made exclusively in cash within the 12 months preceding the
expiration of such tender or exchange offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section or this paragraph (6) has
been made, exceeds 15% of the product of the Current Market Price per share of
the Common Stock as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender or exchange offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any tendered shares)
on the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Settlement Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Settlement Rate immediately prior to the close of
business as of the Expiration Time by a fraction (i) the numerator of which
shall be equal to (A) the product of (I) the Current Market Price per share of
the Common Stock as of the Expiration Time and (II) the number of shares of
Common Stock outstanding (including any tendered shares) as of the Expiration
Time less (B) the amount of cash plus the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
transactions described in clauses (I), (II) and (III) above (assuming in the
case of clause (I) the acceptance, up to any maximum specified in the terms of
the tender or exchange offer, of Purchased Shares), and (ii) the denominator of
which shall be equal to the product of (A) the Current Market Price per share of
the Common Stock as of the Expiration Time and (B) the number of shares of
Common Stock outstanding (including any tendered shares) as of the Expiration
Time less the number of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 5.6(b) applies) shall be deemed to involve
(a)
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a distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be deemed to
be "the date fixed for the determination of stockholders entitled to receive
such distribution" and the "date fixed for such determination" within the
meaning of paragraph (4) of this Section), and (b) a subdivision, split or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
or split becomes effective" or "the day upon which such combination becomes
effective", as the case may be, and "the day upon which such subdivision, split
or combination becomes effective" within the meaning of paragraph (3) of this
Section).
(8) The "Current Market Price" per share of Common Stock on any day
means the average of the daily Closing Prices for the five consecutive Trading
Days selected by the Company commencing not more than 30 Trading Days before,
and ending not later than, the earlier of the day in question and the day before
the "ex date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used with
respect to any issuance or distribution, shall mean the first date on which the
Common Stock trades regular way on such exchange or in such market without the
right to receive such issuance or distribution.
(9) All adjustments to the Settlement Rate, shall be calculated to
the nearest 1/10,000th of a share of Common Stock (or if there is not a nearest
1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment in
the Settlement Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this subparagraph are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
an adjustment is made to the Settlement Rate pursuant to paragraph (1), (2),
(3), (4), (5), (6), (7) or (10) of this Section 5.6(a), an adjustment shall also
be made to the Applicable Market Value solely to determine which of clauses (a),
(b) or (c) of the definition of Settlement Rate in Section 5.1 will apply on the
Purchase Contract Settlement Date. Such adjustment shall be made by multiplying
the Applicable Market Value by a fraction of which the numerator shall be the
Settlement Rate immediately after such adjustment pursuant to paragraph (1),
(2), (3), (4), (5), (6), (7) or (10) of this Section 5.6(a) and the denominator
shall be the Settlement Rate immediately before such adjustment; provided,
however, that if such adjustment to the Settlement Rate is
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required to be made pursuant to the occurrence of any of the events contemplated
by paragraph (1), (2), (3), (4), (5), (7) or (10) of this Section 5.6(a) during
the period taken into consideration for determining the Applicable Market Value,
appropriate and customary adjustments shall be made to the Settlement Rate.
(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be advisable in
order to avoid or diminish any income tax to any holders of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes or for any other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization Event. In
the event of (i) any consolidation or merger of the Company with or into another
Person (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation), (ii) any sale, transfer,
lease or conveyance to another Person of the property of the Company as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of the Company with another Person (other than in connection with a
merger or acquisition) or (iv) any liquidation, dissolution or winding up of the
Company other than as a result of or after the occurrence of a Termination Event
(any such event, a "Reorganization Event"), the Settlement Rate will be adjusted
to provide that each Holder of Securities will receive on the Purchase Contract
Settlement Date with respect to each Purchase Contract forming a part thereof
(or upon any Early Settlement), the kind and amount of securities, cash and
other property receivable upon such Reorganization Event (without any interest
thereon, and without any right to dividends or distribution thereon which have a
record date that is prior to the Purchase Contract Settlement Date) by a Holder
of the number of shares of Common Stock issuable on account of each Purchase
Contract if the Purchase Contract Settlement Date had occurred immediately prior
to such Reorganization Event assuming such Holder of Common Stock is not a
Person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made, as the
case may be (any such Person, a "Constituent Person"), or an Affiliate of a
Constituent Person to the extent such Reorganization Event provides for
different treatment of Common Stock held by Affiliates of the Company and
non-affiliates and such Holder failed to exercise its rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such Reorgani-
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zation Event (provided that if the kind or amount of securities, cash and other
property receivable upon such Reorganization Event is not the same for each
share of Common Stock held immediately prior to such Reorganization Event by
other than a Constituent Person or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such Reorganization Event by each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). In the event of such a Reorganization
Event, the Person formed by such consolidation, merger or exchange or the Person
which acquires or leases the assets of the Company or, in the event of a
liquidation or dissolution of the Company, the Company or a liquidating trust
created in connection therewith, shall execute and deliver to the Agent an
agreement supplemental hereto providing that the Holders of each Outstanding
Security shall have the rights provided by this Section 5.6. Such supplemental
agreement shall provide for adjustments which, for events subsequent to the
effective date of such supplemental agreement, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section. The above
provisions of this Section shall similarly apply to successive Reorganization
Events.
Section 5.7. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein provided, the
Company shall:
(i) forthwith compute the Settlement Rate in accordance with Section
5.6 and prepare and transmit to the Agent an Officer's Certificate setting
forth the Settlement Rate, the method of calculation thereof in reasonable
detail, and the facts requiring such adjustment and upon which such
adjustment is based; and
(ii) within 10 Business Days following the occurrence of an event
that requires an adjustment to the Settlement Rate pursuant to Section 5.6
(or if the Company is not aware of such occurrence, as soon as practicable
after becoming so aware), provide a written notice to the Holders of the
Securities of the occurrence of such event and a statement in reasonable
detail setting forth the method by which the adjustment to the Settlement
Rate was determined and setting forth the adjusted Settlement Rate.
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(b) The Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist which may require
any adjustment of the Settlement Rate, or with respect to the nature or extent
or calculation of any such adjustment when made, or with respect to the method
employed in making the same. The Agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property, which may at the time be issued or delivered with
respect to any Purchase Contract; and the Agent makes no representation with
respect thereto. The Agent shall not be responsible for any failure of the
Company to issue, transfer or deliver any shares of Common Stock pursuant to a
Purchase Contract or to comply with any of the duties, responsibilities or
covenants of the Company contained in this Article.
Section 5.8. Termination Event; Notice.
The Purchase Contracts and all obligations and rights of the Company and
the Holders thereunder, including, without limitation, the rights of the Holders
to receive and the obligation of the Company to pay Contract Adjustment
Payments, if any, or Deferred Contract Adjustment Payments, if the Company shall
have such obligation, and the rights and obligations of Holders to purchase
Common Stock, shall immediately and automatically terminate, without the
necessity of any notice or action by any Holder, the Agent or the Company, if,
on or prior to the Purchase Contract Settlement Date, a Termination Event shall
have occurred. Upon and after the occurrence of a Termination Event, the
Securities shall thereafter represent the right to receive the Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, forming a part of such Securities in the case of
Income PRIDES, or Treasury Securities in the case of Growth PRIDES, in
accordance with the provisions of Section 4.3 of the Pledge Agreement; provided,
however, that, to the extent that a Holder of Income PRIDES or Growth PRIDES
would otherwise be entitled to receive less than $1,000 principal amount at
maturity of the Treasury Portfolio or the Treasury Securities, the Agent shall
dispose of such securities for cash, and transfer the appropriate amount of such
cash to such Holder in accordance with such Holder's instructions. Upon the
occurrence of a Termination Event, the Company shall promptly but in no event
later than two Business Days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in the
Register.
Section 5.9. Early Settlement.
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(a) Subject to and upon compliance with the provisions of this Section
5.9, at the option of the Holder thereof, Purchase Contracts underlying
Securities having an aggregate Stated Amount equal to $1,000 or an integral
multiple thereof may be settled early ("Early Settlement") in the case of Income
PRIDES (unless a Tax Event Redemption has occurred) on or prior to the fifth
Business Day immediately preceding the Purchase Contract Settlement Date and in
the case of Growth PRIDES on or prior to the second Business Day immediately
preceding the Purchase Contract Settlement Date, in each case, as provided
herein; provided however, that if a Tax Event Redemption has occurred and the
Treasury Portfolio has become a component of the Income PRIDES, Purchase
Contracts underlying Income PRIDES may be settled early on or prior to the
second Business Day immediately preceding the Purchase Contract Settlement Date,
but only in an aggregate amount of 40,000 Income PRIDES or in an integral
multiple thereof. In order to exercise the right to effect Early Settlement with
respect to any Purchase Contracts, the Holder of the Certificate evidencing
Securities shall deliver such Certificate to the Agent at the Corporate Trust
Office or the New York Office duly endorsed for transfer to the Company or in
blank with the form of Election to Settle Early on the reverse thereof duly
completed and accompanied by payment (payable to the Company) in immediately
available funds in an amount (the "Early Settlement Amount") equal to (i) the
product of (A) the Stated Amount times (B) the number of Purchase Contracts with
respect to which the Holder has elected to effect Early Settlement plus (ii) if
such delivery is made with respect to any Purchase Contracts during the period
from the close of business on any Record Date next preceding any Payment Date to
the opening of business on such Payment Date, an amount equal to the Contract
Adjustment Payments, if any, payable on such Payment Date with respect to such
Purchase Contracts; provided that no payment shall be required pursuant to
clause (ii) of this sentence if the Company shall have elected to defer the
Contract Adjustment Payments which would otherwise be payable on such Payment
Date. Except as provided in the immediately preceding sentence and subject to
the next to last paragraph of Section 5.2, no payment or adjustment shall be
made upon Early Settlement of any Purchase Contract on account of any Contract
Adjustment Payments accrued on such Purchase Contract or on account of any
dividends on the Common Stock issued upon such Early Settlement or on account of
any Deferred Contract Adjustment Payments. If the foregoing requirements are
first satisfied with respect to Purchase Contracts underlying any Securities at
or prior to 5:00 p.m., New York City time, on a Business Day, such day shall be
the "Early Settlement Date" with respect to such Securities and if such
requirements are first satisfied after 5:00 p.m., New York City time, on a
Business Day or on a day that is not a Business Day,
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the "Early Settlement Date" with respect to such Securities shall be the next
succeeding Business Day.
(b) Upon Early Settlement of Purchase Contracts by a Holder of the related
Securities and payment of any transfer or similar taxes payable by such Holder
in connection with the issuance of the related Common Stock to any person other
than such Holder, the Company shall issue, and the Holder shall be entitled to
receive, .2625 shares of newly issued Common Stock on account of each Purchase
Contract as to which Early Settlement is effected (the "Early Settlement Rate");
provided, however, that upon the Early Settlement of the Purchase Contracts, the
Holder of such related Securities will forfeit the right to receive any Deferred
Contract Adjustment Payments and future Contract Adjustment Payments, if any,
except to the extent that the Early Settlement Date is after the close of
business on a Record Date and prior to the opening of business on the
corresponding Payment Date. The Early Settlement Rate shall be adjusted in the
same manner and at the same time as the Settlement Rate is adjusted. As promptly
as practicable after Early Settlement of Purchase Contracts in accordance with
the provisions of this Section 5.9, the Company shall issue and shall deliver to
the Agent at the Corporate Trust Office a certificate or certificates for the
full number of shares of Common Stock issuable upon such Early Settlement
together with payment in lieu of any fraction of a share, as provided in Section
5.10.
(c) No later than the third Business Day after the applicable Early
Settlement Date the Company shall cause (i) the shares of Common Stock issuable
upon Early Settlement of Purchase Contracts to be issued and delivered, and (ii)
the related Capital Securities or the appropriate Applicable Ownership Interest
of the Treasury Portfolio, in the case of Income PRIDES, or the related Treasury
Securities, in the case of Growth PRIDES, to be released from the Pledge by the
Collateral Agent and transferred, in each case to the Agent for delivery to the
Holder thereof or its designee.
(d) Upon Early Settlement of any Purchase Contracts, and subject to
receipt of shares of Common Stock from the Company and the Capital Securities,
the appropriate Applicable Ownership Interest of the Treasury Portfolio or
Treasury Securities, as the case may be, from the Collateral Agent, as
applicable, the Agent shall, in accordance with the instructions provided by the
Holder thereof on the applicable form of Election to Settle Early on the reverse
of the Certificate evidencing the related Securities, (i) transfer to the Holder
the Capital Securities, Treasury Portfolio or Treasury Securities, as the case
may be, forming a part of such Securi-
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ties, and (ii) deliver to the Holder a certificate or certificates for the full
number of shares of Common Stock issuable upon such Early Settlement together
with payment in lieu of any fraction of a share, as provided in Section 5.10.
(e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Securities evidenced by a
Certificate, upon such Early Settlement the Company shall execute and the Agent
shall authenticate, countersign and deliver to the Holder thereof, at the
expense of the Company, a Certificate evidencing the Securities as to which
Early Settlement was not effected.
Section 5.10. No Fractional Shares.
No fractional shares or scrip representing fractional shares of Common
Stock shall be issued or delivered upon settlement on the Purchase Contract
Settlement Date or upon Early Settlement of any Purchase Contracts. If
Certificates evidencing more than one Purchase Contract shall be surrendered for
settlement at one time by the same Holder, the number of full shares of Common
Stock which shall be delivered upon settlement shall be computed on the basis of
the aggregate number of Purchase Contracts evidenced by the Certificates so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be deliverable upon settlement of any Purchase Contracts on the
Purchase Contract Settlement Date or upon Early Settlement, the Company, through
the Agent, shall make a cash payment in respect of such fractional interest in
an amount equal to the value of such fractional shares times the Applicable
Market Value. The Company shall provide the Agent from time to time with
sufficient funds to permit the Agent to make all cash payments required by this
Section 5.10 in a timely manner.
Section 5.11. Charges and Taxes.
The Company will pay all stock transfer and similar taxes attributable to
the initial issuance and delivery of the shares of Common Stock pursuant to the
Purchase Contracts and in payment of any Deferred Contract Adjustment Payments;
provided, however, that the Company shall not be required to pay any such tax or
taxes which may be payable in respect of any exchange of or substitution for a
Certificate evidencing a Security or any issuance of a share of Common Stock in
a name other than that of the registered Holder of a Certificate surrendered in
respect of the Securities evidenced thereby, other than in the name of the
Agent, as custodian for such Holder, and the Company shall not be required to
issue or deliver such share certificates or Certificates unless or until the
Person or Persons requesting the
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transfer or issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid or that no such tax is due.
ARTICLE VI
Remedies
Section 6.1. Unconditional Right of Holders to Receive Contract Adjustment
Payments and to Purchase Common Stock.
The Holder of any Income PRIDES or Growth PRIDES shall have the right,
which is absolute and unconditional (subject to the right of the Company to
defer payment thereof pursuant to Section 5.3, and to the forfeiture of any
Deferred Contract Adjustment Payments upon Early Settlement pursuant to Section
5.9(b) or upon the occurrence of a Termination Event), to receive payment of
each installment of the Contract Adjustment Payments, if any, with respect to
the Purchase Contract constituting a part of such Security on the respective
Payment Date for such Security and to purchase Common Stock pursuant to such
Purchase Contract and, in each such case, to institute suit for the enforcement
of any such payment and right to purchase Common Stock, and such rights shall
not be impaired without the consent of such Holder.
Section 6.2. Restoration of Rights and Remedies.
If any Holder has instituted any proceeding to enforce any right or remedy
under this Agreement and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to such Holder, then and in every
such case, subject to any determination in such proceeding, the Company and such
Holder shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of such Holder shall continue
as though no such proceeding had been instituted.
Section 6.3. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Certificates in the last paragraph of
Section 3.10, no right or remedy herein conferred upon or reserved to the
Holders is intended to be
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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 6.4. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy upon a
default shall impair any such right or remedy or constitute a waiver of any such
right. Every right and remedy given by this Article or by law to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by such
Holders.
Section 6.5. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of Income PRIDES or
Growth PRIDES, by its acceptance of such Income PRIDES or Growth PRIDES 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 Agreement, or in any suit
against the Agent for any action taken, suffered or omitted by it as Agent, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the
Agent, to any suit instituted by any Holder, or group of Holders, holding in the
aggregate more than 10% of the Outstanding Securities, or to any suit instituted
by any Holder for the enforcement of distributions on any Capital Securities or
Contract Adjustment Payments, if any, on any Purchase Contract on or after the
respective Payment Date therefor in respect of any Security held by such Holder,
or for enforcement of the right to purchase shares of Common Stock under the
Purchase Contracts constituting part of any Security held by such Holder.
Section 6.6. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the
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benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Agreement; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Agent or the Holders, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VII
The Agent
Section 7.1. Certain Duties and Responsibilities.
(a) (1) The Agent undertakes to perform, with respect to the Securities,
such duties and only such duties as are specifically set forth in this Agreement
and the Pledge Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Agent; and
(2) The Agent may, with respect to the Securities, conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Agent and conforming to the requirements of this Agreement, but in the
case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Agent, the Agent shall be
under a duty to examine the same to determine whether or not they conform
to the requirements of this Agreement.
(b) No provision of this Agreement shall be construed to relieve the Agent
from liability for its own negligent action, its own negligent failure to act,
or its own wilful misconduct or bad faith, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Agent shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Agent was negligent in ascertaining the pertinent facts; and
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(3) no provision of this Agreement shall require the Agent 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.
(c) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Agent shall be subject to the provisions of this Section.
(d) The Agent is authorized to execute and deliver the Pledge Agreement in
its capacity as Agent.
Section 7.2. Notice of Default.
Within 30 days after the occurrence of any default by the Company
hereunder of which a Responsible Officer of the Agent has actual knowledge, the
Agent shall transmit by mail to the Company and the Holders of Securities, as
their names and addresses appear in the Register, notice of such default
hereunder, unless such default shall have been cured or waived.
Section 7.3. Certain Rights of Agent.
Subject to the provisions of Section 7.1:
(a) the Agent 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 an Officer's Certificate, Issuer Order or Issuer
Request, and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Agent shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Agent (unless other evidence be herein
specifi-
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cally prescribed) may, in the absence of bad faith on its part, rely upon an
Officer's Certificate of the Company;
(d) the Agent may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Agent 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 Agent,
in its discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the execution, delivery and performance of the
Purchase Contracts as it may see fit, and, if the Agent shall determine to make
such further inquiry or investigation, it shall be given a reasonable
opportunity to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(f) the Agent may execute any of the powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys or an
Affiliate and the Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney or an Affiliate appointed with
due care by it hereunder.
Section 7.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Certificates shall be taken as
the statements of the Company and the Agent assumes no responsibility for their
accuracy. The Agent makes no representations as to the validity or sufficiency
of either this Agreement or of the Securities, or of the Pledge Agreement or the
Pledge. The Agent shall not be accountable for the use or application by the
Company of the proceeds in respect of the Purchase Contracts.
Section 7.5. May Hold Securities.
Any Registrar or any other agent of the Company, or the Agent and its
Affiliates, in their individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with the Company, the Collateral
Agent or any other Person with the same rights it would have if it were not
Registrar or such other agent, or the Agent.
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Section 7.6. Money Held in Custody.
Money held by the Agent in custody hereunder need not be segregated from
the other funds except to the extent required by law or provided herein. The
Agent shall be under no obligation to invest or pay interest on any money
received by it hereunder except as otherwise expressly provided herein or as
otherwise agreed in writing with the Company.
Section 7.7. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Agent from time to time such compensation for all
services rendered by it hereunder as the parties shall agree from time to
time;
(2) except as otherwise expressly provided herein, to reimburse the
Agent upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Agent in accordance with any provision of
this Agreement (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, willful
misconduct or bad faith; and
(3) to indemnify the Agent and any predecessor Agent for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence, willful misconduct or bad faith on its part, arising out of or
in connection with the acceptance or administration of its duties
hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
Section 7.8. Corporate Agent Required; Eligibility.
There shall at all times be an Agent hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having (or being a subsidiary of a bank
holding company having) a combined capital and surplus of at least $50,000,000,
subject to supervi-
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sion or examination by Federal or State authority and having an office in the
Borough of Manhattan, The City of New York, if there be such a corporation in
the Borough of Manhattan, The City of New York, qualified and eligible under
this Article and willing to act on reasonable terms. 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 Agent 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 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Agent and no appointment of a
successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.
(b) The Agent may resign at any time by giving written notice thereof to
the Company 60 days prior to the effective date of such resignation. If the
instrument of acceptance by a successor Agent required by Section 7.10 shall not
have been delivered to the Agent within 30 days after the giving of such notice
of resignation, the resigning Agent may petition any court of competent
jurisdiction for the appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders of a
majority in number of the Outstanding Securities delivered to the Agent and the
Company.
(d) If at any time
(1) the Agent fails to comply with Section 310(b) of the TIA, as if
the Agent were an indenture trustee under an indenture qualified under the
TIA, 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
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(2) the Agent shall cease to be eligible under Section 7.8 and shall
fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Agent shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Agent or of its property
shall be appointed or any public officer shall take charge or control of
the Agent 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
Agent, or (ii) 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 Agent and
the appointment of a successor Agent.
(e) If the Agent shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Agent for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Agent and shall comply
with the applicable requirements of Section 7.10. If no successor Agent shall
have been so appointed by the Company and accepted appointment in the manner
required by Section 7.10, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor Agent to give,
notice of each resignation and each removal of the Agent and each appointment of
a successor Agent by mailing written notice of such event by first-class mail,
postage prepaid, to all Holders as their names and addresses appear in the
applicable Register. Each notice shall include the name of the successor Agent
and the address of its Corporate Trust Office and New York Office, if any.
Section 7.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Agent, every such
successor Agent so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Agent an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Agent shall become
effective and such successor Agent, without any further act, deed or conveyance,
shall become
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vested with all the rights, powers, agencies and duties of the retiring Agent;
but, on the request of the Company or the successor Agent, such retiring Agent
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Agent all the rights, powers and trusts of the
retiring Agent and shall duly assign, transfer and deliver to such successor
Agent all property and money held by such retiring Agent hereunder.
(b) Upon request of any such successor Agent, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Agent all such rights, powers and agencies referred to in
paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at the time of
such acceptance such successor Agent shall be qualified and eligible under this
Article.
Section 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the 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 the Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Agent, shall be the successor of the Agent 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 Certificates shall have been
authenticated and executed on behalf of the Holders, but not delivered, by the
Agent then in office, any successor by merger, conversion or consolidation to
such Agent may adopt such authentication and execution and deliver the
Certificates so authenticated and executed with the same effect as if such
successor Agent had itself authenticated and executed such Securities.
Section 7.12. Preservation of Information; Communications to Holders.
(a) The Agent shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Agent in its
capacity as Registrar.
(b) If three or more Holders (herein referred to as "applicants") apply in
writing to the Agent, and furnish to the Agent reasonable proof that each such
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applicant has owned a Security for a period of at least six months preceding the
date of such application, and such application states that the applicants desire
to communicate with other Holders with respect to their rights under this
Agreement or under the Securities and is accompanied by a copy of the form of
proxy or other communication which such applicants propose to transmit, then the
Agent shall mail to all the Holders copies of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Agent of the materials to be mailed and of payment, or
provision for the payment, of the reasonable expenses of such mailing.
Section 7.13. No Obligations of Agent.
Except to the extent otherwise provided in this Agreement, the Agent
assumes no obligations and shall not be subject to any liability under this
Agreement, the Pledge Agreement or any Purchase Contract in respect of the
obligations of the Holder of any Security thereunder. The Company agrees, and
each Holder of a Certificate, by his acceptance thereof, shall be deemed to have
agreed, that the Agent's execution of the Certificates on behalf of the Holders
shall be solely as agent and attorney-in-fact for the Holders, and that the
Agent shall have no obligation to perform such Purchase Contracts on behalf of
the Holders, except to the extent expressly provided in Article V hereof.
Section 7.14. Tax Compliance.
(a) The Agent, on its own behalf and on behalf of the Company, will comply
with all applicable certification, information reporting and withholding
(including "backup" withholding) requirements imposed by applicable tax laws,
regulations or administrative practice with respect to (i) any payments made
with respect to the Securities or (ii) the issuance, delivery, holding,
transfer, redemption or exercise of rights under the Securities. Such compliance
shall include, without limitation, the preparation and timely filing of required
returns and the timely payment of all amounts required to be withheld to the
appropriate taxing authority or its designated agent.
(b) The Agent shall comply with any written direction received from the
Company with respect to the application of such requirements to particular
payments or Holders or in other particular circumstances, and may for purposes
of this Agreement rely on any such direction in accordance with the provisions
of Section 7.1(a)(2) hereof.
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(c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available, on
written request, to the Company or its authorized representative within a
reasonable period of time after receipt of such request.
ARTICLE VIII
Supplemental Agreements
Section 8.1. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the Company and the Agent, at any time
and from time to time, may enter into one or more agreements supplemental
hereto, in form satisfactory to the Company and the Agent, for any of the
following purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company
herein and in the Certificates; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Agent; or
(4) to make provision with respect to the rights of Holders pursuant
to the requirements of Section 5.6(b); or
(5) to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein, or to
make any other provisions with respect to such matters or questions
arising under this Agreement, provided such action shall not adversely
affect the interests of the Holders.
Section 8.2. Supplemental Agreements with Consent of Holders.
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With the consent of the Holders of not less than a majority of the
Outstanding Purchase Contracts voting together as one class, by Act of said
Holders delivered to the Company and the Agent, the Company, when authorized by
a Board Resolution, and the Agent may enter into an agreement or agreements
supplemental hereto for the purpose of modifying in any manner the terms of the
Purchase Contracts or the provisions of this Agreement or the rights of the
Holders in respect of the Securities (other than the Capital Securities and the
Debentures, which may be modified only in accordance with the applicable
provisions of the Declaration and the Indenture, respectively); provided,
however, that, except as contemplated herein, no such supplemental agreement
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change any Payment Date;
(2) change the amount or the type of Collateral required to be
Pledged to secure a Holder's obligations under any Purchase Contract,
impair the right of the Holder of any Purchase Contract to receive
distributions on the related Collateral (except for the rights of Holders
of Income PRIDES to substitute the Treasury Securities for the Pledged
Capital Securities or the rights of holders of Growth PRIDES to substitute
Capital Securities for the Pledged Treasury Securities) or otherwise
adversely affect the Holder's rights in or to such Collateral or adversely
alter the rights in or to such Collateral;
(3) reduce any Contract Adjustment Payments, if any, or any Deferred
Contract Adjustment Payment, or change any place where, or the coin or
currency in which, any Contract Adjustment Payment is payable;
(4) impair the right to institute suit for the enforcement of any
Purchase Contract, any Contract Adjustment Payment, if any, or any
Deferred Contract Adjustment Payment, if any;
(5) reduce the number of shares of Common Stock (or the amount of
any other property) to be purchased pursuant to any Purchase Contract,
increase the price to purchase shares of Common Stock (or any other
property) upon settlement of any Purchase Contract, change the Purchase
Contract Settlement Date or otherwise adversely affect the Holder's rights
under any Purchase Contract; or
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(6) reduce the percentage of the outstanding Purchase Contracts the
consent of whose Holders is required for any such supplemental agreement;
provided, that if any amendment or proposal referred to above would adversely
affect only the Income PRIDES or the Growth PRIDES, then only the affected class
of Holder as of the record date for the Holders entitled to vote thereon will be
entitled to vote on such amendment or proposal, and such amendment or proposal
shall not be effective except with the consent of Holders of not less than a
majority of such class.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental agreement, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 8.3. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby of
the agencies created by this Agreement, the Agent shall be entitled to receive
and (subject to Section 7.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental agreement is
authorized or permitted by this Agreement. The Agent may, but shall not be
obligated to, enter into any such supplemental agreement which affects the
Agent's own rights, duties or immunities under this Agreement or otherwise.
Section 8.4. Effect of Supplemental Agreements.
Upon the execution of any supplemental agreement under this Article, this
Agreement and the Securities shall be modified in accordance therewith, and such
supplemental agreement shall form a part of this Agreement for all purposes; and
every Holder of Certificates theretofore or thereafter authenticated, executed
on behalf of the Holders and delivered hereunder shall be bound thereby.
Section 8.5. Reference to Supplemental Agreements.
Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Agent, bear a notation in form
approved by the Agent as to any matter provided for in such supplemental
agreement. If the Company shall so
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determine, new Certificates so modified as to conform, in the opinion of the
Agent and the Company, to any such supplemental agreement may be prepared and
executed by the Company and authenticated, executed on behalf of the Holders and
delivered by the Agent in exchange for Outstanding Certificates.
ARTICLE IX
Consolidation, Merger, Sale or Conveyance
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property Except
Under Certain Conditions.
The Company covenants that it will not merge or consolidate with any other
Person or sell, assign, transfer, lease or convey all or substantially all of
its properties and assets to any Person or group of affiliated Persons in one
transaction or a series of related transactions, unless (i) either the Company
shall be the continuing corporation, or the successor (if other than the
Company) shall be a corporation organized and existing under the laws of the
United States of America or a State thereof or the District of Columbia and such
corporation shall expressly assume all the obligations of the Company under the
Purchase Contracts, this Agreement, the Indenture, the Declaration, the
Remarketing Agreement and the Pledge Agreement by one or more supplemental
agreements in form reasonably satisfactory to the Agent and the Collateral
Agent, executed and delivered to the Agent and the Collateral Agent by such
corporation, and (ii) the Company or such successor corporation, as the case may
be, shall not, immediately after such merger or consolidation, or such sale,
assignment, transfer, lease or conveyance, be in default of its payment
obligations under this Agreement or the Debentures, or in default of its
obligations to deliver Common Stock (or other property) on the Purchase Contract
Settlement Date or any Early Settlement Date, or in material default in the
performance of any other covenant hereunder or under the Debentures, the
Indenture, the Declaration, the Remarketing Agreement, the Purchase Contracts or
the Pledge Agreement.
Section 9.2. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance and upon any such assumption by a successor corporation in
accordance with Section 9.1, such successor corporation shall succeed to and be
substituted for the Company with the same effect as if it had been named herein
as the Company,
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and its predecessor shall, except in the case of a lease, be released from its
obligations under this Agreement. Such successor corporation thereupon may cause
to be signed, and may issue either in its own name or in the name of Kaufman and
Broad Home Corporation any or all of the Certificates evidencing Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Agent; and, upon the order of such successor corporation,
instead of the Company, and subject to all the terms, conditions and limitations
in this Agreement prescribed, the Agent shall authenticate and execute on behalf
of the Holders and deliver any Certificates which previously shall have been
signed and delivered by the officers of the Company to the Agent for
authentication and execution, and any Certificate evidencing Securities which
such successor corporation thereafter shall cause to be signed and delivered to
the Agent for that purpose. All the Certificates so issued shall in all respects
have the same legal rank and benefit under this Agreement as the Certificates
theretofore or thereafter issued in accordance with the terms of this Agreement
as though all of such Certificates had been issued at the date of the execution
hereof.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance, such change in phraseology and form (but not in substance)
may be made in the Certificates evidencing Securities thereafter to be issued as
may be appropriate.
Section 9.3. Opinion of Counsel Given to Agent.
The Agent, subject to Sections 7.1 and 7.3, shall receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
assignment, transfer, lease or conveyance, and any such assumption, complies
with the provisions of this Article and that all conditions precedent hereunder
to the consummation of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance have been met.
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ARTICLE X
Covenants
Section 10.1. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders from time
to time of the Securities that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain or cause to be maintained in the Borough of
Manhattan, The City of New York an office or agency (a "New York Office") and in
Chicago, Illinois where Certificates may be presented or surrendered for payment
and for acquisition of shares of Common Stock (or other property) upon
settlement of the Purchase Contracts on the Purchase Contract Settlement Date or
Early Settlement and for transfer of Collateral upon occurrence of a Termination
Event, where Certificates may be surrendered for registration of transfer or
exchange, for a Collateral Substitution or re-establishment of an Income PRIDES
and where notices and demands to or upon the Company in respect of the
Securities and this Agreement may be served. The Company will give prompt
written notice to the Agent of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Agent with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office, and the Company hereby appoints the
Agent as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices
or agencies where Certificates 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 the Borough of
Manhattan, The City of New York for such purposes. The Company will give prompt
written notice to the Agent of any such designation or rescission and of any
change in the location of any such other office or agency.
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The Company hereby designates the Borough of Manhattan, the City of New
York and Chicago, Illinois, as the places of payment for the Securities, and
hereby appoints the Agent, acting through its Corporate Trust Office in Chicago,
Illinois and through its office located at c/o First Chicago Trust Company of
New York, 14 Wall Street, 8th Floor, New York, New York 10005, as the registrar,
paying agent and transfer agent for the Income PRIDES and the Growth PRIDES and
for the other purposes contemplated by this Section 10.2.
Section 10.3. Company to Reserve Common Stock.
The Company shall at all times prior to the Purchase Contract Settlement
Date reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock the full number of shares of Common Stock
issuable against tender of payment in respect of all Purchase Contracts
constituting a part of the Securities evidenced by Outstanding Certificates.
Section 10.4. Covenants as to Common Stock.
The Company covenants that all shares of Common Stock which may be issued
against tender of payment in respect of any Purchase Contract constituting a
part of the Outstanding Securities will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable. The Company shall comply with all
applicable securities laws regulating the offer, issuance and delivery of shares
of Common Stock upon settlement of Purchase Contracts and will endeavor to list
such shares on each national securities exchange or automated quotation system
on which the Common Stock is then listed.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
KAUFMAN AND BROAD HOME
CORPORATION
By: /s/ Michael F. Henn
-------------------------------
Name: Michael F. Henn
Title: Senior Vice President and
Chief Financial Officer
By: /s/ Dennis Welsch
-------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
as Purchase Contract Agent
By: /s/ Mark J. Frye
-------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
<PAGE> 84
EXHIBIT A
(Form of Face of Income PRIDES Certificate)
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
No. _____ CUSIP No.
Number of Income PRIDES _______
____% Income PRIDES
This Income PRIDES Certificate certifies that ___________ is the
registered Holder of the number of Income PRIDES set forth above. Each Income
PRIDES represents (i) either (a) beneficial ownership by the Holder of one 8%
Capital Security (the "Capital Security") of KBHC Financing I, a Delaware
statutory business trust (the "Trust"), having a stated liquidation amount of
$10, subject to the Pledge of such Capital Security by such Holder pursuant to
the Pledge Agreement or
<PAGE> 85
(b) upon the occurrence of a Tax Event Redemption prior to the Purchase Contract
Settlement Date, the appropriate Applicable Ownership Interest of the Treasury
Portfolio, subject to the Pledge of such Applicable Ownership Interest of the
Treasury Portfolio by such Holder pursuant to the Pledge Agreement, and (ii) the
rights and obligations of the Holder under one Purchase Contract with Kaufman
and Broad Home Corporation, a Delaware corporation (the "Company," which term,
as used herein, includes its successors pursuant to the Purchase Contract
Agreement). All capitalized terms used herein which are defined in the Purchase
Contract Agreement have the meaning set forth therein.
Pursuant to the Pledge Agreement, the Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be, constituting part of each Income PRIDES evidenced hereby have been
pledged to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising a portion of
such Income PRIDES.
The Pledge Agreement provides that all payments of the Stated Amount
or the appropriate Applicable Ownership Interest (as specified in clause (A) of
the definition of such term) of the Treasury Portfolio, as the case may be, or
cash distributions on any Pledged Capital Securities (as defined in the Pledge
Agreement) or the appropriate Applicable Ownership Interest (as specified in
clause (B) of the definition of such term) of the Treasury Portfolio, as the
case may be, constituting part of the Income PRIDES received by the Collateral
Agent shall be paid by the Collateral Agent by wire transfer in same day funds
(i) in the case of (A) cash distributions with respect to Pledged Capital
Securities or the appropriate Applicable Ownership Interest (as specified in
clause (B) of the definition of such term) of the Treasury Portfolio, as the
case may be, and (B) any payments of the Stated Amount or the appropriate
Applicable Ownership Interest (as specified in clause (A) of the definition of
such terms) of the Treasury Portfolio, as the case may be, with respect to any
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be, that have been released from the Pledge
pursuant to the Pledge Agreement, to the Agent to the account designated by the
Agent, no later than 2:00 p.m., New York City time, on the Business Day such
payment is received by the Collateral Agent (provided that in the event such
payment is received by the Collateral Agent on a day that is not a Business Day
or after 12:30 p.m., New York City time, on a Business Day, then such payment
shall be made no later than 10:30 a.m., New York City time, on the next
succeeding Business Day) and (ii) in the case of payments of the Stated Amount
of any Pledged Capital Securities or the appropriate Applicable Ownership
Interest (as specified in clause
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(A) of the definition of such term) of the Treasury Portfolio that has not been
released from the Pledge pursuant to the Pledge Agreement, as the case may be,
to the Company on the Purchase Contract Settlement Date (as defined herein) in
accordance with the terms of the Pledge Agreement, in full satisfaction of the
respective obligations of the Holders of the Income PRIDES of which such Pledged
Capital Securities or the Treasury Portfolio, as the case may be, are a part
under the Purchase Contracts forming a part of such Income PRIDES. Distributions
on any Capital Security or the appropriate Applicable Ownership Interest (as
specified in clause (B) of the definition of such term) of the Treasury
Portfolio, as the case may be, forming part of an Income PRIDES evidenced hereby
which are payable quarterly in arrears on February 16, May 16, August 16 and
November 16 each year, commencing August 16, 1998 (a "Payment Date"), shall,
subject to receipt thereof by the Agent from the Collateral Agent, be paid to
the Person in whose name this Income PRIDES Certificate (or a Predecessor Income
PRIDES Certificate) is registered at the close of business on the Record Date
for such Payment Date.
Each Purchase Contract evidenced hereby obligates the Holder of this
Income PRIDES Certificate to purchase, and the Company to sell, on August 16,
2001 (the "Purchase Contract Settlement Date"), at a price equal to $10 (the
"Stated Amount"), a number of shares of Common Stock, $1.00 par value per share
("Common Stock"), of the Company equal to the Settlement Rate, unless on or
prior to the Purchase Contract Settlement Date there shall have occurred a
Termination Event or an Early Settlement with respect to the Income PRIDES of
which such Purchase Contract is a part, all as provided in the Purchase Contract
Agreement and more fully described on the reverse hereof. The purchase price
(the "Purchase Price") for the shares of Common Stock purchased pursuant to each
Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the
Purchase Contract Settlement Date by application of payment received in respect
of the Stated Amount or the appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as the case may be, of the Pledged Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be, pledged to secure the obligations under such Purchase Contract of the
Holder of the Income PRIDES of which such Purchase Contract is a part.
The Company shall pay on each Payment Date in respect of each Purchase
Contract forming part of an Income PRIDES evidenced hereby an amount (the
"Contract Adjustment Payments") equal to .25% per annum of the Stated Amount,
computed on the basis of a 360-day year of twelve 30 day months, subject to
deferral at the option of the Company as provided in the Purchase Contract
Agreement and
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<PAGE> 87
more fully described on the reverse hereof. Such Contract Adjustment Payments,
if any, shall be payable to the Person in whose name this Income PRIDES
Certificate (or a Predecessor Income PRIDES Certificate) is registered at the
close of business on the Record Date for such Payment Date.
Distributions on the Capital Securities or the appropriate Applicable
Ownership Interest (as specified in clause (B) of the definition of such term)
of the Treasury Portfolio, as the case may be, and Contract Adjustment Payments,
if any, will be payable at the Corporate Trust Office of the Agent and at the
New York Office or, at the option of the Company, by check mailed to the address
of the Person entitled thereto as such address appears on the Income PRIDES
Register.
Reference is hereby made to the further provisions set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Agent by manual signature, this Income PRIDES Certificate shall not be entitled
to any benefit under the Pledge Agreement or the Purchase Contract Agreement or
be valid or obligatory for any purpose.
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<PAGE> 88
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
KAUFMAN AND BROAD HOME CORPORATION
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts evidenced hereby)
By: THE FIRST NATIONAL BANK OF CHICAGO
not individually but solely as
attorney-in-fact of such Holder
By:
-------------------------------
Name:
Title:
Dated: , 1998
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Income PRIDES Certificates referred to in the within
mentioned Purchase Contract Agreement.
By: THE FIRST NATIONAL BANK OF CHICAGO,
as Purchase Contract Agent
By:
-------------------------------
Authorized Signatory
<PAGE> 89
(Form of Reverse of Income PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase Contract
Agreement, dated as of July 7, 1998 (as may be supplemented from time to time,
the "Purchase Contract Agreement"), between the Company and The First National
Bank of Chicago, as Purchase Contract Agent (including its successors
thereunder, herein called the "Agent"), to which Purchase Contract Agreement and
supplemental agreements thereto reference is hereby made for a description of
the respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Agent, the Company and the Holders and of the terms upon which
the Income PRIDES Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Income PRIDES Certificate to purchase, and the Company to sell, on the Purchase
Contract Settlement Date at a price equal to the Purchase Price, a number of
shares of Common Stock of the Company equal to the Settlement Rate, unless, on
or prior to the Purchase Contract Settlement Date, there shall have occurred a
Termination Event or an Early Settlement with respect to the Security of which
such Purchase Contract is a part. The "Settlement Rate" is equal to (a) if the
Applicable Market Value (as defined below) is equal to or greater than $38.10
(the "Threshold Appreciation Price"), .2625 shares of Common Stock per Purchase
Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than $21.75, the number of shares of Common
Stock per Purchase Contract equal to the Stated Amount divided by the Applicable
Market Value and (c) if the Applicable Market Amount is less than or equal to
$21.75, .3150 shares of Common Stock per Purchase Contract, in each case subject
to adjustment as provided in the Purchase Contract Agreement. No fractional
shares of Common Stock will be issued upon settlement of Purchase Contracts, as
provided in the Purchase Contract Agreement.
Each Purchase Contract evidenced hereby, which is settled either through
Early Settlement or Cash Settlement, shall obligate the Holder of the related
Income PRIDES to purchase at the Purchase Price, and the Company to sell, a
number of newly issued shares of Common Stock equal to the Early Settlement Rate
or the Settlement Rate, as applicable.
The "Applicable Market Value" means the average of the Closing Price per
share of Common Stock on each of the 20 consecutive Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date
or,
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for purposes of determining cash payable in lieu of factional shares in
connection with an Early Settlement, the third Trading Day immediately preceding
the relevant Early Settlement Date. The "Closing Price" of the Common Stock on
any date of determination means the closing sale price (or, if no closing price
is reported, the last reported sale price) of the Common Stock on The New York
Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by the Nasdaq
National Market, or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Income PRIDES Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby by effecting a Cash Settlement, an Early Settlement or from the proceeds
of a remarketing of the related Pledged Capital Securities of such holders. A
Holder of Income PRIDES who does not elect, on or prior to 5:00 p.m. New York
City time on the fifth Business Day (or, if a Tax Event Redemption has occurred,
the second Business Day) immediately preceding the Purchase Contract Settlement
Date, to make an effective Cash Settlement or an Early Settlement, shall pay the
Purchase Price for the shares of Common Stock to be issued under the related
Purchase Contract from the Proceeds of the sale of the related Pledged Capital
Securities held by the Collateral Agent. Such sale will be made by the
Remarketing Agent pursuant to the terms of the Remarketing Agreement and the
Remarketing Underwriting Agreement on the third Business Day immediately
preceding the Purchase Contract Settlement Date. If, as provided in the Purchase
Contract Agreement, upon the occurrence of a Failed Remarketing the Collateral
Agent, for the benefit of the Company, exercises its rights as a secured
creditor with respect to the Pledged Capital Securities related to this Income
PRIDES certificate, any accrued and unpaid distribu-
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<PAGE> 91
ions (including deferred distributions) on such Pledged Capital Securities will
become payable by the Company to the holder of this Income PRIDES Certificate in
the manner provided for in the Purchase Contract Agreement.
The Company shall not be obligated to issue any shares of Common Stock in
respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate Purchase
Price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
Under the terms of the Pledge Agreement, the Agent will be entitled to
exercise the voting and any other consensual rights pertaining to the Pledged
Capital Securities. Upon receipt of notice of any meeting at which holders of
Capital Securities are entitled to vote or upon the solicitation of consents,
waivers or proxies of holders of Capital Securities, the Agent shall, as soon as
practicable thereafter, mail to the Income PRIDES holders a notice (a)
containing such information as is contained in the notice or solicitation, (b)
stating that each Income PRIDES holder on the record date set by the Agent
therefor (which, to the extent possible, shall be the same date as the record
date for determining the holders of Capital Securities entitled to vote) shall
be entitled to instruct the Agent as to the exercise of the voting rights
pertaining to the Capital Securities constituting a part of such holder's Income
PRIDES and (c) stating the manner in which such instructions may be given. Upon
the written request of the Income PRIDES Holders on such record date, the Agent
shall endeavor insofar as practicable to vote or cause to be voted, in
accordance with the instructions set forth in such requests, the maximum number
of Capital Securities as to which any particular voting instructions are
received. In the absence of specific instructions from the Holder of an Income
PRIDES, the Agent shall abstain from voting the Capital Security evidenced by
such Income PRIDES.
Upon the occurrence of an Investment Company Event or liquidation of the
Trust, a principal amount of the Debentures constituting the assets of the Trust
and underlying the Capital Securities equal to the aggregate Stated Amount of
the Pledged Capital Securities shall be delivered to the Collateral Agent in
exchange for Pledged Capital Securities. Thereafter, the Debentures shall be
substituted for the Capital Securities and will be held by the Collateral Agent
to secure the obligations of each Holder of Income PRIDES to purchase shares of
Common Stock under the Purchase Contracts constituting a part of such Income
PRIDES. Following an Investment Company Event or the liquidation of the Trust,
the Holders and the Collateral Agent shall have such security interests, rights
and obligations with respect to the Debentures as the Holders and the Collateral
Agent had in respect of the Pledged Capital
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<PAGE> 92
Securities, and any reference in the Purchase Contract Agreement or Pledge
Agreement to the Capital Securities shall be deemed to be a reference to the
Debentures and any references to distributions on the Capital Securities shall
be deemed to be a reference to interest on such Debentures.
Upon the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Redemption Price payable on the Tax Event
Redemption Date with respect to the Applicable Principal Amount of Debentures
shall be delivered to the Collateral Agent in exchange for the Pledged Capital
Securities. Thereafter, pursuant to the terms of the Pledge Agreement, the
Collateral Agent will apply an amount equal to the Redemption Amount of such
Redemption Price to purchase on behalf of the Holders of Income PRIDES, the
Treasury Portfolio and promptly remit the remaining portion of such Redemption
Price to the Agent for payment to the Holders of such Income PRIDES.
Following the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Holders of Income PRIDES and the Collateral Agent
shall have such security interests rights and obligations with respect to the
Treasury Portfolio as the Holder of Income PRIDES and the Collateral Agent had
in respect of the Capital Security or Debentures, as the case may be, subject to
the Pledge thereof as provided in Sections 2, 3, 4, 5 and 6 of the Pledge
Agreement and any reference herein to the Capital Security or the Debenture
shall be deemed to be a reference to such Treasury Portfolio and any reference
herein or in the Certificates to distributions on the Capital Securities shall
be deemed to be a reference to corresponding distributions on the Treasury
Portfolio.
The Income PRIDES Certificates are issuable only in registered form and
only in denominations of a single Income PRIDES and any integral multiple
thereof. The transfer of any Income PRIDES Certificate will be registered and
Income PRIDES Certificates may be exchanged as provided in the Purchase Contract
Agreement. The Income PRIDES Registrar may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents permitted by the
Purchase Contract Agreement. No service charge shall be required for any such
registration of transfer or exchange, but the Company and the Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. A Holder who elects to substitute Treasury
Securities for Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, thereby creating or recreating Growth
PRIDES, shall be responsible for any fees or expenses payable in connection
therewith. Except as provided in the Purchase Contract Agreement, for
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<PAGE> 93
so long as the Purchase Contract underlying an Income PRIDES remains in effect,
such Income PRIDES shall not be separable into its constituent parts, and the
rights and obligations of the Holder of such Income PRIDES in respect of Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, and the Purchase Contract constituting such
Income PRIDES may be transferred and exchanged only as an Income PRIDES. A
Holder of an Income PRIDES may create or recreate a Growth PRIDES by delivering
to the Collateral Agent Treasury Securities in an aggregate principal amount
equal to the aggregate Stated Amount of the Pledged Capital Securities or the
appropriate Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio, as the case may be, in
exchange for the release of such Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be, in
accordance with the terms of the Purchase Contract Agreement and the Pledge
Agreement. From and after such Collateral Substitution, the Security for which
such Pledged Treasury Securities secures the Holder's obligation under the
Purchase Contract shall be referred to as a "Growth PRIDES." A Holder may make
such Collateral Substitution only in integral multiples of 100 Income PRIDES for
100 Growth PRIDES; provided, however, that if a Tax Event Redemption has
occurred and the Treasury Portfolio has become a component of the Income PRIDES,
a Holder may make such Collateral Substitutions only in integral multiples of
40,000 Income PRIDES for 40,000 Growth PRIDES. Such Collateral Substitution may
cause the equivalent aggregate Stated Amount of this Certificate to be increased
or decreased; provided, however, the equivalent aggregate Stated Amount
outstanding under this Income PRIDES Certificate shall not exceed $179,750,000.
All such adjustments to the equivalent aggregate Stated Amount of this Income
PRIDES Certificate shall be duly recorded by placing an appropriate notation on
the Schedule attached hereto.
A Holder of Growth PRIDES may create or recreate Income PRIDES by
delivering to the Collateral Agent Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, with a Stated Amount,
in the case of such Capital Securities, or with the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, in the case of such appropriate Applicable Ownership
Interest of the Treasury Portfolio, equal to the aggregate principal amount of
the Pledged Treasury Securities in exchange for the release of such Pledged
Treasury Securities in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. Any such creation or recreation of an Income
PRIDES may be effected only in multiples of 100 Growth PRIDES for 100 Income
PRIDES; provided, however, that if a Tax Event
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<PAGE> 94
Redemption has occurred and the Treasury Portfolio has become a component of the
Income PRIDES, a Holder may make such substitution only in integral multiples of
40,000 Growth PRIDES for 40,000 Income PRIDES.
Subject to the next succeeding paragraph, the Company shall pay, on each
Payment Date, the Contract Adjustment Payments, if any, payable in respect of
each Purchase Contract to the Person in whose name the Income PRIDES Certificate
evidencing such Purchase Contract is registered at the close of business on the
Record Date for such Payment Date. Contract Adjustment Payments, if any, will be
payable at the Corporate Trust Office of the Agent and the New York Office or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto at such address as it appears on the Income PRIDES Register.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments, if any, otherwise payable on any Payment Date, but only if
the Company shall give the Holders and the Agent written notice of its election
to defer such payment (specifying the amount to be deferred) as provided in the
Purchase Contract Agreement. Any Contract Adjustment Payments, if any, so
deferred shall, to the extent permitted by law, bear additional Contract
Adjustment Payments thereon at the rate of 8.75% per annum (computed on the
basis of a 360-day year of twelve 30 day months), compounding on each succeeding
Payment Date, until paid in full (such deferred installments of Contract
Adjustment Payments, if any, together with the additional Contract Adjustment
Payments accrued thereon, are referred to herein as the "Deferred Contract
Adjustment Payments"). Deferred Contract Adjustment Payments, if any, shall be
due on the next succeeding Payment Date except to the extent that payment is
deferred pursuant to the Purchase Contract Agreement. No Contract Adjustment
Payments, if any, may be deferred to a date that is after the Purchase Contract
Settlement Date and no such deferral period may end other than on a Payment
Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until a Payment Date
prior to the Purchase Contract Settlement Date, then all Deferred Contract
Adjustment Payments, if any, shall be payable to the registered Holders as of
the close of business on the Record Date immediately preceding such Payment
Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until the Purchase
Contract
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<PAGE> 95
Settlement Date, the Holder of this Income PRIDES Certificate will receive on
the Purchase Contract Settlement Date, in lieu of a cash payment, a number of
shares of Common Stock (in addition to the number of shares of Common Stock
equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred
Contract Adjustment Payments payable to the Holder of this Income PRIDES
Certificate divided by (y) the Applicable Market Value.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, if any, then until the Deferred Contract
Adjustment Payments have been paid, the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
or make guarantee payments with respect to the foregoing (other than (i)
purchases or acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding on the date of such event requiring the Company to
purchase capital stock of the Company, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) dividends
or distributions in capital stock of the Company (or rights to acquire capital
stock) or repurchases or redemptions of capital stock solely from the issuance
or exchange of capital stock or (v) redemptions or repurchases of any rights
outstanding under a shareholder rights plan or a declaration thereunder of a
dividend of rights in the future).
The Purchase Contracts and all obligations and rights of the Company and
the Holders thereunder, including, without limitation, the rights of the Holders
to receive and the obligation of the Company to pay Contract Adjustment
Payments, if any, or any Deferred Contract Adjustment Payments, and the rights
and obligations of Holders to purchase Common Stock shall immediately and
automatically terminate, without the necessity of any notice or action by any
Holder, the Agent or the Company, if, on or prior to the Purchase Contract
Settlement Date, a Termination Event shall have occurred. Upon the occurrence of
a Termination Event, the Company shall promptly but in no event later than two
Business Days thereafter give written notice to the Agent, the Collateral Agent
and to the Holders, at their addresses as they appear in the Income PRIDES
Register. Upon and after the occurrence of a Termination Event, the Collateral
Agent shall release the Capital Securities or the appropriate
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<PAGE> 96
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
from the Pledge in accordance with the provisions of the Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement, at the option of the Holders thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or an
integral multiple thereof may be settled early ("Early Settlement") as provided
in the Purchase Contract Agreement; provided, however, that if a Tax Event
Redemption has occurred and the Treasury Portfolio has become a component of the
Income PRIDES, Holders may early settle Income PRIDES only in integral multiples
of 40,000 Income PRIDES. In order to exercise the right to effect Early
Settlement with respect to any Purchase Contracts evidenced by this Income
PRIDES Certificate, the Holder of this Income PRIDES Certificate shall deliver
this Income PRIDES Certificate to the Agent at the Corporate Trust Office or the
New York Office duly endorsed for transfer to the Company or in blank with the
form of Election to Settle Early set forth below duly completed and accompanied
by payment in the form of immediately available funds payable to the Company in
an amount (the "Early Settlement Amount") equal to (i) the product of (A) the
Stated Amount times (B) the number of Purchase Contracts with respect to which
the Holder has elected to effect Early Settlement, plus (ii) if such delivery is
made with respect to any Purchase Contracts during the period from the close of
business on any Record Date for any Payment Date to the opening of business on
such Payment Date, an amount equal to the Contract Adjustment Payments, if any,
payable on such Payment Date with respect to such Purchase Contracts; provided
that no payment shall be required pursuant to clause (ii) of this sentence if
the Company shall have elected to defer the Contract Adjustment Payments which
would otherwise be payable on such Payment Date. Upon Early Settlement of
Purchase Contracts by a Holder of the related Securities, the Pledged Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio underlying such Securities shall be released from the Pledge as
provided in the Pledge Agreement and the Holder shall be entitled to receive a
number of shares of Common Stock on account of each Purchase Contract forming
part of a Income PRIDES as to which Early Settlement is effected equal to the
Early Settlement Rate; provided however, that upon the Early Settlement of the
Purchase Contracts, the Holder thereof will forfeit the right to receive any
Deferred Contract Adjustment Payments and any future Contract Adjustment
Payments, if any, on such Purchase Contracts, except to the extent that the
Early Settlement Date is after the close of business on a Record Date and prior
to the opening of business on the corresponding Payment Date. The Early
Settlement Rate shall initially be equal to .2625 shares of Common Stock and
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<PAGE> 97
shall be adjusted in the same manner and at the same time as the Settlement Rate
is adjusted as provided in the Purchase Contract Agreement.
Upon registration of transfer of this Income PRIDES Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement) under the terms of the Purchase Contract Agreement,
the Pledge Agreement and the Purchase Contracts evidenced hereby and the
transferor shall be released from the obligations under the Purchase Contract
Agreement, the Pledge Agreement and the Purchase Contracts evidenced by this
Income PRIDES Certificate. The Company covenants and agrees, and the Holder, by
its acceptance hereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
The Holder of this Income PRIDES Certificate, by its acceptance hereof,
authorizes the Agent to enter into and perform the related Purchase Contracts
forming part of the Income PRIDES evidenced hereby on his behalf as his
attorney-in-fact, expressly withholds any consent to the assumption (i.e.,
affirmance) of the Purchase Contracts by the Company or its trustee in the event
that the Company becomes the subject of a case under the Bankruptcy Code, agrees
to be bound by the terms and provisions thereof, covenants and agrees to perform
its obligations under such Purchase Contracts, consents to the provisions of the
Purchase Contract Agreement, authorizes the Agent to enter into and perform the
Pledge Agreement on its behalf as its attorney-in-fact, and consents to the
Pledge of the Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, underlying this Income
PRIDES Certificate pursuant to the Pledge Agreement. The Holder further
covenants and agrees, that, to the extent and in the manner provided in the
Purchase Contract Agreement and the Pledge Agreement, but subject to the terms
thereof, payments in respect to the Stated Amount of the Pledged Capital
Securities, or the appropriate Applicable Ownership Interest (as specified in
clause (A) of the definition of such term) of the Treasury Portfolio, on the
Purchase Contract Settlement Date shall be paid by the Collateral Agent to the
Company in satisfaction of such Holder's obligations under such Purchase
Contract and such Holder shall acquire no right, title or interest in such
payments.
Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of a majority of the
Purchase Contracts.
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<PAGE> 98
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the Company or
the Agent may treat the Person in whose name this Income PRIDES Certificate is
registered as the owner of the Income PRIDES evidenced hereby for the purpose of
receiving payments of distributions payable quarterly on the Capital Securities
or on the maturing quarterly interest strips of the Treasury Portfolio, as
applicable, receiving payments of Contract Adjustment Payments, if any, and any
Deferred Contract Adjustment Payments, if any, performance of the Purchase
Contracts and for all other purposes whatsoever, whether or not any payments in
respect thereof be overdue and notwithstanding any notice to the contrary, and
neither the Company, the Agent nor any such agent shall be affected by notice to
the contrary.
The Purchase Contracts shall not, prior to the settlement thereof, entitle
the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for inspection at
the offices of the Agent.
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<PAGE> 99
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ------------Custodian------------
(cust) (minor)
Under Uniform Gifts to Minors Act
---------------------------------
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list.
---------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
(Please insert Social Security or Taxpayer I.D. or other Identifying Number of
Assignee)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Income PRIDES Certificates and all rights thereunder, hereby
irrevocably constituting and appointing
________________________________________________________________________________
attorney to transfer said Income PRIDES Certificates on the books of Kaufman and
Broad Home Corporation with full power of substitution in the premises.
Dated: _________________ ____________________________________
Signature
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Income PRIDES
Certificates in every particular,
without alteration or enlargement or
any change whatsoever.
Signature Guarantee: ______________________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined
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<PAGE> 100
by the Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
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<PAGE> 101
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Purchase Contract Settlement
Date of the Purchase Contracts underlying the number of Income PRIDES evidenced
by this Income PRIDES Certificate be registered in the name of, and delivered,
together with a check in payment for any fractional share, to the undersigned at
the address indicated below unless a different name and address have been
indicated below. If shares are to be registered in the name of a Person other
than the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated: _________________ ____________________________________
Signature
Signature Guarantee:________________
(if assigned to another person)
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
If shares are to be registered
in the name of and delivered REGISTERED HOLDER
to a Person other than the
Holder, please (i) print such
Person's name and address and
(ii) provide a guarantee of
your signature:
Please print name and address
of Registered Holder:
_________________________________ ___________________________________
Name Name
_________________________________ ___________________________________
Address Address
_________________________________ ___________________________________
_________________________________ ___________________________________
_________________________________ ___________________________________
Social Security or other
Taxpayer Identification
Number, if any ___________________________________
A-18
<PAGE> 102
ELECTION TO SETTLE EARLY
The undersigned Holder of this Income PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Income PRIDES evidenced by this Income PRIDES
Certificate specified below. The option to effect Early Settlement may be
exercised only with respect to Purchase Contracts underlying Growth PRIDES with
an aggregate Stated Amount equal to $1,000 or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement be registered in the name of, and
delivered, together with a check in payment for any fractional share and any
Income PRIDES Certificate representing any Income PRIDES evidenced hereby as to
which Early Settlement of the related Purchase Contracts is not effected, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
deliverable upon such Early Settlement will be transferred in accordance with
the transfer instructions set forth below. If shares are to be registered in the
name of a Person other than the undersigned, the undersigned will pay any
transfer tax payable incident thereto.
Dated: ___________________ ____________________________________
Signature
Signature Guarantee
(if assigned to another person): __________________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-19
<PAGE> 103
Number of Securities evidenced hereby as to which Early Settlement of the
related Purchase Contracts is being elected:
If shares of Common Stock or Income REGISTERED HOLDER
PRIDES Certificates are to be regis-
tered in the name of and delivered to
and Pledged Capital Securities, or an
Applicable Ownership Interest in
the Treasury Portfolio, as the case may
be, are to be transferred to a Person
other than the Holder, please (i) print
such Person's name and address and
(ii) provide a guarantee of your
signature:
Please print name and address
of Registered Holder:
_________________________________ ___________________________________
Name Name
_________________________________ ___________________________________
Address Address
_________________________________ ___________________________________
_________________________________ ___________________________________
_________________________________ ___________________________________
Social Security or other
Taxpayer Identification
Number, if any ___________________________________
A-20
<PAGE> 104
Transfer Instructions for Pledged Capital Securities, or the Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, Transferable
Upon Early Settlement or a Termination Event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
A-21
<PAGE> 105
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE
The following increases or decreases in this Global Certificate have
been made:
<TABLE>
<CAPTION>
===============================================================================================
Stated Amount Signature of
Amount of Amount of of this Global authorized
decrease in Stated increase in Stated Certificate officer of Purchase
Amount of the Amount of the following such Contract Agent or
Date Global Certificate Global Certificate decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
A-22
<PAGE> 106
EXHIBIT B
(Form of Face of Growth PRIDES Certificate)
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
No. __________ CUSIP NO.
Number of Growth PRIDES _____
____% Growth PRIDES
This Growth PRIDES Certificate certifies that __________ is the registered
Holder of the number of Growth PRIDES set forth above. Each Growth PRIDES
represents (i) a 1/100 undivided beneficial ownership interest in a Treasury
Security having a principal amount at maturity equal to $1,000, subject to the
Pledge of such Treasury Security by such Holder pursuant to the Pledge
Agreement, and (ii) the rights and obligations of the Holder under one Purchase
Contract with Kaufman and Broad Home Corporation, a Delaware corporation (the
"Company," which term, as used herein, includes its successors pursuant to the
Purchase Contract Agreement). All capitalized terms used herein which are
defined in the Purchase Contract Agreement have the meaning set forth therein.
<PAGE> 107
Pursuant to the Pledge Agreement, the Treasury Securities constituting
part of each Growth PRIDES evidenced hereby have been pledged to the Collateral
Agent, for the benefit of the Company, to secure the obligations of the Holder
under the Purchase Contract comprising a portion of such Growth PRIDES.
The Pledge Agreement provides that all payments of the principal of any
Treasury Securities received by the Collateral Agent shall be paid by the
Collateral Agent by wire transfer of same day funds (i) in the case of any
principal payments with respect to any Treasury Securities that have been
released from the Pledge pursuant to the Pledge Agreement, to the Holders of the
applicable Growth PRIDES to the accounts designated by them in writing for such
purpose no later than 2:00 p.m. New York City time, on the Business Day such
payment is received by the Collateral Agent (provided that in the event such
payment is received by the Collateral Agent on a day that is not a Business Day
or after 12:30 p.m., New York City time, on a Business Day, then such payment
shall be made no later than 10:30 a.m., New York City time, on the next
succeeding Business Day), and (ii) in the case of the principal of any Pledged
Treasury Securities, to the Company on the Purchase Contract Settlement Date (as
defined herein) in accordance with the terms of the Pledge Agreement, in full
satisfaction of the respective obligations of the Holders of the Growth PRIDES
of which such Pledged Treasury Securities are a part under the Purchase
Contracts forming a part of such Growth PRIDES.
Each Purchase Contract evidenced hereby obligates the Holder of this
Growth PRIDES Certificate to purchase, and the Company, to sell, on August 16,
2001 (the "Purchase Contract Settlement Date"), at a price equal to $10 (the
"Stated Amount"), a number of shares of Common stock, $1.00 par value per share
("Common Stock"), of the Company equal to the Settlement Rate, unless on or
prior to the Purchase Contract Settlement Date there shall have occurred a
Termination Event or an Early Settlement with respect to the Growth PRIDES of
which such Purchase Contract is a part, all as provided in the Purchase Contract
Agreement and more fully described on the reverse hereof. The purchase price
(the "Purchase Price") for the shares of Common Stock purchased pursuant to each
Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the
Purchase Contract Settlement Date by application of the Proceeds from the
Treasury Securities pledged to secure the obligations under such Purchase
Contract in accordance with the terms of the Pledge Agreement.
The Company shall pay on each Payment Date in respect of each Purchase
Contract forming part of a Growth PRIDES evidenced hereby an amount (the
"Contract Adjustment Payments") equal to .75% per annum of the Stated Amount,
computed on the basis of a 360-day year of twelve 30 day months, subject to
deferral at the option of the Company as provided in the Purchase Contract
Agreement and more fully described on the reverse hereof. Such Contract
Adjustment Payments, if any, shall be payable to the Person in whose name this
Growth PRIDES Certificate (or a Predecessor Growth PRIDES Certificate) is
registered at the close of business on the Record Date for such Payment Date.
B-2
<PAGE> 108
Contract Adjustment Payments, if any, will be payable at the Corporate
Trust Office of the Agent and at the New York Office or, at the option of the
Company, by check mailed to the address of the Person entitled thereto as such
address appears on the Growth PRIDES Register.
Reference is hereby made to the further provisions set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Agent by manual signature, this Growth PRIDES Certificate shall not be entitled
to any benefit under the Pledge Agreement or the Purchase Contract Agreement or
be valid or obligatory for any purpose.
B-3
<PAGE> 109
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
KAUFMAN AND BROAD HOME CORPORATION
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts)
By: THE FIRST NATIONAL BANK OF CHICAGO,
not individually but solely as attorney-
in-fact of such Holder
By:
-------------------------------
Name:
Title:
Dated: , 1998
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Growth PRIDES referred to in the within-mentioned
Purchase Contract Agreement.
By: THE FIRST NATIONAL BANK OF CHICAGO,
as Purchase Contract Agent
By:
-------------------------------
Authorized Signatory
<PAGE> 110
(Form of Reverse of
Growth PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase Contract
Agreement, dated as of July 7, 1998 (as may be supplemented from time to time,
the "Purchase Contract Agreement"), between the Company and The First National
Bank of Chicago, as Purchase Contract Agent (including its successors
thereunder, herein called the "Agent"), to which the Purchase Contract Agreement
and supplemental agreements thereto reference is hereby made for a description
of the respective rights, limitations of rights, obligations, duties and
immunities thereunder of the Agent, the Company and the Holders and of the terms
upon which the Growth PRIDES Certificates are, and are to be, executed and
delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Growth PRIDES Certificate to purchase, and the Company to sell, on the Purchase
Contract Settlement Date at the Purchase Price, a number of shares of Common
Stock of the Company equal to the Settlement Rate, unless, on or prior to the
Purchase Contract Settlement Date, there shall have occurred a Termination Event
or an Early Settlement with respect to the Security of which such Purchase
Contract is a part. The "Settlement Rate" is equal to (a) if the Applicable
Market Value (as defined below) is equal to or greater than $38.10 (the
"Threshold Appreciation Price"), .2625 shares of Common Stock per Purchase
Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than $31.75, the number of shares of Common
Stock per Purchase Contract equal to the Stated Amount divided by the Applicable
Market Value and (c) if the Applicable Market Amount is less than or equal to
$31.75, .3150 shares of Common Stock per Purchase Contract, in each case subject
to adjustment as provided in the Purchase Contract Agreement. No fractional
shares of Common Stock will be issued upon settlement of Purchase Contracts, as
provided in the Purchase Contract Agreement.
Each Purchase Contract evidenced hereby, which is settled through Early
Settlement, shall obligate the Holder of the related Growth PRIDES to purchase
at the Purchase Price, and the Company to sell, a number of newly issued shares
of Common Stock equal to the Early Settlement Rate.
The "Applicable Market Value" means the average of the Closing Price per
share of Common Stock on each of the 20 consecutive Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date
or, for purposes of determining cash payable in lieu of fractional shares in
connection with an Early Settlement, the third Trading Day immediately preceding
the relevant Early Settlement Date. The "Closing Price" of the Common Stock on
any date of determination means the closing sale price (or, if no closing price
is reported, the last reported sale price) of the Common Stock on The New York
Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not
listed for trading on the NYSE on any such date, as reported in the composite
<PAGE> 111
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by the Nasdaq
National Market or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Growth PRIDES Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby by effecting either an Early Settlement of each such Purchase Contract or
by applying a principal amount of the Pledged Treasury Securities underlying
such Holder's Growth PRIDES equal to the Stated Amount of such Purchase Contract
to the purchase of the Common Stock. A Holder of Growth PRIDES who does not
elect, on or prior to 5:00 p.m. New York City time on the second Business Day
immediately preceding the Purchase Contract Settlement Date, to make an Early
Settlement, shall pay the Purchase Price for the shares of Common Stock to be
issued on the related Purchase Contract by applying a principal amount of the
Pledged Treasury Securities as aforesaid.
The Company shall not be obligated to issue any shares of Common Stock in
respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate Purchase
Price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
The Growth PRIDES Certificates are issuable only in registered form and
only in denominations of a single Growth PRIDES and any integral multiple
thereof. The transfer of any Growth PRIDES Certificate will be registered and
Growth PRIDES Certificates may be exchanged as provided in the Purchase Contract
Agreement. The Growth PRIDES Registrar may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents permitted by the
Purchase Contract Agreement. No service charge shall be required for any such
registration of transfer or exchange, but the Company and the Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. A Holder who elects to substitute Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, for Treasury Securities, thereby creating or
recreating Income PRIDES, shall be responsible for any fees or expenses payable
in connection therewith. Except as provided in the Purchase Contract Agreement,
for so long as the Purchase Contract underlying a Growth
B-6
<PAGE> 112
PRIDES remains in effect, such Growth PRIDES shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such Growth
PRIDES in respect of the Treasury Security and the Purchase Contract
constituting such Growth PRIDES may be transferred and exchanged only as a
Growth PRIDES. A Holder of Growth PRIDES may create or recreate Income PRIDES by
delivering to the Collateral Agent Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, with a Stated Amount,
in the case of such Capital Securities, or with the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, in the case of such appropriate Applicable Ownership
Interest of the Treasury Portfolio, equal to the aggregate principal amount of
the Pledged Treasury Securities in exchange for the release of such Pledged
Treasury Securities in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. From and after such substitution, the
Security for which such Pledged Capital Securities or appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, secures the
Holder's obligation under the Purchase Contract shall be referred to as an
"Income PRIDES." A Holder may make such a substitution only in integral
multiples of 100 Growth PRIDES for 100 Income PRIDES; provided, however, that if
a Tax Event Redemption has occurred and the Treasury Portfolio has become a
component of the Income PRIDES, a Holder may make such substitution only in
integral multiples of 40,000 Growth PRIDES for 40,000 Income PRIDES. Such
substitution may cause the equivalent aggregate Stated Amount of this
Certificate to be increased or decreased; provided, however, the equivalent
aggregate Stated Amount outstanding under this Growth PRIDES Certificate shall
not exceed $10,000,000. All such adjustments to the equivalent aggregate Stated
Amount of this Growth PRIDES Certificate shall be duly recorded by placing an
appropriate notation on the Schedule attached hereto.
A Holder of an Income PRIDES may create or recreate a Growth PRIDES by
delivering to the Collateral Agent Treasury Securities in an aggregate principal
amount equal to the aggregate Stated Amount of the Pledged Capital Securities or
the appropriate Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio, as the case may be, in
exchange for the release of such Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be, in
accordance with the terms of the Purchase Contract Agreement and the Pledge
Agreement. Any such creation or recreation of a Growth PRIDES may be effected
only in multiples of 100 Income PRIDES for 100 Growth PRIDES; provided, however,
if a Tax Event Redemption has occurred and the Treasury Portfolio has become a
component of the Income PRIDES, a Holder may make such Collateral Substitution
only in integral multiples of 40,000 Income PRIDES for 40,000 Growth PRIDES.
Subject to the next succeeding paragraph, the Company shall pay, on each
Payment Date, the Contract Adjustment Payments, if any, payable in respect of
each Purchase Contract to the Person in whose name the Growth PRIDES Certificate
evidencing such
B-7
<PAGE> 113
Purchase Contract is registered at the close of business on the Record Date for
such Payment Date. Contract Adjustment Payments, if any, will be payable at the
Corporate Trust Office of the Agent and the New York Office or, at the option of
the Company, by check mailed to the address of the Person entitled thereto at
such address as it appears on the Growth PRIDES Register.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments, if any, otherwise payable on any Payment Date, but only if
the Company shall give the Holders and the Agent written notice of its election
to defer such payment (specifying the amount to be deferred) as provided in the
Purchase Contract Agreement. Any Contract Adjustment Payments, if any, so
deferred shall, to the extent permitted by law, bear additional Contract
Adjustment Payments thereon at the rate of 8.75% per annum (computed on the
basis of a 360-day year of twelve 30 day months), compounding on each succeeding
Payment Date, until paid in full (such deferred installments of Contract
Adjustment Payments, if any, together with the additional Contract Adjustment
Payments accrued thereon, are referred to herein as the "Deferred Contract
Adjustment Payments"). Deferred Contract Adjustment Payments, if any, shall be
due on the next succeeding Payment Date except to the extent that payment is
deferred pursuant to the Purchase Contract Agreement. No Contract Adjustment
Payments, if any, may be deferred to a date that is after the Purchase Contract
Settlement Date and no such deferral period may end other than on a Payment
Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until a Payment Date
prior to the Purchase Contract Settlement Date, then all Deferred Contract
Adjustment Payments, if any, shall be payable to the registered Holders as of
the close of business on the Record Date immediately preceding such Payment
Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments, if any, on the Purchase Contracts until the Purchase
Contract Settlement Date, the Holder of this Growth PRIDES Certificate will
receive on the Purchase Contract Settlement Date, in lieu of a cash payment, a
number of shares of Common Stock (in addition to the number of shares of Common
Stock equal to the Settlement Rate) equal to (x) the aggregate amount of
Deferred Contract Adjustment Payments payable to the Holder of this Growth
PRIDES Certificate divided by (y) the Applicable Market Value.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, if any, then until the Deferred Contract
Adjustment Payments have been paid, the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
or make guarantee payments with respect to the foregoing (other than (i)
purchases or acquisitions of shares of capital stock of the Company in
connection with
B-8
<PAGE> 114
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security outstanding on the date of such event requiring the Company
to purchase capital stock of the Company, (ii) as a result of a reclassification
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (iii) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) dividends
or distributions in capital stock of the Company (or rights to acquire capital
stock) or repurchases or redemptions of capital stock solely from the issuance
or exchange of capital stock or (v) redemptions or repurchases of any rights
outstanding under a shareholder rights plan or a declaration thereunder of a
dividend of rights in the future).
The Purchase Contracts and all obligations and rights of the Company and
the Holders thereunder, including, without limitation, the rights of the Holders
to receive and the obligation of the Company to pay Contract Adjustment
Payments, if any, or any Deferred Contract Adjustment Payments, and the rights
and obligations of Holders to purchase Common Stock shall immediately and
automatically terminate, without the necessity of any notice or action by any
Holder, the Agent or the Company, if, on or prior to the Purchase Contract
Settlement Date, a Termination Event shall have occurred. Upon the occurrence of
a Termination Event, the Company shall promptly but in no event later than two
Business Days thereafter give written notice to the Agent, the Collateral Agent
and to the Holders, at their addresses as they appear in the Growth PRIDES
Register. Upon and after the occurrence of a Termination Event, the Collateral
Agent shall release the Treasury Securities from the Pledge in accordance with
the provisions of the Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement, at the option of the Holders thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or an
integral multiple thereof may be settled early ("Early Settlement") as provided
in the Purchase Contract Agreement. In order to exercise the right to effect
Early Settlement with respect to any Purchase Contracts evidenced by this Growth
PRIDES Certificate, the Holder of this Growth PRIDES Certificate shall deliver
this Growth PRIDES Certificate to the Agent at the Corporate Trust Office or the
New York Office duly endorsed for transfer to the Company or in blank with the
form of Election to Settle Early set forth below duly completed and accompanied
by payment in the form of immediately available funds payable to the Company in
an amount (the "Early Settlement Amount") equal to (i) the product of (A) the
Stated Amount times (B) the number of Purchase Contracts with respect to which
the Holder has elected to effect Early Settlement, plus (ii) if such delivery is
made with respect to any Purchase Contracts during the period from the close of
business on any Record Date for any Payment Date to the opening of business on
such Payment Date, an amount equal to the Contract Adjustment Payments, if any,
payable on such Payment Date with respect to such Purchase Contracts; provided
that no payment shall be required pursuant to clause (ii) of this sentence if
the
B-9
<PAGE> 115
Company shall have elected to defer the Contract Adjustment Payments which would
otherwise be payable on such Payment Date. Upon Early Settlement of Purchase
Contracts by a Holder of the related Securities, the Pledged Treasury Securities
underlying such Securities shall be released from the Pledge as provided in the
Pledge Agreement and the Holder shall be entitled to receive a number of shares
of Common Stock on account of each Purchase Contract forming part of a Growth
PRIDES as to which Early Settlement is effected equal to the Early Settlement
Rate; provided however, that upon the Early Settlement of the Purchase
Contracts, the Holder thereof will forfeit the right to receive any Deferred
Contract Adjustment Payments and any future Contract Adjustment Payments on such
Purchase Contracts, except to the extent that the Early Settlement Date is after
the close of business on a Record Date and prior to the opening of business on
the corresponding Payment Date. The Early Settlement Rate shall initially be
equal to .2625 shares of Common Stock and shall be adjusted in the same manner
and at the same time as the Settlement Rate is adjusted as provided in the
Purchase Contract Agreement.
Upon registration of transfer of this Growth PRIDES Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement) under the terms of the Purchase Contract Agreement,
the Pledge Agreement and the Purchase Contracts evidenced hereby and the
transferor shall be released from the obligations under the Purchase Contract
Agreement, the Pledge Agreement and the Purchase Contracts evidenced by this
Growth PRIDES Certificate. The Company covenants and agrees, and the Holder, by
his acceptance hereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
The Holder of this Growth PRIDES Certificate, by its acceptance hereof,
authorizes the Agent to enter into and perform the related Purchase Contracts
forming part of the Growth PRIDES evidenced hereby on his behalf as its
attorney-in-fact, expressly withholds any consent to the assumption (i.e.,
affirmance) of the Purchase Contracts by the Company or its trustee in the event
that the Company becomes the subject of a case under the Bankruptcy Code, agrees
to be bound by the terms and provisions thereof, covenants and agrees to perform
its obligations under such Purchase Contracts, consents to the provisions of the
Purchase Contract Agreement, authorizes the Agent to enter into and perform the
Pledge Agreement on its behalf as its attorney-in-fact, and consents to the
Pledge of the Treasury Securities underlying this Growth PRIDES Certificate
pursuant to the Pledge Agreement. The Holder further covenants and agrees, that,
to the extent and in the manner provided in the Purchase Contract Agreement and
the Pledge Agreement, but subject to the terms thereof, payments in respect to
the Stated Amount of the Pledged Treasury Securities on the Purchase Contract
Settlement Date shall be paid by the Collateral Agent to the Company in
satisfaction of such Holder's obligations under such Purchase Contract and such
Holder shall acquire no right, title or interest in such payments.
B-10
<PAGE> 116
Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of a majority of the
Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the Company or
the Agent may treat the Person in whose name this Growth PRIDES Certificate is
registered as the owner of the Growth PRIDES evidenced hereby for the purpose of
receiving payments of interest on the Treasury Securities, receiving payments of
Contract Adjustment Payments, if any, and any Deferred Contract Adjustment
Payments, if any, performance of the Purchase Contracts and for all other
purposes whatsoever, whether or not any payments in respect thereof be overdue
and notwithstanding any notice to the contrary, and neither the Company, the
Agent nor any such agent shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof, entitle
the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for inspection at
the offices of the Agent.
B-11
<PAGE> 117
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ------------Custodian------------
(cust) (minor)
Under Uniform Gifts to Minors Act
---------------------------------
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list.
---------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
(Please insert Social Security or Taxpayer I.D. or other Identifying Number of
Assignee)_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Growth PRIDES Certificates and all rights thereunder, hereby
irrevocably constituting and appointing
________________________________________________________________________________
attorney to transfer said Growth PRIDES Certificates on the books of Kaufman and
Broad Home Corporation with full power of substitution in the premises.
Dated: _________________ ____________________________________
Signature
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Growth PRIDES
Certificates in every particular,
without alteration or enlargement or
any change whatsoever.
Signature Guarantee: ______________________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent
B-12
<PAGE> 118
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
B-13
<PAGE> 119
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Purchase Contract Settlement
Date of the Purchase Contracts underlying the number of Growth PRIDES evidenced
by this Growth PRIDES Certificate be registered in the name of, and delivered,
together with a check in payment for any fractional share, to the undersigned at
the address indicated below unless a different name and address have been
indicated below. If shares are to be registered in the name of a Person other
than the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated: _________________ ____________________________________
Signature
Signature Guarantee: _______________
(if assigned to another person)
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the
Holder, please (i) print such
Person's name and address and
(ii) provide a guarantee of
your signature:
Please print name and address
of Registered Holder:
______________________________ ___________________________________
Name Name
______________________________ ___________________________________
Address Address
______________________________ ___________________________________
B-14
<PAGE> 120
______________________________ ___________________________________
______________________________ ___________________________________
Social Security or other
Taxpayer Identification
Number, if any ___________________________________
B-15
<PAGE> 121
ELECTION TO SETTLE EARLY
The undersigned Holder of this Growth PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Growth PRIDES evidenced by this Growth PRIDES
Certificate specified below. The option to effect Early Settlement may be
exercised only with respect to Purchase Contracts underlying Growth PRIDES with
an aggregate Stated Amount equal to $1,000 or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement be registered in the name of, and
delivered, together with a check in payment for any fractional share and any
Growth PRIDES Certificate representing any Growth PRIDES evidenced hereby as to
which Early Settlement of the related Purchase Contracts is not effected, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. Pledged Treasury Securities deliverable upon such
Early Settlement will be transferred in accordance with the transfer
instructions set forth below. If shares are to be registered in the name of a
Person other than the undersigned, the undersigned will pay any transfer or
similar tax payable incident thereto.
Dated: _________________ ____________________________________
Signature
Signature Guarantee: _______________________________
(if assigned to another person)
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
B-16
<PAGE> 122
Number of Securities evidenced hereby as to which Early Settlement of the
related Purchase Contracts is being elected:
If shares of Common Stock or Growth REGISTERED HOLDER
PRIDES Certificates are to be regis-
tered in the name of and delivered to
and Pledged Treasury Securities are to
be transferred to a Person other than
the Holder, please (i) print such Person's
name and address and (ii) provide a
guarantee of your signature:
Please print name and address
of Registered Holder:
______________________________ ___________________________________
Name Name
______________________________ ___________________________________
Address Address
______________________________ ___________________________________
______________________________ ___________________________________
______________________________ ___________________________________
Social Security or other
Taxpayer Identification
Number, if any ___________________________________
Transfer Instructions for Pledged Treasury Securities Transferable Upon Early
Settlement or a Termination Event:
______________________________
______________________________
______________________________
B-17
<PAGE> 123
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE
The following increases or decreases in this Global Certificate have
been made:
<TABLE>
<CAPTION>
===============================================================================================
Stated Amount Signature of
Amount of Amount of of this Global authorized
decrease in Stated increase in Stated Certificate officer of Purchase
Amount of the Amount of the following such Contract Agent or
Date Global Certificate Global Certificate decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
B-18
<PAGE> 124
EXHIBIT C
INSTRUCTION FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention:
Re: FELINE PRIDES of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
We hereby notify you in accordance with Section [4.1] [4.2] of the
Pledge Agreement, dated as of , 1998, (the "Pledge Agreement") among the
Company, yourselves, as Collateral Agent, Custodial Agent and Securities
Intermediary and ourselves, as Purchase Contract Agent and as attorney-in-fact
for the holders of [Income PRIDES] [Growth PRIDES] from time to time, that the
holder of the Securities listed below (the "Holder") has elected to substitute
[$_____ aggregate principal amount of Treasury Securities] [$_______stated
liquidation amount of Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be,] in exchange for an
equal Value of [Pledged Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be,] [Pledged
Treasury Securities] held by you in accordance with the Pledge Agreement and has
delivered to us a notice stating that the Holder has Transferred [Treasury
Securities] [Capital Securities or the appropriate Applicable Ownership Interest
of the Treasury Portfolio, as the case may be,] to you, as Collateral Agent. We
hereby instruct you, upon receipt of such [Pledged Treasury Securities] [Pledged
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as the case may be,], and upon the payment by such Holder of
any applicable fees, to release the [Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,]
[Treasury Securities] related to such [Income PRIDES] [Growth PRIDES] to us in
accordance with the Holder's instructions. Capitalized terms used herein but not
defined shall have the meaning set forth in the Pledge Agreement.
Date:_____________ ___________________________
By:______________________
Name:
Title:
Signature Guarantee:_____________
<PAGE> 125
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be,] for the
[Pledged Capital Securities or the appropriate Applicable Ownership Interest of
the Treasury Portfolio, as the case may be,] [Pledged Treasury Securities]:
___________________________________ _____________________________________
Name Social Security or other Taxpayer
Identification Number, if any
___________________________________
Address
___________________________________
___________________________________
C-2
<PAGE> 126
EXHIBIT D
INSTRUCTION TO PURCHASE CONTRACT AGENT
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: FELINE PRIDES of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
The undersigned Holder hereby notifies you that it has delivered to
The Bank of New York, as Collateral Agent, [$_______ aggregate principal amount
of Treasury Securities] [$ aggregate stated liquidation amount of Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, the case may be,] in exchange for an equal Value of [Pledged Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be,] [Pledged Treasury Securities] held by the
Collateral Agent, in accordance with Section [4.1], [4.2] of the Pledge
Agreement, dated July 7, 1998 (the "Pledge Agreement"), between you, the Company
and the Collateral Agent. The undersigned Holder has paid the Collateral Agent
all applicable fees relating to such exchange. The undersigned Holder hereby
instructs you to instruct the Collateral Agent to release to you on behalf of
the undersigned Holder the [Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio] [Pledged Treasury
Securities] related to such [Income PRIDES] [Growth PRIDES]. Capitalized terms
used herein but not defined shall have the meaning set forth in the Pledge
Agreement.
Dated:_____________ _________________________
Signature
Signature Guarantee: _____________________
Please print name and address of Registered Holder:
___________________________________ _____________________________________
Name Social Security or other Taxpayer
Identification Number, if any
___________________________________
Address
___________________________________
___________________________________
<PAGE> 127
EXHIBIT E
NOTICE TO SETTLE BY SEPARATE CASH
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: FELINE PRIDES of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
The undersigned Holder hereby irrevocably notifies you in accordance
with Section 5.4 of the Purchase Contract Agreement dated as of July 7, 1998
among the Company and yourselves, as Purchase Contract Agent and as
Attorney-in-Fact for the Holders of the Purchase Contracts, that such Holder has
elected to pay to the Collateral Agent, on or prior to 11:00 a.m. New York City
time, on the Business Day immediately preceding the Purchase Contract Settlement
Date, (in lawful money of the United States by [certified or cashiers check or]
wire transfer, in each case in immediately available funds), $_________ as the
Purchase Price for the shares of Common Stock issuable to such Holder by the
Company under the related Purchase Contract on the Purchase Contract Settlement
Date. The undersigned Holder hereby instructs you to notify promptly the
Collateral Agent of the undersigned Holders election to make such cash
settlement with respect to the Purchase Contracts related to such Holder's
[Income PRIDES] [Growth PRIDES].
Dated:_____________ __________________________________________
Signature
Signature Guarantee: _____________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Please print name and address of Registered Holder:
___________________________________ _____________________________________
Name Social Security or other Taxpayer
Identification Number, if any
Address
___________________________________
___________________________________
E-1
<PAGE> 1
Exhibit 4.16
KAUFMAN AND BROAD HOME CORPORATION,
THE BANK OF NEW YORK,
as Collateral Agent, Custodial Agent
and Securities Intermediary
AND
THE FIRST NATIONAL BANK OF CHICAGO,
as Purchase Contract Agent
PLEDGE AGREEMENT
Dated as of July 7, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS ..................................................................1
Section 1. Definitions.......................................................3
Section 2. Pledge; Control and Perfection....................................8
Section 2.1. The Pledge .........................................8
Section 2.2. Control and Perfection..............................10
Section 3. Distributions on Pledged Collateral..............................12
Section 4. Substitution, Release, Repledge and Settlement of
Capital Securities...............................................14
Section 4.1. Substitution for Capital Securities
and the Creation of Growth PRIDES...................14
Section 4.2. Substitution of Treasury Securities
and the Creation of Income PRIDES...................16
Section 4.3. Termination Event...................................16
Section 4.4. Cash Settlement ...................................17
Section 4.5. Early Settlement ...................................19
Section 4.6. Application of Proceeds Settlement..................20
Section 5. Voting Rights -- Capital Securities..............................23
Section 6. Rights and Remedies; Distribution of the
Debentures; Tax Event Redemption........................24
Section 6.1. Rights and Remedies of the Collateral
Agent...............................................24
Section 6.2. Distribution of the Debentures; Tax
Event Redemption....................................26
Section 6.3. Substitutions.......................................27
Section 7. Representations and Warranties; Covenants........................27
Section 7.1. Representations and Warranties......................27
Section 7.2. Covenants...........................................29
Section 8. The Collateral Agent.............................................29
Section 8.1. Appointment, Powers and Immunities..................29
i
<PAGE> 3
Page
----
Section 8.2. Instructions of the Company.........................30
Section 8.3. Reliance by Collateral Agent........................31
Section 8.4. Rights in Other Capacities..........................31
Section 8.5. Non-Reliance on Collateral Agent....................32
Section 8.6. Compensation and Indemnity..........................32
Section 8.7. Failure to Act ...................................33
Section 8.8. Resignation of Collateral Agent.....................34
Section 8.9. Right to Appoint Agent or Advisor...................35
Section 8.10. Survival............................................35
Section 8.11. Exculpation.........................................35
Section 9. Amendment........................................................36
Section 9.1. Amendment Without Consent of Holders................36
Section 9.2. Amendment with Consent of Holders...................36
Section 9.3. Execution of Amendments.............................37
Section 9.4. Effect of Amendments................................38
Section 9.5. Reference to Amendments.............................38
Section 10. Miscellaneous...................................................38
Section 10.1. No Waiver..........................................38
Section 10.2. Governing Law......................................39
Section 10.3. Notices............................................39
Section 10.4. Successors and Assigns.............................40
Section 10.5. Counterparts.......................................40
Section 10.6. Severability.......................................40
Section 10.7. Expenses, etc. ....................................40
Section 10.8. Security Interest Absolute.........................41
EXHIBIT A INSTRUCTION TO COLLATERAL AGENT
EXHIBIT B INSTRUCTION TO PURCHASE CONTRACT AGENT
EXHIBIT C INSTRUCTION TO CUSTODIAL AGENT REGARDING
REMARKETING
EXHIBIT D INSTRUCTION TO CUSTODIAL AGENT REGARDING
WITHDRAWAL FROM REMARKETING
ii
<PAGE> 4
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 7, 1998 (this "Agreement"), among
Kaufman and Broad Home Corporation, a Delaware corporation (the "Company"), The
Bank of New York, a New York banking corporation, not individually but solely as
collateral agent (in such capacity, together with its successors in such
capacity, the "Collateral Agent"), as custodial agent (in such capacity,
together with its successors in such capacity, the "Custodial Agent") and as
"securities intermediary" as defined in Section 8-102(a)(14) of the Code (as
defined herein) (in such capacity, together with its successors in such
capacity, the "Securities Intermediary"), and The First National Bank of
Chicago, not individually but solely as purchase contract agent and as
attorney-in-fact of the Holders (as defined in the Purchase Contract Agreement)
from time to time of the Securities (as hereinafter defined) (in such capacity,
together with its successors in such capacity, the "Purchase Contract Agent")
under the Purchase Contract Agreement (as hereinafter defined).
RECITALS
The Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement, dated as of the date hereof (as modified and supplemented
and in effect from time to time, the "Purchase Contract Agreement"), pursuant
to which there may be issued 18,975,000 FELINE PRIDES of the Company, having a
stated amount of $10 (the "Stated Amount") per FELINE PRIDES.
The FELINE PRIDES will initially consist of (A) 17,975,000 units (referred
to as "Income PRIDES") with a stated amount, per Income PRIDES, equal to the
Stated Amount and (B) 1,000,000 units (referred to as "Growth PRIDES" and,
together with the Income PRIDES, the "Securities") with a stated amount, per
Growth PRIDES, equal to the Stated Amount. Each Income PRIDES will initially
consist of (a) a stock purchase contract (the "Purchase Contract") under which
(i) the holder will purchase from the Company not later than August 16, 2001
(the "Purchase Contract Settlement Date"), for an amount of cash equal to the
Stated Amount, a number of newly issued shares of common stock, $1.00 par value
per share (the "Common Stock"), of the Company equal to the Settlement Rate (as
<PAGE> 5
defined below) and (ii) the Company will pay the Holder Contract Adjustment
Payments at the rate of .25% of the Stated Amount per annum and (b) either
beneficial owner ship of a Capital Security (as defined below) or, upon the
occurrence of a Tax Event Redemption the Applicable Ownership Interest of the
Treasury Portfolio. Each Growth PRIDES will initially consist of (a) a Purchase
Contract under which (i) the holder will purchase from the Company on the
Purchase Contract Settlement Date, for an amount in cash equal to the Stated
Amount, a number of newly issued shares of Common Stock of the Company, equal to
the Settlement Rate, and (ii) the Company will pay the Holder Contract
Adjustment Payments at the rate of .75% of the Stated Amount per annum, and (b)
a 1/100 undivided beneficial interest in a zero-coupon U.S. Treasury Security
(CUSIP No. 912820 BB 2) having a principal amount at maturity equal to $1,000
and maturing on August 15, 2001 (the "Treasury Securities").
Pursuant to the terms of the Declaration (as defined below), KBHC
Financing I, a statutory business trust formed under the laws of the State of
Delaware (the "Trust") will issue 1,000,000 8% Capital Securities (the "Capital
Securities") having a stated liquidation value equal to the Stated Amount.
Pursuant to the terms of the Purchase Contract Agreement and the Purchase
Contracts, the Holders, from time to time, of the Securities have irrevocably
authorized the Purchase Contract Agent, as attorney-in-fact of such Holders,
among other things, to execute and deliver this Agreement on behalf of such
Holders and to grant the pledge provided hereby of the Capital Securities, any
Applicable Ownership Interest in the Treasury Portfolio and the Treasury
Securities to secure each Holder's obligations under the related Purchase
Contract, as provided herein and subject to the terms hereof. Upon such pledge,
the Pledged Capital Securities or the Applicable Ownership Interests in the
Treasury Portfolio, as the case may be, and the Pledged Treasury Securities will
be beneficially owned by the Holders but will be owned of record by the Purchase
Contract Agent subject to the Pledge hereunder.
Accordingly, the Company, the Collateral Agent, the Securities
Intermediary, the Custodial Agent and the Purchase Contract Agent, on its own
behalf and as attor-
2
<PAGE> 6
ney-in-fact of the Holders from time to time of the Securities, agree as
follows:
Section 1. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) the following terms have the meanings assigned to them in the
Purchase Contract Agreement: (i) Act, (ii) Agent, (iii) Board Resolution,
(iv) Cash Settlement, (v) Certificate, (vi) Contract Adjustment Payments,
(vii) Debentures, (viii) Early Settlement, (ix) Early Settlement Amount,
(x) Early Settlement Date, (xi) Failed Remarketing, (xii) Holder, (xiii)
Opinion of Counsel, (xiv) Outstanding Securities, (xv) Remarketing Agent,
(xvi) Remarketing Agreement, (xvii) Settlement Rate, and (xviii)
Termination Event; (xix) Income PRIDES; (xx) Growth PRIDES; and
(d) the following terms have the meanings as signed to them in the
Declaration: (i) Applicable Ownership Interest (ii) Applicable Principal
Amount, (iii) Institutional Trustee, (iv) Investment Company Event, (v)
Primary Treasury Dealer, (vi) Quotation Agent, (vii) Redemption Amount,
(viii) Redemption Price, (ix) Tax Event, (x) Tax Event Redemption, (xi)
Tax Event Redemption Date, (xii) Treasury Portfolio, (xiii) Treasury
Portfolio Purchase Price, (xiv) Indenture, and (xv) Purchase Price.
"Agreement" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more agreements supplemental
hereto entered into pursuant to the applicable provisions hereof.
3
<PAGE> 7
"Bankruptcy Code" means title 11 of the United States Code, or any other
law of the United States that from time to time provides a uniform system of
bankruptcy laws.
"Business Day" means any day other than a Saturday, a Sunday or any other
day on which banking institutions in The City of New York (in the State of New
York) are permitted or required by any applicable law to close.
"Capital Securities" has the meaning specified in the Recitals.
"Cash" means any coin or currency of the United States as at the time
shall be legal tender for payment of public and private debts.
"Code" has the meaning specified in Section 6.1 hereof.
"Collateral" has the meaning specified in Section 2.1 hereof.
"Collateral Account" means the securities account (number 192079)
maintained at The Bank of New York in the name "The First National Bank of
Chicago, as Purchase Contract Agent on behalf of the holders of certain
securities of KBHC Financing I, Collateral Account subject to the security
interest of The Bank of New York, as Collateral Agent, for the benefit of
Kaufman and Broad Home Corporation, as pledgee" and any successor account.
"Collateral Agent" has the meaning specified in the first paragraph of
this instrument.
"Common Stock" has the meaning specified in the Recitals.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor shall have become such, and thereafter
"Company" shall mean such successor.
"Custodial Agent" has the meaning specified in the first paragraph of this
instrument.
4
<PAGE> 8
"Debenture Trustee" means The First National Bank of Chicago, as trustee
under the Indenture until a successor is appointed thereunder, and thereafter
means such successor trustee.
"Declaration" means the Amended and Restated Declaration of Trust, dated
as of July 7, 1998, among the Company as sponsor, the trustees named therein and
the holders from time to time of undivided beneficial interests in the assets
of the Trust.
"Intermediary" means any entity that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"Permitted Investments" means any one of the following which shall mature
not later than the next succeeding Business Day (i) any evidence of indebtedness
with an original maturity of 365 days or less issued, or directly and fully
guaranteed or insured, by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof or such indebtedness
constitutes a general obligation of it); (ii) deposits, certificates of deposit
or acceptances with an original maturity of 365 days or less of any institution
which is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than US $200.0 million at the time of
deposit; (iii) investments with an original maturity of 365 days or less of any
Person that is fully and unconditionally guaranteed by a bank referred to in
clause (ii); (iv) investments in commercial paper, other than commercial paper
issued by the Company or its affiliates, of any corporation incorporated under
the laws of the United States or any State thereof, which commercial paper has a
rating at the time of purchase at least equal to "A-1" by Standard & Poor's
Ratings Services ("S&P") or at least equal to "P-1" by Moody's Investors
Service, Inc. ("Moody's"); and (v) investments in money market funds registered
under the Investment Company Act of 1940, as amended, rated in the highest
applicable rating category by S&P or Moody's.
"Person" and "person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unin-
5
<PAGE> 9
corporated organization or government or any agency or political subdivision
thereof.
"Pledge" has the meaning specified in Section 2.1 hereof.
"Pledged Capital Securities" has the meaning specified in Section 2.1
hereof.
"Pledged Treasury Securities" has the meaning specified in Section 2.1
hereof.
"Proceeds" means all interest, dividends, cash, instruments, securities,
financial assets (as defined in ss. 8-102(a)(9) of the Code) and other property
from time to time received, receivable or otherwise distributed upon the sale,
exchange, collection or disposition of the Collateral or any proceeds thereof.
"Purchase Contract" has the meaning specified in the Recitals.
"Purchase Contract Agent" has the meaning specified in the first paragraph
of this Agreement.
"Purchase Contract Agreement" has the meaning specified in the Recitals.
"Purchase Contract Settlement Date" has the meaning specified in the
Recitals.
"Securities" has the meaning specified in the Recitals.
"Securities Intermediary" has the meaning specified in the first paragraph
of this Agreement.
"Security Entitlement" has the meaning set forth in Section 8-102(a)(17)
of the Code.
"Separate Capital Securities" means any Capital Securities that are not
Pledged Capital Securities.
"Stated Amount" has the meaning specified in the Recitals.
6
<PAGE> 10
"Supplemental Remarketing Agreement" means the Supplemental Remarketing
Agreement, as defined in the Remarketing Agreement.
"TRADES" means the Treasury/Reserve Automated Debt Entry System maintained
by the Federal Reserve Bank of New York pursuant to the TRADES Regulations.
"TRADES Regulations" means the regulations of the United States Department
of the Treasury, published at 31 C.F.R. Part 357, as amended from time to time.
Unless otherwise defined herein, all terms defined in the TRADES Regulations are
used herein as therein defined.
"Transfer" means, except as otherwise expressly provided herein, with
respect to the Collateral and in accordance with the instructions of the
Collateral Agent, the Purchase Contract Agent or the Holder, as applicable:
(i) in the case of Collateral consisting of securities which cannot be
delivered by book-entry or which the parties agree are to be
delivered in physical form, delivery in appropriate physical form to
the recipient accompanied by any duly executed instruments of
transfer, assignments in blank, transfer tax stamps and any other
documents necessary to constitute a legally valid transfer to the
recipient;
(ii) in the case of Collateral consisting of securities maintained in
book-entry form by causing a "securities intermediary" (as defined
in Section 8-102(a)(14) of the Code) to (i) credit a "security
entitlement" (as defined in Section 8-102(a)(17) of the Code) with
respect to such securities to a "securities account" (as defined in
Section 8-501(a) of the Code) maintained by or on behalf of the
recipient and (ii) to issue a confirmation to the recipient with
respect to such credit. In the case of Collateral to be delivered to
the Collateral Agent, the Securities Intermediary shall be the
securities intermediary and the securities account shall be the
Collateral Account.
7
<PAGE> 11
"Treasury Securities" has the meaning specified in the Recitals.
"Trust" has the meaning specified in the Recitals.
"Value" with respect to any item of Collateral on any date means, as to
(i) a Capital Security, the stated liquidation amount thereof, (ii) Cash, the
face amount thereof and (iii) Treasury Securities, the aggregate principal
amount thereof at maturity.
Section 2. Pledge; Control and Perfection.
Section 2.1. The Pledge. (a) The Holders from time to time as beneficial
owners of the Collateral (as defined below) acting through the Purchase
Contract Agent, as their attorney-in-fact, and the Purchase Contract Agent, as
nominal owner of the Collateral (as defined below), each hereby pledge and grant
to the Collateral Agent, for the benefit of the Company, as collateral security
for the performance when due by such Holders of their respective obligations
under the related Purchase Contracts, a security interest in all of the right,
title and interest of the Purchase Contract Agent and such Holders (a) in the
Capital Securities and Treasury Securities constituting a part of the
Securities and any Treasury Securities delivered in exchange for any Capital
Securities (or, if applicable, the Applicable Ownership Interest in the Treasury
Portfolio), and any Capital Securities (or, if applicable, the Applicable
Ownership Interest in the Treasury Portfolio) delivered in exchange for any
Treasury Securities, in accordance with Section 4 hereof, in each case that have
been Transferred to or received by the Collateral Agent and not released by the
Collateral Agent to such Holders under the provisions of this Agreement; (b) in
payments made by Holders pursuant to Section 4.4; (c) in the Collateral Account
and all securities, financial assets, Cash and other property credited thereto
and all Security Entitlements related thereto; (d) in any Debentures delivered
to the Collateral Agent upon the occurrence of an Investment Company Event or a
liquidation of the Trust as provided in Section 6.2; (e) in the Treasury
Portfolio purchased on behalf of the Holders of Income PRIDES by the Collateral
Agent upon the occurrence of a Tax Event Redemption as provided in Section 6.2
and (f) all Proceeds of the foregoing (all of the foregoing, collectively, the
"Col-
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lateral"). Prior to or concurrently with the execution and delivery of this
Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the
Securities, shall cause the Capital Securities comprising a part of the Income
PRIDES, and the Treasury Securities comprising a part of the Growth PRIDES, to
be Transferred to the Collateral Agent for the benefit of the Company. Such
Capital Securities shall be Transferred by physically delivering such Capital
Securities to the Securities Intermediary indorsed in blank (or accompanied by a
stock or bond power indorsed in blank) and causing the Securities Intermediary
to credit the Collateral Account with such Capital Securities and sending the
Collateral Agent a confirmation of the deposit of such Capital Securities. In
the event a Holder of Income PRIDES so elects, such Holder may Transfer Treasury
Securities to the Collateral Agent for the benefit of the Company as provided in
Section 4.1 hereof in exchange for the release by the Collateral Agent on behalf
of the Company of Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, with an aggregate stated
liquidation amount equal to the aggregate principal amount of the Treasury
Securities so Transferred, in the case of Capital Securities, or with an
appropriate Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio equal to the aggregate
principal amount of the Treasury Securities so transferred, in the event that a
Tax Event Redemption has occurred, to the Purchase Contract Agent on behalf of
such Holder. In the event that a Holder of Growth PRIDES so elects, such Holder
may Transfer Capital Securities or the appropriate Applicable Ownership Interest
(as specified in clause (A) of the definition of such term) of the Treasury
Portfolio to the Collateral Agent for the benefit of the Company as provided in
Section 4.2 hereof in exchange for the release by the Collateral Agent on behalf
of the Company of Treasury Securities with an aggregate principal amount at
maturity equal to the aggregate stated liquidation amount of the Capital
Securities or the appropriate Applicable Ownership Interest (as specified in
clause (A) of the definition of such term) of the Treasury Portfolio so
transferred to the Purchase Contract Agent on behalf of such Holder. Treasury
Securities and the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as applicable, shall be Transferred to the Collateral Account
maintained by the Collateral Agent at the Securi-
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ties Intermediary by book-entry transfer to the Collateral Account in accordance
with the TRADES Regulations and other applicable law and by the notation by the
Securities Intermediary on its books that a Security Entitlement with respect to
such Treasury Securities or appropriate Applicable Ownership Interest of the
Treasury Portfolio, has been credited to the Collateral Account.
(b) For purposes of perfecting the Pledge under applicable law, including,
to the extent applicable, the TRADES Regulations or the Uniform Commercial Code
as adopted and in effect in any applicable jurisdiction, the Collateral Agent
shall be the agent of the Company as provided herein. The pledge provided in
this Section 2.1 is herein referred to as the "Pledge" and the Capital
Securities (or the Debentures that are delivered pursuant to Section 6.2 hereof)
or Treasury Securities subject to the Pledge, excluding any Capital Securities
(or the Debentures that are delivered pursuant to Section 6.2 hereof) or
Treasury Securities released from the Pledge as provided in Section 4 hereof,
are hereinafter referred to as "Pledged Capital Securities" or the "Pledged
Treasury Securities," respectively. Subject to the Pledge and the provisions of
Section 2.2 hereof, the Holders from time to time shall have full beneficial
ownership of the Collateral. Whenever directed by the Collateral Agent acting on
behalf of the Company, the Securities Intermediary shall have the right to
reregister the Capital Securities or any other securities held in physical form
in its name.
Except as may be required in order to release Capital Securities in
connection with a Holder's election to convert its investment from an Income
PRIDES to a Growth PRIDES, or except as otherwise required to release Capital
Securities as specified herein, neither the Collateral Agent nor the Securities
Intermediary shall relinquish physical possession of any certificate evidencing
a Capital Security prior to the termination of this Agreement, except they may
be held in any clearing corporation in an account including only assets of
customers of the Collateral Agent or Securities Intermediary. If it becomes
necessary for the Securities Intermediary to relinquish physical possession
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of a certificate in order to release a portion of the Capital Securities
evidenced thereby from the Pledge, the Securities Intermediary shall use its
best efforts to obtain physical possession of a replacement certificate
evidencing any Capital Securities remaining subject to the Pledge hereunder
registered to it or indorsed in blank (or accompanied by a stock or bond power
indorsed in blank) within fifteen days of the date it relinquished possession.
The Securities Intermediary shall promptly notify the Company and the
Collateral Agent of the Securities Intermediary's failure to obtain possession
of any such replacement certificate as required hereby.
Section 2.2. Control and Perfection. (a) In connection with the Pledge
granted in Section 2.1, and subject to the other provisions of this Agreement,
the Holders from time to time acting through the Purchase Contract Agent, as
their attorney-in-fact, and the Purchase Contract Agent each hereby authorize
and direct the Securities Intermediary (without the necessity of obtaining the
further consent of the Purchase Contract Agent or any of the Holders), and the
Securities Intermediary agrees, to comply with and follow any instructions and
entitlement orders (as defined in Section 8-102(a)(8) of the Code) that the
Collateral Agent on behalf of the Company may give in writing with respect to
the Collateral Account, the Collateral credited thereto and any Security
Entitlements with respect to any thereof. Such instructions and entitlement
orders may, without limitation, direct the Securities Intermediary to transfer,
redeem, sell, liquidate, assign, deliver or otherwise dispose of the Capital
Securities, the Treasury Securities, the Treasury Portfolio, and any Security
Entitlements with respect thereto and to pay and deliver any income, proceeds or
other funds derived therefrom to the Company. The Holders from time to time
acting through the Purchase Contract Agent hereby further authorize and direct
the Collateral Agent, as agent of the Company, to itself issue instructions and
entitlement orders, and to otherwise take action, with respect to the Collateral
Account, the Collateral credited thereto and any security entitlements with
respect thereto, pursuant to the terms and provisions hereof, all without the
necessity of obtaining the further consent of the Purchase Contract Agent or
any of the Holders. The Collateral Agent shall be the agent of the Company and
shall act as directed in writing by the Company. Without limiting the generality
of the foregoing, the Collateral Agent shall issue entitlement orders to the
Securities Intermediary when and as directed by the Company.
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<PAGE> 15
(b) The Securities Intermediary hereby confirms and agrees that: (i) all
securities or other property underlying any financial assets credited to the
Collateral Account shall be registered in the name of the Securities
Intermediary, indorsed to the Securities Intermediary or in blank or credited to
another collateral account maintained in the name of the Securities Intermediary
and in no case will any financial asset credited to the Collateral Account be
registered in the name of the Purchase Contract Agent, the Collateral Agent, the
Company or any Holder, payable to the order of, or specially indorsed to, the
Purchase Contract Agent, the Collateral Agent, the Company or any Holder except
to the extent the foregoing have been specially indorsed to the Securities
Intermediary or in blank; (ii) all property delivered to the Securities
Intermediary pursuant to this Pledge Agreement (including, without limitation,
any Capital Securities, the Treasury Portfolio or Treasury Securities) will be
promptly credited to the Collateral Account; (iii) the Collateral Account is an
account to which financial assets are or may be credited, and the Securities
Intermediary shall, subject to the terms of this Agreement, treat the Purchase
Contract Agent as entitled to exercise the rights of any financial asset
credited to the Collateral Account; (iv) the Securities Intermediary has not
entered into, and until the termination of the this Agreement will not enter
into, any agreement with any other person relating to the Collateral Account
and/or any financial assets credited thereto pursuant to which it has agreed to
comply with entitlement orders (as defined in Section 8-102(a)(8) of the Code)
of such other person; and (v) the Securities Intermediary has not entered into,
and until the termination of this Agreement will not enter into, any agreement
with the Company, the Collateral Agent or the Purchase Contract Agent
purporting to limit or condition the obligation of the Securities Intermediary
to comply with entitlement orders as set forth in this Section 2.2 hereof.
(c) The Securities Intermediary hereby agrees that each item of property
(whether investment property, financial asset, security, instrument or cash)
credited to the Collateral Account shall be treated as a "financial asset"
within the meaning of Section 8-102(a)(9) of the Code.
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<PAGE> 16
(d) In the event of any conflict between this Agreement (or any portion
thereof) and any other agreement now existing or hereafter entered into, the
terms of this Agreement shall prevail.
(e) The Purchase Contract Agent hereby irrevocably constitutes and
appoints the Collateral Agent and the Company, with full power of substitution,
as the Purchase Contract Agent's attorneys-in-fact to take on behalf of, and in
the name, place and stead of, the Purchase Contract Agent and the Holders, any
action necessary or desirable to perfect and to keep perfected the security
interest in the Collateral referred to in Section 2.1. The grant of such
power-of-attorney shall not be deemed to require of the Collateral Agent any
specific duties or obligations not otherwise assumed by the Collateral Agent
hereunder.
Section 3. Distributions on Pledged Collateral. So long as the Purchase
Contract Agent is the registered owner of the Pledged Capital Securities, it
shall receive all payments thereon. If the Pledged Capital Securities are
reregistered, such that the Collateral Agent becomes the registered holder, all
payments of the Stated Amount or, if applicable, the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, or cash distributions on, the Pledged Capital
Securities or on the appropriate Applicable Ownership Interest (as specified in
clause (B) of the definition of such term) of the Treasury Portfolio, as the
case may be, and all payments of the principal of, or cash distributions on, any
Pledged Treasury Securities received by the Collateral Agent that are properly
payable hereunder shall be paid by the Collateral Agent by wire transfer in same
day funds:
(i) In the case of (A) cash distributions with respect to the
Pledged Capital Securities or the appropriate Applicable Ownership
Interest (as specified in clause (B) of the definition of such term) of
the Treasury Portfolio, as the case may be, and (B) any payments of the
Stated Amount or, if applicable, the appropriate Applicable Ownership
Interest (as specified in clause (A) of the definition of such term) of
the Treasury Portfolio with respect to any Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Port-
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<PAGE> 17
folio, as the case may be, that have been released from the Pledge
pursuant to Section 4.1 or 4.3 hereof, to the Purchase Contract Agent, for
the benefit of the relevant Holders of Securities, to the account
designated by the Purchase Contract Agent for such purpose, no later than
2:00 p.m., New York City time, on the Business Day such payment is
received by the Collateral Agent (provided that in the event such payment
is received by the Collateral Agent on a day that is not a Business Day or
after 12:30 p.m., New York City time, on a Business Day, then such payment
shall be made no later than 10:30 a.m., New York City time, on the next
succeeding Business Day);
(ii) In the case of any principal payments with respect to any
Treasury Securities that have been released from the Pledge pursuant to
Section 4.2 or 4.3 hereof, to the Holders of the Growth PRIDES to the
accounts designated by them in writing for such purpose no later than 2:00
p.m., New York City time, on the Business Day such payment is received by
the Collateral Agent (provided that in the event such payment is received
by the Collateral Agent on a day that is not a Business Day or after 12:30
p.m., New York City time, on a Business Day, then such payment shall be
made no later than 10:30 a.m., New York City time, on the next succeeding
Business Day); and
(iii) In the case of payments of the Stated Amount of any Pledged
Capital Securities or the appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as the case may be, or the principal of any Pledged Treasury
Securities, to the Company on the Purchase Contract Settlement Date in
accordance with the procedure set forth in Section 4.6(a) or 4.6(b)
hereof, in full satisfaction of the respective obligations of the Holders
under the related Purchase Contracts.
All payments received by the Purchase Contract Agent as provided herein shall be
applied by the Purchase Contract Agent pursuant to the provisions of the
Purchase Contract Agreement. If, notwithstanding the foregoing, the Purchase
Contract Agent shall receive any payments of the
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<PAGE> 18
Stated Amount or, if applicable, the appropriate Applicable Ownership Interest
(as specified in clause (A) of the definition of such term) on account of any
Capital Security or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as applicable, that, at the time of such payment, is subject
to the Pledge, or a Holder of a Growth PRIDES shall receive any payments of
principal on account of any Treasury Securities that, at the time of such
payment, are Pledged Treasury Securities, the Purchase Contract Agent or such
Holder shall hold the same as trustee of an express trust for the benefit of the
Company (and promptly deliver the same over to the Company) for application to
the obligations of the Holders under the related Purchase Contracts, and the
Holders shall acquire no right, title or interest in any such payments of Stated
Amount or principal so received.
Section 4. Substitution, Release, Repledge and Settlement of Capital
Securities.
Section 4.1. Substitution for Capital Securities and the Creation of
Growth PRIDES. At any time on or prior to the fifth Business Day immediately
preceding the Purchase Contract Settlement Date (or on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date, if a
Tax Event Redemption has occurred), a Holder of Income PRIDES shall have the
right to substitute Treasury Securities for the Pledged Capital Securities (or,
if a Tax Event Redemption has occurred, the appropriate Applicable Ownership
Interest (as defined in clause (A) of the definition of such term) in the
Treasury Portfolio) securing such Holder's obligations under the Purchase
Contract(s) comprising a part of its Income PRIDES in integral multiples of 100
Income PRIDES by (a) Transferring to the Collateral Agent Treasury Securities
having a Value equal to the aggregate Stated Amount of the Pledged Capital
Securities (or appropriate Applicable Ownership Interest in the Treasury
Portfolio as the case may be), to be released and (b)(i) delivering to the
Purchase Contract Agent cash in an amount equal to the excess of the Contract
Adjustment Payments, that would have accrued since the last date that Contract
Adjustment Payments were made to the date of substitution on the Growth PRIDES
being created by the Holder, over the Contract Adjustment Payments that have
accrued over the same time period on the related Income PRIDES, which amount the
Purchase Contract Agent shall promptly remit
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<PAGE> 19
to the Company, and (ii) transferring the related Income PRIDES to the Purchase
Contract Agent, accompanied by a notice, substantially in the form of Exhibit B
hereto, to the Purchase Contract Agent stating that such Holder has Transferred
the relevant Treasury Securities to the Collateral Agent pursuant to clause (a)
above (stating the Value of the Treasury Securities Transferred by such Holder)
and requesting that the Purchase Contract Agent instruct the Collateral Agent to
release from the Pledge the Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be,
related to such Income PRIDES. The Purchase Contract Agent shall instruct the
Collateral Agent in the form provided in Exhibit A; provided, however, that if
a Tax Event Redemption has occurred and the Treasury Portfolio has become a
component of the Income PRIDES, Holders of Income PRIDES may make such
substitution only in integral multiples of 40,000 Income PRIDES at any time on
or prior to the second Business Day immediately preceding the Purchase Contract
Settlement Date. Upon receipt of Treasury Securities from a Holder of Income
PRIDES and the related instruction from the Purchase Contract Agent, the
Collateral Agent shall release the Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may be, and
shall promptly Transfer to the securities account specified by the Purchase
Contract Agent such Pledged Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, free and clear
of any lien, pledge or security interest created hereby, to the Purchase
Contract Agent. All items Transferred and/or substituted by any Holder pursuant
to this Section 4.1, Section 4.2 or any other Section of this Agreement shall be
Transferred and/or substituted free and clear of all liens, claims and
encumbrances.
Section 4.2. Substitution of Treasury Securities and the Creation of
Income PRIDES. At any time on or prior to the fifth Business Day immediately
preceding the Purchase Contract Settlement Date (or on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date, if a
Tax Event Redemption has occurred), a Holder of Growth PRIDES shall have the
right to create or recreate Income PRIDES in integral multiples of 100 Income
PRIDES by (a) Transferring to the Collateral Agent Capital Securities (or the
appropriate Appli-
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cable Ownership Interest (as defined in clause (A) of the definition of such
term) of the Treasury Portfolio) having a Value equal to the Value of the
Pledged Treasury Securities to be released and (b) delivering the related Growth
PRIDES to the Purchase Contract Agent, accompanied by a notice, substantially in
the form of Exhibit B hereto, to the Purchase Contract Agent stating that such
Holder has transferred the relevant amount of Capital Securities (or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be) to the Collateral Agent pursuant to clause (a) above and requesting that
the Purchase Contract Agent instruct the Collateral Agent to release from the
Pledge the Pledged Treasury Securities underlying such Growth PRIDES. The
Purchase Contract Agent shall instruct the Collateral Agent in the form provided
in Exhibit A; provided, however, that if a Tax Event Redemption has occurred
and the Treasury Portfolio has become a component of the Income PRIDES, Holders
of Growth PRIDES may make such substitution only in integral multiples of
40,000 Growth PRIDES, at any time on or prior to the Business Day immediately
preceding the Purchase Contract Settlement Date. Upon receipt of the Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, from such Holder and the instruction from the
Purchase Contract Agent, the Collateral Agent shall release the Treasury
Securities having a corresponding aggregate principal amount from the Pledge
and shall promptly Transfer such Treasury Securities, free and clear of any
lien, pledge or security interest created hereby, to the Purchase Contract
Agent.
Section 4.3. Termination Event. Upon receipt by the Collateral Agent of
written notice from the Company or the Purchase Contract Agent that there has
occurred a Termination Event, the Collateral Agent shall release all Collateral
from the Pledge and shall promptly Transfer any Pledged Capital Securities (or
the Applicable Ownership Interest of the Treasury Portfolio if a Tax Event
Redemption has occurred) and Pledged Treasury Securities to the Purchase
Contract Agent for the benefit of the Holders of the Income PRIDES and the
Growth PRIDES, respectively, free and clear of any lien, pledge or security
interest or other interest created hereby.
If such Termination Event shall result from the Company's becoming a
debtor under the Bankruptcy Code,
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<PAGE> 21
and if the Collateral Agent shall for any reason fail promptly to effectuate the
release and Transfer of all Pledged Capital Securities, the Treasury Portfolio
or of the Pledged Treasury Securities, as the case may be, as provided by this
Section 4.3, the Purchase Contract Agent shall (i) use its best efforts to
obtain an opinion of a nationally recognized law firm reasonably acceptable to
the Collateral Agent to the effect that, as a result of the Company's being the
debtor in such a bankruptcy case, the Collateral Agent will not be prohibited
from releasing or Transferring the Collateral as provided in this Section 4.3,
and shall deliver such opinion to the Collateral Agent within ten days after the
occurrence of such Termination Event, and if (y) the Purchase Contract Agent
shall be unable to obtain such opinion within ten days after the occurrence of
such Termination Event or (z) the Collateral Agent shall continue, after
delivery of such opinion, to refuse to effectuate the release and Transfer of
all Pledged Capital Securities, the Treasury Portfolio or the Pledged Treasury
Securities, as the case may be, as provided in this Section 4.3, then the
Purchase Contract Agent shall within fifteen days after the occurrence of such
Termination Event commence an action or proceeding in the court with
jurisdiction of the Company's case under the Bankruptcy Code seeking an order
requiring the Collateral Agent to effectuate the release and transfer of all
Pledged Capital Securities, the Treasury Portfolio or of the Pledged Treasury
Securities, as the case may be, as provided by this Section 4.3 or (ii) commence
an action or proceeding like that described in subsection (i)(z) hereof within
ten days after the occurrence of such Termination Event.
Section 4.4. Cash Settlement. (a) Upon receipt by the Collateral Agent of
(i) a notice from the Purchase Contract Agent promptly after the receipt by the
Purchase Contract Agent of such notice that a Holder of an Income PRIDES has
elected, in accordance with the procedures specified in Section 5.4(a)(i) or
(d)(i) of the Purchase Contract Agreement, respectively, to settle its Purchase
Contract with Cash and (ii) payment of the amount required to settle such
Purchase Contract by such Holder on or prior to 11:00 a.m., New York City time,
on the Business Day immediately preceding the Purchase Contract Settlement Date
in lawful money of the United States by certified or cashiers' check or wire
transfer in immediately available funds payable to or upon the order of the
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<PAGE> 22
Company, then the Collateral Agent shall, promptly invest any Cash received from
a Holder in connection with a Cash Settlement in Permitted Investments. Upon
receipt of the proceeds upon the maturity of the Permitted Investments on the
Purchase Contract Settlement Date, the Collateral Agent shall pay the portion of
such proceeds and deliver any certified or cashiers' checks received and any
funds so wired, in an aggregate amount equal to the Purchase Price, to the
Company on the Purchase Contract Settlement Date, and shall distribute any funds
in respect of the interest earned from the Permitted Investments to the Purchase
Contract Agent for payment to the relevant Holders.
(b) If a Holder of an Income PRIDES (if a Tax Event Redemption has not
occurred) fails to notify the Agent of its intention to make a Cash Settlement
in accordance with Section 5.4(a)(i) of the Purchase Contract Agreement, such
failure shall constitute an event of default under the Purchase Contract
Agreement and hereunder, and the Holder shall be deemed to have consented to the
disposition of the Pledged Capital Securities (or Debentures exchanged for such
Pledged Capital Securities following an Investment Company Event or other
dissolution of the Trust) pursuant to the remarketing as described in Section
5.4(b) of the Purchase Contract Agreement, which is incorporated herein by
reference. If a Holder of an Income PRIDES does notify the Agent as provided in
Section 5.4(a)(i) of the Purchase Contract Agreement of its intention to pay the
Purchase Price in cash, but fails to make such payment as required by Section
5.4(a)(ii) of the Purchase Contract Agreement, the Capital Securities (or
Debentures) of such a Holder will not be remarketed but instead the Collateral
Agent, for the benefit of the Company, will exercise its rights as a secured
party with respect to such Capital Securities (or Debentures) at the direction
of the Company to retain or dispose of the Collateral in accordance with
applicable law. In addition, in the event of a Failed Remarketing as described
in Section 5.4(b) of the Purchase Contract Agreement, such Failed Remarketing
shall constitute an additional event of default hereunder by such Holder and the
Collateral Agent, for the benefit of the Company, will also exercise its rights
as a secured party with respect to such Capital Securities (or Debentures) at
the direction of the Company to retain or
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<PAGE> 23
dispose of the Collateral in accordance with applicable law.
(c) If a Holder of an Income PRIDES (if a Tax Event Redemption has
occurred) fails to notify the Purchase Contract Agent of such Holder's intention
to make a Cash Settlement in accordance with Section 5.4(d)(i) of the Purchase
Contract Agreement, or if a Holder of an Income PRIDES (if a Tax Event
Redemption has occurred) does notify the Agent as provided in paragraph 5.4
(d)(i) of the Purchase Contract Agreement of its intention to pay the Purchase
Price in cash, but fails to make such payment as required by paragraph
5.4(d)(ii) of the Purchase Contract Agreement, such failure shall constitute an
event of default hereunder by such Holder and upon the maturity of the
appropriate Applicable Ownership Interest of the Treasury Portfolio, held by the
Collateral Agent on the Business Day immediately preceding the Purchase Contract
Settlement Date, the principal amount of the appropriate Applicable Ownership
Interest of the Treasury Portfolio, received by the Collateral Agent shall, upon
written direction of the Company, be invested promptly in overnight Permitted
Investments. On the Purchase Contract Settlement Date, an amount equal to the
Purchase Price will be remitted to the Company as payment thereof without
receiving any instructions from the Holder. In the event the sum of the proceeds
from the appropriate Applicable Ownership Interest of the Treasury Portfolio and
the investment earnings earned from such investments is in excess of the
aggregate Purchase Price of the Purchase Contracts being settled thereby, the
Collateral Agent shall distribute such excess to the Purchase Contract Agent
for the benefit of the Holder of the related Income PRIDES when received.
Section 4.5. Early Settlement. Upon written notice to the Collateral Agent
by the Purchase Contract Agent that one or more Holders of Securities have
elected to effect Early Settlement of their respective obligations under the
Purchase Contracts forming a part of such Securities in accordance with the
terms of the Purchase Contracts and the Purchase Contract Agreement (setting
forth the number of such Purchase Contracts as to which such Holders have
elected to effect Early Settlement), and that the Purchase Contract Agent has
received from such Holders, and paid to the Company as confirmed in writing by
the Company, the related Early Settlement
20
<PAGE> 24
Amounts pursuant to the terms of the Purchase Contracts and the Purchase
Contract Agreement and that all conditions to such Early Settlement have been
satisfied, then the Collateral Agent shall release from the Pledge, (a) Pledged
Capital Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio in the case of a Holder of Income PRIDES or (b) Pledged
Treasury Securities in the case of a Holder of Growth PRIDES, as the case may
be, in each case with an aggregate liquidation amount or principal amount, as
the case may be, equal to the product of (i) the Stated Amount times (ii) the
number of such Purchase Contracts as to which such Holders have elected to
effect Early Settlement and shall Transfer all such Pledged Capital Securities,
the appropriate Applicable Ownership Interest of the Treasury Portfolio or the
Pledged Treasury Securities, as the case may be, free and clear of the Pledge
created hereby, to the Purchase Contract Agent for the benefit of such Holders.
Section 4.6. Application of Proceeds; Settlement. (a) In the event a
Holder of Income PRIDES (if a Tax Event Redemption has not occurred) has not
elected to make an effective Cash Settlement by notifying the Purchase Contract
Agent in the manner provided for in paragraph 5.4(a)(i) in the Purchase Contract
Agreement and has not made an Early Settlement of the Purchase Contracts
underlying its Income PRIDES, such Holder shall be deemed to have elected to pay
for the shares of Common Stock to be issued under such Purchase Contracts from
the Proceeds of the related Pledged Capital Securities. The Collateral Agent
shall, by 10:00 a.m., New York City time, on the fourth Business Day immediately
preceding the Purchase Contract Settlement Date, without any instruction from
such Holder of Income PRIDES, present the related Pledged Capital Securities to
the Remarketing Agent for remarketing. Upon receiving such Pledged Capital
Securities, the Remarketing Agent, pursuant to the terms of the Remarketing
Agreement and the Supplemental Remarketing Agreement, will use its reasonable
efforts to remarket such Pledged Capital Securities on such date at a price of
approximately 100.75% (but not less than 100%) of the aggregate Value of such
Pledged Capital Securities, plus accrued and unpaid distributions (including
deferred distributions), if any, thereon. After deducting as the Remarketing Fee
an amount not exceeding 50 basis points (.50%) of the aggregate Value of the
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<PAGE> 25
remarketed Pledged Capital Securities from any amount of such Proceeds in excess
of the aggregate Value, plus such accrued and unpaid distributions (including
deferred distributions) of the remarketed Pledged Capital Securities, the
Remarketing Agent will remit the entire amount of the Proceeds of such
remarketing to the Collateral Agent. On the Purchase Contract Settlement Date,
the Collateral Agent shall apply that portion of the Proceeds from such
remarketing equal to the aggregate Value of such remarketed Pledged Capital
Securities to satisfy in full the obligations of such Holders of Income PRIDES
to pay the Purchase Price to purchase the Common Stock under the related
Purchase Contracts. The remaining portion of such Proceeds, if any, shall be
remitted by the Collateral Agent to the Purchase Contract Agent for payment to
the Holders. If the Remarketing Agent advises the Collateral Agent in writing
that it cannot remarket the related Pledged Capital Securities of such Holders
of Income PRIDES at a price not less than 100% of the aggregate Value of such
Pledged Capital Securities plus any accrued and unpaid distributions (including
deferred distributions) or if the remarketing shall not have occurred because a
condition precedent to the remarketing shall not have been fulfilled, thus
resulting in a Failed Remarketing and an event of default under the Purchase
Contract Agreement and hereunder, the Collateral Agent, for the benefit of the
Company will, at the written direction of the Company, retain or dispose of the
Pledged Capital Securities in accordance with applicable law and satisfy in
full, from any such disposition or retention, such Holder's obligation to pay
the Purchase Price for the Common Stock.
(b) In the event a Holder of Growth PRIDES or Income PRIDES (if a Tax
Event Redemption has occurred) has not made an Early Settlement of the Purchase
Contracts under lying its Growth PRIDES or Income PRIDES, or in the event a Tax
Event Redemption has occurred and a Holder of Income PRIDES has not elected to
make an effective Cash Settlement by notifying the Purchase Contract Agent in
the manner provided in paragraph 5.4(d)(i) of the Purchase Contract Agreement,
such Holder shall be deemed to have elected to pay for the shares of Common
Stock to be issued under such Purchase Contracts from the Proceeds of the
related Pledged Treasury Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be. On the Business Day
immediately
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prior to the Purchase Contract Settlement Date, the Collateral Agent shall, at
the written direction of the Purchase Contract Agent, invest the Cash proceeds
of the maturing Pledged Treasury Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, in overnight
Permitted Investments. Without receiving any instruction from any such Holder of
Growth PRIDES or Income PRIDES (if a Tax Event Redemption has occurred), the
Collateral Agent shall apply the Proceeds of the related Pledged Treasury
Securities or appropriate Applicable Ownership Interest of the Treasury
Portfolio to the settlement of such Purchase Contracts on the Purchase Contract
Settlement Date.
In the event the sum of the Proceeds from the related Pledged Treasury
Securities or appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, and the investment earnings from the investment
in overnight Permitted Investments is in excess of the aggregate Purchase Price
of the Purchase Contracts being settled thereby, the Collateral Agent shall
remit such excess, when received, to the Purchase Contract Agent for the benefit
of the Holders.
(c) Pursuant to the Remarketing Agreement and subject to the terms of the
Supplemental Remarketing Agreement, on or prior to the fifth Business Day
immediately preceding the Purchase Contract Settlement Date, but no earlier than
the Payment Date immediately preceding the Purchase Contract Settlement Date,
holders of Separate Capital Securities may elect to have their Separate Capital
Securities remarketed by delivering their Separate Capital Securities, together
with a notice of such election, substantially in the form of Exhibit C hereto,
to the Custodial Agent. The Custodial Agent shall hold such Separate Capital
Securities in an account separate from the Collateral Account. A holder of
Separate Capital Securities electing to have its Separate Capital Securities
remarketed will also have the right to withdraw such election by written notice
to the Custodial Agent, substantially in the form of Exhibit D hereto, on or
prior to the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, upon which notice the Custodial Agent shall return such
Separate Capital Securities to such holder. On the fourth Business Day
immediately preceding the Purchase Contract Settlement Date, the Custodial Agent
shall notify the Remarketing
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Agent of the aggregate Stated Amount of the separate Capital Securities to be
remarketed and will deliver to the Remarketing Agent for remarketing all
separate Capital Securities delivered to the Custodial Agent pursuant to this
Section 4.6(c) and not withdrawn pursuant to the terms hereof prior to such
date. The portion of the proceeds from such remarketing equal to the aggregate
Value of such Separate Capital Securities will automatically be remitted by the
Remarketing Agent to the Custodial Agent for the benefit of the holders of such
Separate Capital Securities. In addition, after deducting as the Remarketing Fee
an amount not exceeding 50 basis points (.50%) of the Value of the remarketed
Separate Capital Securities, from any amount of such proceeds in excess of the
aggregate Value of the remarketed Separate Capital Securities plus any accrued
and unpaid distributions (including deferred distributions, if any), the
Remarketing Agent will remit to the Custodial Agent the remaining portion of the
proceeds, if any, for the benefit of such holders. If, despite using its
reasonable efforts, the Remarketing Agent advises the Custodial Agent in writing
that it cannot remarket the related Separate Capital Securities of such holders
at a price not less than 100% of the aggregate Value of such Separate Capital
Securities plus accrued and unpaid distributions (including deferred
distributions) or if the remarketing shall not have occurred because a condition
precedent to the remarketing shall not have been fulfilled, and thus resulting
in a Failed Remarketing, the Remarketing Agent will promptly return such Capital
Securities to the Custodial Agent for redelivery to such holders. In the event
of a dissolution of the Trust and the distribution of the Debentures as
described in the Declaration, all references to "Separate Capital Securities"
in this Section 4.6(c) shall be deemed to be references to Debentures which are
not pledged hereunder or required to be part of the Collateral and all
references to distributions on the Separate Capital Securities shall be deemed
to be references to interest on such Debentures.
Section 5. Voting Rights -- Capital Securities. The Purchase Contract
Agent may exercise, or refrain from exercising, any and all voting and other
consensual rights pertaining to the Pledged Capital Securities or any part
thereof for any purpose not inconsistent with the terms of this Agreement and in
accordance with the
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terms of the Purchase Contract Agreement; provided, that the Purchase Contract
Agent shall not exercise or, as the case may be, shall not refrain from
exercising such right if, in the judgment of the Company, such action would
impair or otherwise have a material adverse effect on the value of all or any of
the Pledged Capital Securities; and provided, further, that the Purchase
Contract Agent shall give the Company and the Collateral Agent at least five
days' prior written notice of the manner in which it intends to exercise, or its
reasons for refraining from exercising, any such right. Upon receipt of any
notices and other communications in respect of any Pledged Capital Securities,
including notice of any meeting at which holders of Capital Securities are
entitled to vote or solicitation of consents, waivers or proxies of holders of
Capital Securities, the Collateral Agent shall use reasonable efforts to send
promptly to the Purchase Contract Agent such notice or communication, and as
soon as reasonably practicable after receipt of a written request therefor from
the Purchase Contract Agent, execute and deliver to the Purchase Contract Agent
such proxies and other instruments in respect of such Pledged Capital Securities
(in form and substance satisfactory to the Collateral Agent) as are prepared by
the Purchase Contract Agent with respect to the Pledged Capital Securities.
Section 6. Rights and Remedies; Distribution of the Debentures; Tax Event
Redemption
Section 6.1. Rights and Remedies of the Collateral Agent. (a) In addition
to the rights and remedies specified in Section 4.4 hereof or otherwise
available at law or in equity, after an event of default hereunder, the
Collateral Agent shall have all of the rights and remedies with respect to the
Collateral of a secured party under the Uniform Commercial Code (or any
successor thereto) as in effect in the State of New York from time to time (the
"Code") (whether or not, to the extent permitted by law, the Code is in effect
in the jurisdiction where the rights and remedies are asserted) and the TRADES
Regulations and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted. Wherever reference is made in this Agreement
to any section of the Code, such reference shall be deemed to include a
reference to any
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provision of the Code which is a successor to, or amendment of, such section.
Without limiting the generality of the foregoing, such remedies may include, to
the extent permitted by applicable law, (i) retention of the Pledged Capital
Securities or other Collateral in full satisfaction of the Holders obligations
under the Purchase Contracts or (ii) sale of the Pledged Capital Securities or
other Collateral in one or more public or private sales.
(b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments to the Company on account of the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio or on account of principal payments of any Pledged
Treasury Securities as provided in Section 3 hereof in satisfaction of the
obligations of the Holder of the Securities of which such Pledged Treasury
Securities, or the appropriate Applicable Ownership Interest (as specified in
clause (A) of the definition of such term) of the Treasury Portfolio, as
applicable, is a part under the related Purchase Contracts, the inability to
make such payments shall constitute an event of default hereunder and the
Collateral Agent shall have and may exercise, with reference to such Pledged
Treasury Securities, or such appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as applicable, and such obligations of such Holder, any and all of
the rights and remedies available to a secured party under the Code and the
TRADES Regulations after default by a debtor, and as otherwise granted herein or
under any other law.
(c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of (i) the stated liquidated
amount of or, cash distributions on, the Pledged Capital Securities, (ii) the
principal amount of the Pledged Treasury Securities, or (iii) the appropriate
Applicable Ownership Interest (as specified in clause (A) of the definition of
such term) of the Treasury Portfolio, subject, in each case, to the provisions
of Section 3, and as otherwise granted herein.
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(d) The Purchase Contract Agent, individually and as attorney-in-fact for
each Holder of Securities, in the event such Holder becomes the Holder of a
Growth PRIDES, agrees that, from time to time, upon the written request of the
Collateral Agent, the Purchase Contract Agent or such Holder shall execute and
deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order to maintain the Pledge, and the
perfection and priority thereof, and to confirm the rights of the Collateral
Agent hereunder. The Purchase Contract Agent shall have no liability to any
Holder for executing any documents or taking any such acts requested by the
Collateral Agent hereunder, except for liability for its own negligent act, its
own negligent failure to act or its own willful misconduct.
Section 6.2. Distribution of the Debentures; Tax Event Redemption. Upon
the occurrence of an Investment Company Event or a liquidation of the Trust, a
principal amount of the Debentures constituting the assets of the Trust and
underlying the Capital Securities equal to the aggregate stated liquidation
amount of the Pledged Capital Securities shall be delivered to the Collateral
Agent in exchange for the Pledged Capital Securities. In the event the
Collateral Agent receives such Debentures in respect of Pledged Capital
Securities upon the occurrence of an Investment Company Event or liquidation of
the Trust, the Collateral Agent shall Transfer the Debentures to the Collateral
Account in the manner specified herein (including, without limitation, physical
delivery thereof as set forth in Section 2.1) for Pledged Capital Securities to
secure the obligations of the Holders of Income PRIDES to purchase the Company's
Common Stock under the related Purchase Contracts. Thereafter, the Collateral
Agent shall have such security interests, rights and obligations with respect to
the Debentures as it had in respect of the Pledged Capital Securities as
provided in Sections 2, 3, 4, 5 and 6 hereof, and any reference herein to the
Pledged Capital Securities shall be deemed to be referring to such Debentures
and any references to distributions on the Pledged Capital Securities shall be
deemed to be referring to interest on such Debentures.
Upon the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Redemption Price payable on the Tax Event
Redemption Date with respect to the Applicable Principal Amount of Debentures
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shall be delivered to the Collateral Agent by the Institutional Trustee on or
prior to 12:00 p.m., New York City time, by check or wire transfer in
immediately available funds at such place and at such account as may be
designated by the Collateral Agent in exchange for the Pledged Capital
Securities or Pledged Debentures, as the case may be. In the event the
Collateral Agent receives such Redemption Price, the Collateral Agent will, at
the written direction of the Company, apply an amount equal to the Redemption
Amount of such Redemption Price to purchase from the Quotation Agent the
Treasury Portfolio and promptly remit the remaining portion of such Redemption
Price to the Purchase Contract Agent for payment to the Holders of Income
PRIDES. The Collateral Agent shall Transfer the Treasury Portfolio to the
Collateral Account in the manner specified herein for Pledged Capital Securities
to secure the obligation of all Holders of Income PRIDES to purchase Common
Stock of the Company under the Purchase Contracts constituting a part of such
Income PRIDES, in substitution for the Pledged Capital Securities. Thereafter
the Collateral Agent shall have such security interests, rights and obligations
with respect to the Treasury Portfolio as it had in respect of the Pledged
Capital Securities or Pledged Debentures, as the case may be, as provided in
Sections 2, 3, 4, 5 and 6, and any reference herein to the Pledged Capital
Securities or the Debentures shall be deemed to be reference to such Treasury
Portfolio, and any reference herein to distributions on the Pledged Capital
Securities or interest on the Debentures shall be deemed to be a reference to
distributions on such Treasury Portfolio.
Section 6.3. Substitutions. Whenever a Holder has the right to substitute
Treasury Securities, Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, for Collateral held by
the Collateral Agent, such substitution shall not constitute a novation of the
security interest created hereby.
Section 7. Representations and Warranties; Covenants.
Section 7.1. Representations and Warranties. The Holders from time to
time, acting through the Purchase Contract Agent as their attorney-in-fact (it
being understood that the Purchase Contract Agent shall not be
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liable for any representation or warranty made by or on behalf of a Holder),
hereby represent and warrant to the Collateral Agent, which representations and
warranties shall be deemed repeated on each day a Holder Transfers Collateral
that:
(a) such Holder has the power to grant a security interest in and
lien on the Collateral;
(b) such Holder is the sole beneficial owner of the Collateral
and, in the case of Collateral delivered in physical form, is
the sole holder of such Collateral and is the sole beneficial
owner of, or has the right to Transfer, the Collateral it
Transfers to the Collateral Agent, free and clear of any
security interest, lien, encumbrance, call, liability to pay
money or other restriction other than the security interest
and lien granted under Section 2 hereof;
(c) upon the Transfer of the Collateral to the Collateral Account,
the Collateral Agent, for the benefit of the Company, will
have a valid and perfected first priority security interest
therein (assuming that any central clearing operation or any
Intermediary or other entity not within the control of the
Holder involved in the Transfer of the Collateral, including
the Collateral Agent, gives the notices and takes the action
required of it hereunder and under applicable law for
perfection of that interest and assuming the establishment and
exercise of control pursuant to Section 2.2 hereof); and
(d) the execution and performance by the Holder of its obligations
under this Agreement will not result in the creation of any
security interest, lien or other encumbrance on the Collateral
other than the security interest and lien granted under
Section 2 hereof or violate any provision of any existing law
or regula-
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tion applicable to it or of any mortgage, charge, pledge,
indenture, contract or undertaking to which it is a party or
which is binding on it or any of its assets.
Section 7.2. Covenants. The Holders from time to time, acting through the
Purchase Contract Agent as their attorney-in-fact (it being understood that the
Purchase Contract Agent shall not be liable for any covenant made by or on
behalf of a Holder), hereby covenant to the Collateral Agent that for so long as
the Collateral remains subject to the Pledge:
(a) neither the Purchase Contract Agent nor such Holders will
create or purport to create or allow to subsist any mortgage,
charge, lien, pledge or any other security interest
whatsoever over the Collateral or any part of it other than
pursuant to this Agreement; and
(b) neither the Purchase Contract Agent nor such Holders will sell
or otherwise dispose (or attempt to dispose) of the Collateral
or any part of it except for the beneficial interest therein,
subject to the pledge hereunder, transferred in connection
with the Transfer of the Securities.
Section 8. The Collateral Agent. It is hereby agreed as follows:
Section 8.1. Appointment, Powers and Immunities. The Collateral Agent
shall act as Agent for the Company hereunder with such powers as are
specifically vested in the Collateral Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto. Each of
the Collateral Agent, the Custodial Agent and the Securities Intermediary: (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and no implied covenants or obligations shall be inferred from
this Agreement against any of them, nor shall any of them be bound by the
provisions of any agreement beyond the specific terms hereof; (b) shall not be
responsible for any recitals contained
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in this Agreement, or in any certificate or other document referred to or
provided for in, or received by it under, this Agreement, the Securities or the
Purchase Contract Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement (other than as
against the Collateral Agent), the Securities or the Purchase Contract Agreement
or any other document referred to or provided for herein or therein or for any
failure by the Company or any other Person (except the Collateral Agent, the
Custodial Agent or the Securities Intermediary, as the case may be) to perform
any of its obligations hereunder or thereunder or for the perfection, priority
or, except as expressly required hereby, maintenance of any security interest
created hereunder; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder (except in the case of the
Collateral Agent, pursuant to directions furnished under Section 8.2 hereof,
subject to Section 8.6 hereof); (d) shall not be responsible for any action
taken or omitted to be taken by it hereunder or under any other document or
instrument referred to or provided for herein or in connection herewith or
therewith, except for its own negligence, bad faith or willful misconduct; (e)
shall not be required to advise any party as to selling or retaining, or taking
or refraining from taking any action with respect to, the Securities or other
property deposited hereunder; and (f) shall not be responsible for the acts or
omissions of any clearing corporation with whom collateral is deposited. Subject
to the foregoing, during the term of this Agreement, the Collateral Agent shall
take all reasonable action in connection with the safekeeping and preservation
of the Collateral hereunder.
No provision of this Agreement shall require the Collateral Agent, the
Custodial Agent or the Securities Intermediary to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder. In no event shall the Collateral Agent, the Custodial Agent
or the Securities Intermediary be liable for any amount in excess of the Value
of the Collateral. Notwithstanding the foregoing, the Collateral Agent, the
Custodial Agent, the Purchase Contract Agent and Securities Intermediary, each
in its individual capacity, hereby waive any right of setoff, bankers lien,
liens or perfection rights as securities
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intermediary or any counterclaim with respect to any of the Collateral.
Section 8.2. Instructions of the Company. The Company shall have the
right, by one or more instruments in writing executed and delivered to the
Collateral Agent, the Custodial Agent or the Securities Intermediary, as the
case may be, to direct the time, method and place of conducting any proceeding
for the realization of any right or remedy available to the Collateral Agent, or
of exercising any power conferred on the Collateral Agent, the Custodial Agent
or the Securities Intermediary, as the case may be, or to direct the taking or
refraining from taking of any action authorized by this Agreement; provided,
however, that (i) such direction shall not conflict with the provisions of any
law or of this Agreement and (ii) the Collateral Agent, the Custodial Agent and
the Securities Intermediary shall be adequately indemnified as provided herein.
Nothing in this Section 8.2 shall impair the right of the Collateral Agent in
its discretion to take any action or omit to take any action which it deems
proper and which is not inconsistent with such direction.
Section 8.3. Reliance. Each of the Securities Intermediary, the Custodial
Agent and the Collateral Agent shall be entitled conclusively to rely upon any
certification, order, judgment, opinion, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex or
facsimile) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons (without being required to
determine the correctness of any fact stated therein), and upon advice and
statements of legal counsel and other experts selected by the Collateral Agent,
the Custodial Agent or the Securities Intermediary, as the case may be. As to
any matters not expressly provided for by this Agreement, the Collateral Agent,
the Custodial Agent and the Securities Intermediary shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions given by the Company in accordance with this Agreement.
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Section 8.4. Rights in Other Capacities. The Collateral Agent, the
Custodial Agent and the Securities Intermediary and their affiliates may
(without having to account therefor to the Company) accept deposits from, lend
money to, make their investments in and generally engage in any kind of banking,
trust or other business with the Purchase Contract Agent, any Holder of
Securities and any holder of separate Capital Securities (and any of their
respective subsidiaries or affiliates) as if it were not acting as the
Collateral Agent, the Custodial Agent or the Securities Intermediary, as the
case may be, and the Collateral Agent, the Custodial Agent and the Securities
Intermediary and their affiliates may accept fees and other consideration from
the Purchase Contract Agent, any Holder of Securities or any holder of separate
Capital Securities without having to account for the same to the Company;
provided that each of the Securities Intermediary, the Custodial Agent and the
Collateral Agent covenants and agrees with the Company that it shall not accept,
receive or permit there to be created in favor of itself and shall take no
affirmative action to permit there to be created in favor of any other Person,
any security interest, lien or other encumbrance of any kind in or upon the
Collateral and the Collateral shall be segregated or the books and records of
the Collateral Agent and not commingled with any other assets of any such
Person.
Section 8.5. Non-Reliance. None of the Securities Intermediary, the
Custodial Agent or the Collateral Agent shall be required to keep itself
informed as to the performance or observance by the Purchase Contract Agent or
any Holder of Securities of this Agreement, the Purchase Contract Agreement,
the Securities or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Purchase Contract Agent or
any Holder of Securities. The Collateral Agent, the Custodial Agent and the
Securities Intermediary shall not have any duty or responsibility to provide
the Company or the Remarketing Agent with any credit or other information
concerning the affairs, financial condition or business of the Purchase Contract
Agent, any Holder of Securities or any holder of separate Capital Securities (or
any of their respective subsidiaries or affiliates) that may come into the
possession of the Collateral Agent, the Custodial Agent or the Securities
Intermediary or any of their respective affiliates.
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Section 8.6. Compensation and Indemnity. The Company agrees: (i) to pay
each of the Collateral Agent and the Custodial Agent from time to time such
compensation as shall be agreed in writing between the Company and the
Collateral Agent or the Custodial Agent, as the case may be, for all services
rendered by each of them hereunder and (ii) to indemnify the Collateral Agent,
the Custodial Agent and the Securities Intermediary for, and to hold each of
them harmless from and against, any loss, liability or reasonable out-of-pocket
expense incurred without negligence, willful misconduct or bad faith on its
part, arising out of or in connection with the acceptance or administration of
its powers and duties under this Agreement, including the reasonable
out-of-pocket costs and expenses (including reasonable fees and expenses of
counsel) of defending itself against any claim or liability in connection with
the exercise or performance of such powers and duties. The Collateral Agent,
the Custodial Agent and the Securities Intermediary shall each promptly notify
the Company of any third party claim which may give rise to the indemnity
hereunder and give the Company the opportunity to participate in the defense of
such claim with counsel reasonably satisfactory to the indemnified party, and no
such claim shall be settled without the written consent of the Company, which
consent shall not be unreasonably withheld.
Section 8.7. Failure to Act. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by or
among the parties hereto or any other Person with respect to any funds or
property deposited hereunder, the Collateral Agent and the Custodial Agent shall
be entitled, after prompt notice to the Company and the Purchase Contract Agent,
at its sole option, to refuse to comply with any and all claims, demands or
instructions with respect to such property or funds so long as such dispute or
conflict shall continue, and neither the Collateral Agent nor the Custodial
Agent shall be or become liable in any way to any of the parties hereto for its
failure or refusal to comply with such conflicting claims, demands or
instructions. The Collateral Agent and the Custodial Agent shall be entitled to
refuse to act until either (i) such conflicting or adverse claims or demands
shall have been finally determined by a court of competent jurisdiction or
settled by agreement between the conflicting parties as evidenced in a writing,
satisfactory to the
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Collateral Agent or the Custodial Agent, as the case may be, or (ii) the
Collateral Agent or the Custodial Agent, as the case may be, shall have received
security or an indemnity reasonably satisfactory to the Collateral Agent or the
Custodial Agent, as the case may be, sufficient to save the Collateral Agent or
the Custodial Agent, as the case may be, harmless from and against any and all
loss, liability or reasonable out-of-pocket expense which the Collateral Agent
or the Custodial Agent, as the case may be, may incur by reason of its acting
without bad faith, willful misconduct or negligence. The Collateral Agent or the
Custodial Agent may in addition elect to commence an interpleader action or seek
other judicial relief or orders as the Collateral Agent or the Custodial Agent,
as the case may be, may deem necessary. Notwithstanding anything contained
herein to the contrary, neither the Collateral Agent nor the Custodial Agent
shall be required to take any action that is in its opinion contrary to law or
to the terms of this Agreement, or which would in its opinion subject it or any
of its officers, employees or directors to liability.
Section 8.8. Resignation. Subject to the appointment and acceptance of a
successor Collateral Agent or Custodial Agent as provided below, (a) the
Collateral Agent and the Custodial Agent may resign at any time by giving notice
thereof to the Company and the Purchase Contract Agent as attorney-in-fact for
the Holders of Securities, (b) the Collateral Agent and the Custodial Agent may
be removed at any time by the Company and (c) if the Collateral Agent or the
Custodial Agent fails to perform any of its material obligations hereunder in
any material respect for a period of not less than 20 days after receiving
written notice of such failure by the Purchase Contract Agent and such failure
shall be continuing, the Collateral Agent or the Custodial Agent may be removed
by the Purchase Contract Agent. The Purchase Contract Agent shall promptly
notify the Company of any removal of the Collateral Agent pursuant to clause (c)
of the immediately preceding sentence. Upon any such resignation or removal,
the Company shall have the right to appoint a successor Collateral Agent or
Custodial Agent, as the case may be. If no successor Collateral Agent or
Custodial Agent, as the case may be, shall have been so appointed and shall have
accepted such appointment within 30 days after the retiring Collateral Agent's
or Custodial Agent's giving of notice of resignation or such
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removal, then the retiring Collateral Agent or Custodial Agent, as the case may
be, may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent or Custodial Agent, as the case may be. Each of the
Collateral Agent and the Custodial Agent shall be a bank which has an office in
New York, New York with a combined capital and surplus of at least $75,000,000.
Upon the acceptance of any appointment as Collateral Agent or Custodial Agent,
as the case may be, hereunder by a successor Collateral Agent or Custodial
Agent, as the case may be, such successor shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent or Custodial Agent, as the case may be, and the retiring
Collateral Agent or Custodial Agent, as the case may be, shall take all
appropriate action to transfer any money and property held by it hereunder
(including the Collateral) to such successor. The retiring Collateral Agent or
Custodial Agent shall, upon such succession, be discharged from its duties and
obligations as Collateral Agent or Custodial Agent hereunder. After any retiring
Collateral Agent's or Custodial Agent's resignation hereunder as Collateral
Agent or Custodial Agent, the provisions of this Section 8 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Collateral Agent or Custodial Agent. Any
resignation or removal of the Collateral Agent hereunder shall be deemed for all
purposes of this Agreement as the simultaneous resignation or removal of the
Custodial Agent and the Securities Intermediary.
Section 8.9. Right to Appoint Agent or Advisor. The Collateral Agent shall
have the right to appoint agents or advisors in connection with any of its
duties hereunder, and the Collateral Agent shall not be liable for any action
taken or omitted by, or in reliance upon the advice of, such agents or advisors
selected in good faith. The appointment of agents pursuant to this Section 8.9
shall be subject to prior consent of the Company, which consent shall not be
unreasonably withheld.
Section 8.10. Survival. The provisions of this Section 8 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent or the Custodial Agent.
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Section 8.11. Exculpation. Anything in this Agreement to the contrary
notwithstanding, in no event shall any of the Collateral Agent, the Custodial
Agent or the Securities Intermediary or their officers, employees or agents be
liable under this Agreement to any third party for indirect, special, punitive,
or consequential loss or damage of any kind whatsoever, including lost profits,
whether or not the likelihood of such loss or damage was known to the Collateral
Agent, the Custodial Agent or the Securities Intermediary, or any of them,
incurred without any act or deed that is found to be attributable to gross
negligence or willful misconduct on the part of the Collateral Agent, the
Custodial Agent or the Securities Intermediary.
Section 9. Amendment.
Section 9.1. Amendment Without Consent of Holders. Without the consent of
any Holders or the holders of any Separate Capital Securities, the Company, the
Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Purchase Contract Agent, at any time and from time to time, may amend this
Agreement, in form satisfactory to the Company, the Collateral Agent, the
Custodial Agent, the Securities Intermediary and the Purchase Contract Agent,
for any of the following purposes:
(1) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the covenants of the Company;
or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company so long as such covenants or such surrender do not adversely
affect the validity, perfection or priority of the security interests
granted or created hereunder; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Collateral Agent, Securities Intermediary or
Purchase Contract Agent; or
(4) to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other such provisions herein,
or to
37
<PAGE> 41
make any other provisions with respect to such matters or questions
arising under this Agreement, provided such action shall not adversely
affect the interests of the Holders.
Section 9.2. Amendment with Consent of Holders. With the consent of the
Holders of not less than a majority of the Purchase Contracts at the time
outstanding, by Act of said Holders delivered to the Company, the Purchase
Contract Agent or the Collateral Agent, as the case may be, the Company, when
duly authorized, the Purchase Contract Agent, the Collateral Agent, the
Custodial Agent and the Securities Intermediary may amend this Agreement for the
purpose of modifying in any manner the provisions of this Agreement or the
rights of the Holders in respect of the Securities; provided, however, that no
such supplemental agreement shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the amount or type of Collateral underlying a Security
(except for the rights of holders of Income PRIDES to substitute the
Treasury Securities for the Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as the case may
be, or the rights of Holders of Growth PRIDES to substitute Capital
Securities or the appropriate Applicable Ownership Interest of the
Treasury Portfolio, as applicable, for the Pledged Treasury Securities),
impair the right of the Holder of any Security to receive distributions on
the underlying Collateral or otherwise adversely affect the Holder's
rights in or to such Collateral; or
(2) otherwise effect any action that would require the consent of
the Holder of each Outstanding Security affected thereby pursuant to the
Purchase Contract Agreement if such action were effected by an agreement
supplemental thereto;
(3) reduce the amount payable or distributable to Holders upon the
remarketing of Capital Securities or Debentures; or
(4) reduce the percentage of Purchase Contracts the consent of whose
Holders is required for any such amendment.
38
<PAGE> 42
It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed amendment, but it shall be sufficient if
such Act shall approve the substance thereof.
Section 9.3. Execution of Amendments. In executing any amendment permitted
by this Section, the Collateral Agent, the Custodial Agent, the Securities
Intermediary and the Purchase Contract Agent shall be entitled to receive and
(subject to Section 8.1 hereof, with respect to the Collateral Agent, and
Section 7.1 of the Purchase Contract Agreement, with respect to the Purchase
Contract Agent) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement and that all conditions precedent, if any, to the execution and
delivery of such amendment have been satisfied. All amendments must be in
writing, signed by all parties to this Agreement.
Section 9.4. Effect of Amendments. Upon the execution of any amendment
under this Section 9, this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for all purposes; and
every Holder of Certificates theretofore or thereafter authenticated, executed
on behalf of the Holders and delivered under the Purchase Contract Agreement
shall be bound thereby.
Section 9.5. Reference to Amendments. Security Certificates authenticated,
executed on behalf of the Holders and delivered after the execution of any
amendment pursuant to this Section may, and shall if required by the Collateral
Agent or the Purchase Contract Agent, bear a notation in form approved by the
Purchase Contract Agent and the Collateral Agent as to any matter provided for
in such amendment. If the Company shall so determine, new Security Certificates
so modified as to conform, in the opinion of the Collateral Agent, the Purchase
Contract Agent and the Company, to any such amendment may be prepared and
executed by the Company and authenticated, executed on behalf of the Holders and
delivered by the Purchase Contract Agent in accordance with the Purchase
Contract Agreement and without charge or expense to Holders in exchange for
Outstanding Security Certificates.
39
<PAGE> 43
Section 10. Miscellaneous.
Section 10.1. No Waiver. To the extent permitted by law, no failure on the
part of any party hereto or any of its agents to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by any party hereto or any of its agents of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. To the extent permitted by law, the remedies
herein are cumulative and are not exclusive of any remedies provided by law.
Section 10.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Without limiting
the foregoing, the above choice of law is expressly agreed to by the Securities
Intermediary, the Collateral Agent and the Holders from time to time acting
through the Purchase Contract Agent, as their attorney-in-fact, in connection
with the establishment and maintenance of the Collateral Account. The Company,
the Collateral Agent and the Holders from time to time of the Securities, acting
through the Purchase Contract Agent as their attorney-in-fact, hereby submit to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York state court sitting in New
York City for the purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. The Company, the
Collateral Agent and the Holders from time to time of the Securities, acting
through the Purchase Contract Agent as their attorney-in-fact, irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum, as well as to trial by jury.
Section 10.3. Notices. All notices, requests, consents and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by
40
<PAGE> 44
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or, as to any party, at
such other address as shall be designated by such party in a notice to the other
parties. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telecopier or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
Section 10.4. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary
and the Purchase Contract Agent, and the Holders from time to time of the
Securities, by their acceptance of the same, shall be deemed to have agreed to
be bound by the provisions hereof and to have ratified the agreements of, and
the grant of the Pledge hereunder by, the Purchase Contract Agent.
Section 10.5. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 10.6. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be construed in order to carry out the intentions of the
parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 10.7. Expenses, etc. The Company agrees to reimburse the
Collateral Agent and the Custodial Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Collateral Agent and the Custodial Agent (including,
without limitation, the reasonable fees and expenses of counsel to the
Collateral Agent and the Custodial Agent), in connection with (i) the
negotiation, preparation, execution and delivery or performance of this
41
<PAGE> 45
Agreement and (ii) any modification, supplement or waiver of any of the terms of
this Agreement; (b) all reasonable costs and expenses of the Collateral Agent
(including, without limitation, reasonable fees and expenses of counsel) in
connection with (i) any enforcement or proceedings resulting or incurred in
connection with causing any Holder of Securities to satisfy its obligations
under the Purchase Contracts forming a part of the Securities and (ii) the
enforcement of this Section 10.7; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any other document referred to
herein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated hereby.
Section 10.8. Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Holders from
time to time hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the
Purchase Contracts or the Securities or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or any
other term of, or any increase in the amount of, all or any of the
obligations of Holders of Securities under the related Purchase Contracts,
or any other amendment or waiver of any term of, or any consent to any
departure from any requirement of, the Purchase Contract Agreement or any
Purchase Contract or any other agreement or instrument relating thereto;
or
(c) any other circumstance which might otherwise constitute a
defense available to, or discharge of, a borrower, a guarantor or a
pledgor.
42
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KAUFMAN AND BROAD HOME
CORPORATION
By: /s/ Dennis Welsch
--------------------------------------------
Name: Dennis Welsch
Title: Vice President and Treasurer
Address for Notices:
KAUFMAN AND BROAD HOME
CORPORATION
10990 Wilshire Blvd.
Los Angeles, CA 90024
Attention: Chief Financial Officer
Telecopy: (310)231-4222
THE FIRST NATIONAL BANK OF CHICAGO, as Purchase
Contract Agent and as attorney-in-fact of the
Holders from time to time of the Securities
By: /s/ Mark J. Frye
--------------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
Address for Notices:
The First National Bank of Chicago
One First National Plaza,
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust
Services Division
Telecopy: (312) 407-1708
<PAGE> 47
The Bank of New York,
as Collateral Agent, Custodial
Agent and as Securities Intermediary
By: /s/ Betty A. Cocozza
--------------------------------------------
Name: Betty A. Cocozza
Title: AVP
Address for Notices:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Corporate Trust Administration
Telecopy: (212) 815-7157
<PAGE> 48
EXHIBIT A
INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention:
Re: FELINE PRIDES of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
We hereby notify you in accordance with Section [4.1] [4.2] of the
Pledge Agreement, dated as of, 1998, (the "Pledge Agreement") among the
Company, your selves, as Collateral Agent, Custodial Agent and Securities
Intermediary and ourselves, as Purchase Contract Agent and as attorney-in-fact
for the holders of [Income PRIDES] [Growth PRIDES] from time to time, that the
holder of the Securities listed below (the "Holder") has elected to substitute
[$_____ aggregate principal amount of Treasury Securities] [$_______stated
liquidation amount of Capital Securities or the appropriate Applicable Ownership
Interest of the Treasury Portfolio, as the case may be,] in exchange for an
equal Value of [Pledged Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be,] [Pledged
Treasury Securities] held by you in accordance with the Pledge Agreement and
has delivered to us a notice stating that the Holder has Transferred [Treasury
Securities] [Capital Securities or the appropriate Applicable Ownership Interest
of the Treasury Portfolio, as the case may be,] to you, as Collateral Agent. We
hereby instruct you, upon receipt of such [Pledged Treasury Securities]
[Pledged Capital Securities or the appropriate Applicable Ownership Interest of
the Treasury Portfolio, as the case may be,], and upon the payment by such
Holder of any applicable fees, to release the [Capital Securities or the
appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case
may be,] [Treasury Securities] related to such [Income PRIDES] [Growth PRIDES]
<PAGE> 49
to us in accordance with the Holder's instructions. Capitalized terms used
herein but not defined shall have the meaning set forth in the Pledge Agreement.
Date:_____________ ___________________________
By:______________________
Name:
Title:
Signature Guarantee:_____________
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Capital Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be,] for the
[Pledged Capital Securities or the appropriate Applicable Ownership Interest of
the Treasury Portfolio, as the case may be,] [Pledged Treasury Securities]:
- --------------------------- ------------------------------
Name Social Security or other Tax
payer Identification Number,
if any
- ---------------------------
Address
- ---------------------------
- ---------------------------
<PAGE> 50
EXHIBIT B
INSTRUCTION TO PURCHASE CONTRACT AGENT
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: FELINE PRIDES of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
The undersigned Holder hereby notifies you that it has delivered to
The Bank of New York, as Collateral Agent, [$_______ aggregate principal amount
of Treasury Securities] [$ aggregate stated liquidation amount of Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, the case may be,] in exchange for an equal Value of [Pledged Capital
Securities or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be,] [Pledged Treasury Securities] held by the
Collateral Agent, in accordance with Section [4.1], [4.2] of the Pledge
Agreement, dated ______, 1998 (the "Pledge Agreement"), between you, the Company
and the Collateral Agent. The undersigned Holder has paid the Collateral Agent
all applicable fees relating to such exchange. The undersigned Holder hereby
instructs you to instruct the Collateral Agent to release to you on behalf of
the undersigned Holder the [Pledged Capital Securities or the appropriate
Applicable Ownership Interest of the Treasury Portfolio] [Pledged Treasury
Securities] related to such [Income PRIDES] [Growth PRIDES]. Capitalized terms
used herein but not defined shall have the meaning set forth in the Pledge
Agreement.
Dated:_____________ _________________________
Signature
Signature Guarantee: _______________________
<PAGE> 51
Please print name and address of Registered Holder:
- ------------------------- -------------------------
Name Social Security or other
Taxpayer Identification
- ------------------------- Number, if any
Address
- -------------------------
- -------------------------
- -------------------------
<PAGE> 52
EXHIBIT C
INSTRUCTION TO CUSTODIAL AGENT REGARDING REMARKETING
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention:
Re: Capital Securities of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
The undersigned hereby notifies you in accordance with Section
4.6(c) of the Pledge Agreement, dated as of, 1998 (the "Pledge Agreement"),
among the Company, yourselves, as Collateral Agent, Securities Intermediary and
Custodial Agent, and The First National Bank of Chicago, as Purchase Contract
Agent and as attorney-in-fact for the Holders of Income PRIDES and Growth PRIDES
from time to time, that the undersigned elects to deliver $ stated liquidation
amount of Capital Securities for delivery to the Remarketing Agent on the fourth
Business Day immediately preceding the Purchase Contract Settlement Date for
remarketing pursuant to Section 4.6(c) of the Pledge Agreement. The undersigned
will, upon request of the Remarketing Agent, execute and deliver any additional
documents deemed by the Remarketing Agent or by the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Capital
Securities tendered hereby.
The undersigned hereby instructs you, upon receipt of the Proceeds
of such remarketing from the Remarketing Agent to deliver such Proceeds to the
undersigned in accordance with the instructions indicated herein under "A.
Payment Instructions". The undersigned hereby instructs you, in the event of
Failed Remarketing, upon receipt of the Capital Securities tendered herewith
from the Remarketing Agent, to be delivered to the person(s) and the address(es)
indicated herein under "B. Delivery Instructions."
With this notice, the undersigned hereby (i) represents and warrants
that the undersigned has full power and authority to tender, sell, assign and
transfer the Capital Securities tendered hereby and that the undersigned is the
record owner of any Capital Securities tendered herewith in physical form or a
participant in The Depositary Trust Company ("DTC") and the beneficial owner of
any Capi-
<PAGE> 53
tal Securities tendered herewith by book-entry transfer to your account
at DTC and (ii) agrees to be bound by the terms and conditions of Section 4.6(c)
of the Pledge Agreement. Capitalized terms used herein but not defined shall
have the meaning set forth in the Pledge Agreement.
Date:_____________ ________________________________
By: ____________________________
Name:
Title:
Signature Guarantee: ___________
Please print name and address:
- ----------------------- --------------------------------------
Name Social Security or other Tax
payer Identification Number,
if any
- -----------------------
Address
- -----------------------
- -----------------------
- -----------------------
A. PAYMENT INSTRUCTIONS
Proceeds of the remarketing should be paid by check in the name of the person(s)
set forth be low and mailed to the address set forth below.
Name(s) ___________________________________
(Please Print)
Address ___________________________________
(Please Print)
- ----------------------------------------------
- ----------------------------------------------
(Zip Code)
- ----------------------------------------------
(Tax Identification or Social Security Number)
B. DELIVERY INSTRUCTIONS
In the event of a Failed Remarketing, Capital Securities which are in physical
form should be delivered to the person(s) set forth below and mailed to the
address set forth below.
Name(s) ____________________________________
(Please Print)
Address ____________________________________
(Please Print)
- -----------------------------------------------
- -----------------------------------------------
(Zip Code)
- -----------------------------------------------
(Tax Identification or Social Security Number)
In the event of a Failed Remarketing, Capital Securities which are in book-entry
form should be credited to the account at The Depositary Trust Company set forth
below.
-------------------
DTC Account Number
Name of Account Party: ______________
<PAGE> 54
EXHIBIT D
INSTRUCTION TO CUSTODIAL AGENT REGARDING
WITHDRAWAL FROM REMARKETING
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention:
Re: Capital Securities of Kaufman and Broad Home Corporation (the
"Company"), and KBHC Financing I
The undersigned hereby notifies you in accordance with Section
4.6(c) of the Pledge Agreement, dated as of, 1998 (the "Pledge Agreement")
among the Company, yourselves, as Collateral Agent, Securities Intermediary and
Custodial Agent and The First National Bank of Chicago, as Purchase Contract
Agent and as attorney-in-fact for the Holders of Income PRIDES and Growth PRIDES
from time to time, that the undersigned elects to withdraw the $_____ aggregate
stated liquidation amount of Capital Securities delivered to the Custodial Agent
on, 2001 for remarketing pursuant to Section 4.6(c) of the Pledge Agreement.
The undersigned hereby instructs you to return such Capital Securities to the
undersigned in accordance with the undersigned's instructions. With this notice,
the Undersigned hereby agrees to be bound by the terms and conditions of
Section 4.6(c) of the Pledge Agreement. Capitalized terms used herein but not
defined shall have the meaning set forth in the Pledge Agreement.
Date:_____________ ________________________________________
By: ____________________________________
Name:
Title:
Signature Guarantee: ___________________
<PAGE> 55
Please print name and address:
- ------------------------- -----------------------------------------
Name Social Security or other Tax
payer Identification Number,
if any
- -------------------------
Address
- -------------------------
- -------------------------
- -------------------------
A. DELIVERY INSTRUCTIONS
In the event of a Failed Remarketing, Capital Securities which are in physical
form should be delivered to the person(s) set forth below and mailed to the
address set forth below.
Name(s) ___________________________________
(Please Print)
Address ___________________________________
(Please Print)
- ----------------------------------------------
- ----------------------------------------------
(Zip Code)
- ----------------------------------------------
(Tax Identification or Social Security Number)
In the event of a Failed Remarketing, Capital Securities which are in
book-entry form should be credited to the account at The Depositary Trust
Company set forth below.
-------------------
DTC Account Number
Name of Account Party: ______________
<PAGE> 1
Exhibit 4.17
REMARKETING AGREEMENT
REMARKETING AGREEMENT, dated as of July 7, 1998 (the "Agreement")
by and between Kaufman and Broad Home Corporation, a Delaware corporation (the
"Company"), KBHC Financing I, a Delaware statutory business trust (the "Trust"),
The First National Bank of Chicago, a national banking association, not
individually but solely as Purchase Contract Agent (the "Purchase Contract
Agent") and as attorney-in-fact of the holders of Purchase Contracts (as defined
in the Purchase Contract Agreement (as defined herein)), and Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Remarketing
Agent").
WITNESSETH:
WHEREAS, the Company will issue $189,750,000 aggregate Stated Amount
of its FELINE PRIDES (the "FELINE PRIDES") under the Purchase Contract
Agreement, dated as of July 7, 1998, by and between the Purchase Contract Agent
and the Company (the "Purchase Contract Agreement"); and
WHEREAS, the Trust will issue concurrently in connection with the
issuance of the FELINE PRIDES 8% Capital Securities (the "Capital Securities")
in an aggregate stated liquidation amount of $189,750,000 under the Amended and
Restated Declaration of Trust, dated as of July 7, 1998, by and among the
Company, the Regular Trustees, the Delaware Trustee and the Institutional
Trustee (the "Declaration"); and
WHEREAS, the FELINE PRIDES will initially consist of 17,975,000
units referred to as "Income PRIDES" and 1,000,000 units referred to as "Growth
PRIDES."
WHEREAS, the sole assets of the Trust, $195,618,560 aggregate
principal amount of 8% Debentures due August 16, 2003 (the "Debentures") of the
Company, will be purchased by the Trust from the Company with the proceeds of
the sale of the Capital Securities and the proceeds of the sale of the common
securities of the Trust (the "Common Securities" and, together with the Capital
Securities, the "Trust Securities"); and
WHEREAS, the Capital Securities forming a part of the Income PRIDES
(or upon a dissolution of the Trust and the distribution of Debentures in
respect of such Income PRIDES as described in the Declaration, such Debentures)
will be pledged pursuant to the Pledge Agreement (the "Pledge Agreement"), dated
as of July 7, 1998, by and among the Company, The Bank of New York, as
collateral agent (the "Collateral Agent") and the Purchase Contract Agent, to
secure an Income PRIDES holder's obligations under the related Purchase
Contract on the Purchase Contract Settlement Date; and
<PAGE> 2
WHEREAS, the Capital Securities or the Debentures, as the case may
be, of such Capital Security or Debenture holders electing to have their Capital
Securities or Debentures remarketed, or of such Income PRIDES holders who have
elected not to settle the Purchase Contracts related to their Income PRIDES from
the proceeds of a Cash Settlement and who have not early settled their Purchase
Contracts, will be remarketed by the Remarketing Agent on the third Business Day
immediately preceding the Purchase Contract Settlement Date; and
WHEREAS, the applicable distribution rate on the Capital Securities
(and, thus, the interest rate on the Debentures) or the applicable interest rate
on the Debentures, as the case may be, that remain outstanding on and after the
Purchase Contract Settlement Date will be reset on the third Business Day
immediately preceding the Purchase Contract Settlement Date, to the Reset Rate
to be determined by the Reset Agent as the rate that such Capital Securities or
the Debentures, as the case may be, should bear in order to have an approximate
market value of 100.75% of the aggregate stated liquidation amount of the
Capital Securities or the aggregate principal amount of the Debentures, as the
case may be, on the third Business Day immediately preceding the Purchase
Contract Settlement Date, provided that in the determination of such Reset Rate,
the Company may limit the Reset Spread (a component of the Reset Rate) to be no
higher than 300 basis points (3.00%) and the Company shall, if applicable, limit
the Reset Rate to the maximum rate permitted by applicable law; and
WHEREAS, the Company has requested Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to act as the Reset
Agent and as the Remarketing Agent, and as such to perform the services
described herein; and
WHEREAS, Merrill Lynch is willing to act as Reset Agent and
Remarketing Agent and as such to perform such duties on the terms and conditions
expressly set forth herein;
NOW, THEREFORE, for and in consideration of the covenants herein
made, and subject to the conditions herein set forth, the parties hereto agree
as follows:
Section 1. Definitions. Capitalized terms used and not defined in
this Agreement, in the recitals hereto or in the paragraph preceding such
recitals shall have the meanings assigned to them in the Purchase Contract
Agreement or, if not therein defined, the Declaration or, if not therein
defined, the Pledge Agreement.
Section 2. Appointment and Obligations of Remarketing Agent. (a) The
Company hereby appoints Merrill Lynch and Merrill Lynch hereby accepts such
appointment, (i) as the Reset Agent to determine in consultation with the
Company, in the manner provided for herein and in the Declaration (as in effect
on the date of this Remarketing Agreement) with respect to the Trust Securities
or the Indenture (as in effect on the date of
2
<PAGE> 3
this Remarketing Agreement) with respect to the Debentures, as the case may be,
the Reset Rate that, in the opinion of the Reset Agent, will, when applied to
the Capital Securities or, if the Debentures have been distributed in exchange
for the Capital Securities, the Debentures, will enable a Capital Security or
Debenture, as the case may be, to have an approximate market value, as of the
third Business Day preceding the Purchase Contract Settlement Date, of 100.75%
of the stated liquidation amount in the case of such Capital Security or 100.75%
of the principal amount in the case of such Debenture (provided that the
Company, by notice to the Reset Agent prior to the tenth Business Day preceding
the Purchase Contract Settlement Date, (x) may limit such Reset Rate to be no
higher than the rate on the Two-Year Benchmark Treasury plus 300 basis points
(3.00%) and (y) shall, if applicable, limit the Reset Rate so that it does not
exceed the maximum rate permitted by applicable law), and (ii) as the exclusive
Remarketing Agent (subject to the right of Merrill Lynch to appoint additional
remarketing agents hereunder as described below) to remarket the Capital
Securities or the Debentures, as the case may be, of such Capital Security or
Debenture holders electing to have their Capital Securities or Debentures
remarketed, or of such Income PRIDES holders who have not early settled the
related Purchase Contracts and have failed to notify the Purchase Contract
Agent, on or prior to the fifth Business Day immediately preceding the Purchase
Contract Settlement Date, of their intention to settle the related Purchase
Contracts through Cash Settlement, for settlement on the Purchase Contract
Settlement Date. On the third day immediately preceding the Purchase Contract
Settlement Date the distribution rate per annum on the Common Securities will
also be reset to the Reset Rate on the Capital Securities, as determined by the
Reset Agent. In connection with the remarketing contemplated hereby, the
Remarketing Agent will enter into a Supplemental Remarketing Agreement (the
"Supplemental Remarketing Agreement") with the Company, the Trust (unless the
Trust shall have been dissolved) and the Purchase Contract Agent, which shall
either be (i) substantially in the form attached hereto as Exhibit A (with such
changes as the Company and the Remarketing Agent may agree upon, it being
understood that changes may be necessary in the representations, warranties,
covenants and other provisions of the Supplemental Remarketing Agreement due to
changes in law or facts and circumstances or in the event that Merrill Lynch is
not the sole remarketing agent or in the event that Debentures rather than
Capital Securities are remarketed, and with such further changes therein as the
Remarketing Agent may reasonably request, or (ii) in such other form as the
Remarketing Agent may reasonably request, subject to the approval of the Company
(such approval not to be unreasonably withheld). Anything herein to the contrary
notwithstanding, Merrill Lynch shall not be obligated to act as Remarketing
Agent or Reset Agent hereunder unless the Supplemental Remarketing Agreement is
in form and substance reasonably satisfactory to Merrill Lynch. The Company
agrees that Merrill Lynch shall have the right, on 15 Business Days notice to
the Company, to appoint one or more additional remarketing agents so long as any
such additional remarketing agents shall be reasonably acceptable to the
Company. Upon any such appointment, the parties shall enter into an appropriate
amendment to this Agreement to reflect the addition of any such remarketing
agent.
3
<PAGE> 4
(b) Pursuant to the Supplemental Remarketing Agreement, the
Remarketing Agent, either as sole remarketing agent or as representative of a
group of remarketing agents appointed as aforesaid, will agree, subject to the
terms and conditions set forth herein and therein, to use its reasonable efforts
to remarket, on the third Business Day immediately preceding the Purchase
Contract Settlement Date, the Capital Securities or the Debentures, as the case
may be, that the Institutional Trustee or the Debenture Trustee (as such terms
are defined in the Declaration) shall have notified the Remarketing Agent have
been tendered for, or otherwise are to be included in, the Remarketing (such
remarketing being hereinafter referred to as the "Remarketing"), at a price of
approximately 100.75% of the aggregate stated liquidation amount of such
Capital Securities, plus any accrued and unpaid distributions (including any
deferred distributions) or in the case of Debentures, at a price of
approximately 100.75% of the aggregate principal amount of such Debentures, plus
any accrued and unpaid interest (including any deferred interest).
Notwithstanding the preceding sentence, the Remarketing Agent shall not remarket
any Capital Securities or Debentures, as the case may be, for a price less than
100% of the aggregate stated liquidation amount or aggregate principal amount of
such Capital Securities or Debentures, respectively, plus accrued and unpaid
distributions or accrued and unpaid interest, as the case may be. After
deducting the fee specified in Section 3 below, the proceeds of such remarketing
shall be paid to the Collateral Agent in accordance with Section 4.6 of the
Pledge Agreement and Section 5.4 of the Purchase Contract Agreement (each of
which Sections are incorporated herein by reference). The right of each holder
of Capital Securities or Debentures, as the case may be, or Income PRIDES to
have Capital Securities or Debentures, as the case may be, tendered for
remarketing shall be limited to the extent that (i) the Remarketing Agent
conducts a remarketing pursuant to the terms of this Agreement, (ii) Capital
Securities or Debentures, as the case may be, tendered have not been called for
redemption, (iii) the Remarketing Agent is able to find a purchaser or
purchasers for tendered Capital Securities or Debentures, as the case may be, at
a price of not less than 100% of the stated liquidation or principal amount
thereof, as the case may be, plus accrued and unpaid distributions or interest,
as applicable, thereon, and (iv) such purchaser or purchasers deliver the
purchase price therefor to the Remarketing Agent as and when required.
(c) It is understood and agreed that neither the Remarketing Agent
nor the Reset Agent shall have any obligation whatsoever to purchase any Capital
Securities or Debentures, whether in the Remarketing or otherwise, and shall in
no way be obligated to provide funds to make payment upon tender of Capital
Securities or Debentures for remarketing or to otherwise expend or risk their
own funds or incur or be exposed to financial liability in the performance of
their respective duties under this Agreement or the Supplemental Remarketing
Agreement, and, without limitation to the foregoing, the Remarketing Agent shall
not be deemed an underwriter of the remarketed Capital Securities or
Debentures. Neither the Trust, any Trustee nor the Sponsor shall be obligated in
any case to provide funds to make payment upon tender of Capital Securities or
Debentures for remarketing.
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Section 3. Fees. With respect to the Remarketing, the Remarketing
Agent shall retain as a remarketing fee (the "Remarketing Fee") an amount not
exceeding 50 basis points (.50%), of the aggregate stated liquidation or
principal amount, as the case may be, of the remarketed Capital Securities or
Debentures, as the case may be, from any amount received in connection with such
Remarketing in excess of the aggregate stated liquidation amount or aggregate
principal amount of such remarketed Capital Securities or Debentures plus any
accrued and unpaid distributions (including deferred distributions) or any
accrued and unpaid interest (including any deferred interest), as the case may
be. In addition, the Reset Agent shall receive from the Company a reasonable and
customary fee (the "Reset Agent Fee"); provided, however, that if the
Remarketing Agent shall also act as the Reset Agent, then the Reset Agent shall
not be entitled to receive any such Reset Agent Fee. Payment of such Reset Agent
Fee shall be made by the Company on the third Business Day immediately preceding
the Purchase Contract Settlement Date in immediately available funds or, upon
the instructions of the Reset Agent, by certified or official bank check or
checks or by wire transfer.
Section 4. Replacement and Resignation of Remarketing Agent. (a) The
Company may in its absolute discretion replace Merrill Lynch as the Remarketing
Agent and as the Reset Agent hereunder by giving notice prior to 3:00 p.m., New
York City time, on the eleventh Business Day immediately prior to the Purchase
Contract Settlement Date, provided that the Company must replace Merrill Lynch
both as Remarketing Agent and as Reset Agent unless Merrill Lynch shall
otherwise agree. Any such replacement shall become effective upon the Company's
appointment of a successor to perform the services that would otherwise be
performed hereunder by the Remarketing Agent and the Reset Agent. Upon providing
such notice, the Company shall use all reasonable efforts to appoint such a
successor and to enter into a remarketing agreement with such successor as soon
as reasonably practicable.
(b) Merrill Lynch may resign at any time and be discharged from its
duties and obligations hereunder as the Remarketing Agent and/or as the Reset
Agent by giving notice prior to 3:00 p.m., New York City time, on the eleventh
Business Day immediately prior to the Purchase Contract Settlement Date. Any
such resignation shall become effective upon the Company's appointment of a
successor to perform the services that would otherwise be performed hereunder by
the Remarketing Agent and/or the Reset Agent. Upon receiving notice from the
Remarketing Agent and/or the Reset Agent that it wishes to resign hereunder, the
Company shall appoint such a successor and enter into a remarketing agreement
with it as soon as reasonably practicable.
Section 5. Dealing in the Securities. Each of the Remarketing Agent
and the Reset Agent, when acting hereunder or, in the case of the Remarketing
Agent, under the Supplemental Remarketing Agreement, or when acting in its
individual or any other capacity, may, to the extent permitted by law, buy,
sell, hold or deal in any of the Capital Securities, Debentures, Growth PRIDES,
Income PRIDES or any other securities of the
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<PAGE> 6
Company or the Trust. With respect to any Capital Securities, Debentures, Growth
PRIDES, Income PRIDES or any other securities of the Company or the Trust owned
by it, each of the Remarketing Agent and the Reset Agent may exercise any vote
or join in any action with like effect as if it did not act in any capacity
hereunder. Each of the Remarketing Agent and the Reset Agent, in its individual
capacity, either as principal or agent, may also engage in or have an interest
in any financial or other transaction with the Company and the Trust as freely
as if it did not act in any capacity hereunder.
Section 6. Registration Statement and Prospectus. In connection with
the Remarketing, if and to the extent required in the view of counsel (which
need not be an opinion) for either the Remarketing Agent or the Company) by
applicable law, regulations or interpretations in effect at the time of such
Remarketing, the Company and the Trust shall use their reasonable efforts to
have a registration statement relating to the Capital Securities or the
Debentures, as the case may be, effective under the Securities Act of 1933 prior
to the third Business Day immediately preceding the Purchase Contract Settlement
Date, if requested by the Remarketing Agent, shall furnish a current preliminary
prospectus and, if applicable, a current preliminary prospectus supplement to be
used in such Remarketing by the Remarketing Agent not later than seven Business
Days prior to the Purchase Contract Settlement Date (or such earlier date as the
Remarketing Agent may reasonably request) and in such quantities as the
Remarketing Agent may reasonably request, and shall furnish a current final
prospectus and, if applicable, a final prospectus supplement to be used in such
Remarketing by the Remarketing Agent not later than the third Business Day
immediately preceding the Purchase Contract Settlement Date in such quantities
as the Remarketing Agent may reasonably request, and shall pay all expenses
relating thereto. The Company shall also take all such actions as may (upon
advice of counsel to the Company or the Remarketing Agent) be necessary or
desirable under state securities or blue sky laws in connection with the
Remarketing.
Section 7. Conditions to the Remarketing Agent's Obligations. (a)
The obligations of the Remarketing Agent and the Reset Agent under this
Agreement and, in the case of the Remarketing Agent, the Supplemental
Remarketing Agreement shall be subject to the terms and conditions of this
Agreement and the Supplemental Remarketing Agreement, including, without
limitation, the following conditions: (i) the Capital Securities or Debentures,
as the case may be, tendered for, or otherwise to be included in such,
Remarketing have not been called for redemption, (ii) the Remarketing Agent is
able to find a purchaser or purchasers for tendered Capital Securities or
Debentures, as the case may be, at a price not less than 100% of the stated
liquidation amount or principal amount thereof, as the case may be, plus accrued
and unpaid distributions or interest, as applicable, thereon, (iii) the
Purchase Contract Agent, the Collateral Agent, the Custodial Agent, the Company,
the Institutional Trustee, the Debt Trustee and the Trust shall have per formed
their respective obligations in connection with the Remarketing pursuant to the
Purchase Contract Agreement, the Pledge Agreement, the Declaration, the
Indenture, this Agreement and the Supplemental Remarketing Agreement (including,
without limitation,
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<PAGE> 7
giving the Remarketing Agent notice of the aggregate liquidation amount or
principal amount, as the case may be, of Capital Securities or Debentures, as
the case may be, to be remarketed no later than 10:00 a.m., New York City time,
on the fourth Business Day prior to the Purchase Contract Settlement Date and
concurrently delivering the Capital Securities or Debentures to be remarketed to
the Remarketing Agent), (iv) no Event of Default (as defined in the Declaration
and the Indenture) shall have occurred and be continuing, (v) the accuracy of
the representations and warranties of the Company and the Trust included and
incorporated by reference in this Agreement and the Supplemental Remarketing
Agreement or in certificates of any officer of the Company or any of its
subsidiaries or of any trustee of the Trust delivered pursuant to the provisions
included or incorporated by reference in this Agreement or the Supplemental
Remarketing Agreement, (vi) the performance by the Company and the Trust of
their covenants and other obligations included and incorporated by reference in
this Agreement and the Supplemental Remarketing Agreement, and (vii) the
satisfaction of the other conditions set forth and incorporated by reference in
this Agreement and the Supplemental Remarketing Agreement.
(b) If at any time during the term of this Agreement, any Indenture
Event of Default or Declaration Event of Default, or event that with the passage
of time or the giving of notice or both would become an Indenture Event of
Default or Declaration Event of Default, has occurred and is continuing under
the Indenture or the Declaration, then the obligations and duties of the
Remarketing Agent and the Reset Agent under this Agreement and the Supplemental
Remarketing Agreement shall be suspended until such default or event has been
cured. The Company will promptly give the Remarketing Agent notice of all such
defaults and events of which the Company is aware.
Section 8. Termination of Remarketing Agreement. This Agreement
shall terminate as to any Remarketing Agent or Reset Agent which is replaced on
the effective date of its replacement pursuant to Section 4(a) hereof or
pursuant to Section 4(b) hereof. Notwithstanding any such termination, the
obligations set forth in Section 3 hereof shall survive and remain in full force
and effect until all amounts payable under said Section 3 shall have been paid
in full. In addition, each former Remarketing Agent and Reset Agent shall be
entitled to the rights and benefits under Section 10 of this Agreement
notwithstanding the replacement or resignation of such Remarketing Agent or
Reset Agent
Section 9. Remarketing Agent's Performance; Duty of Care. The duties
and obligations of the Remarketing Agent and the Reset Agent shall be determined
solely by the express provisions of this Agreement and, in the case of the
Remarketing Agent, the Supplemental Remarketing Agreement. No implied covenants
or obligations of or against the Remarketing Agent or the Reset Agent shall be
read into this Agreement or the Supplemental Remarketing Agreement. In the
absence of bad faith on the part of the Remarketing Agent or the Reset Agent, as
the case may be, the Remarketing Agent and the Reset Agent each may conclusively
rely upon any document furnished to it which
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<PAGE> 8
purports to conform to the requirements of this Agreement or the Supplemental
Remarketing Agreement, as the case may be, as to the truth of the statements
expressed therein. Each of the Remarketing Agent and the Reset Agent shall be
protected in acting upon any document or communication reasonably believed by it
to be signed, presented or made by the proper party or parties. Neither the
Remarketing Agent nor the Reset Agent shall have any obligation to determine
whether there is any limitation under applicable law on the Reset Rate on the
Capital Securities or the Debentures or, if there is any such limitation, the
maximum permissible Reset Rate on the Capital Securities or the Debentures, and
they shall rely solely upon written notice from the Company and the Trust (which
the Company and the Trust agree to provide prior to the tenth Business Day
before the Purchase Contract Settlement Date) as to whether or not there is any
such limitation and, if so, the maximum permissible Reset Rate. Neither the
Remarketing Agent nor the Reset Agent shall incur any liability under this
Agreement or the Supplemental Remarketing Agreement to any beneficial owner or
holder of Capital Securities, Debentures or other securities, either in its
individual capacity or as Remarketing Agent or Reset Agent, as the case may be,
for any action or failure to act in connection with the Remarketing or otherwise
in connection with the transactions contemplated by this Agreement or the
Supplemental Remarketing Agreement. The provisions of this Section 9 shall
survive any termination of this Agreement and shall also continue to apply to
every Remarketing Agent and Reset Agent notwithstanding their resignation or
removal.
Section 10. Indemnification and Contribution. (a) The Company and
the Trust, jointly and severally, agree to indemnify and hold harmless the
Remarketing Agent, the Reset Agent and their respective directors, officers,
employees, agents, affiliates and each person, if any, who controls the
Remarketing Agent or the Reset Agent within the meaning of either Section 15 of
the Securities Act of 1933, as amended (the "1933 Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (the Remarketing
Agent, the Reset Agent and each such person or entity being an "Indemnified
Party"), as follows:
(i) from and against any and all losses, claims, damages,
liabilities and expenses whatsoever, joint or several, as incurred, to which
such Indemnified Party may become subject under any applicable federal or state
law, or otherwise, and related to, arising out of, or based on (A) the failure
to have an effective Registration Statement (as defined in the Supplemental
Remarketing Agreement) under the 1933 Act relating to the Capital Securities or
the Debentures, as the case may be, if required, or the failure to satisfy the
prospectus delivery requirements of the 1933 Act because the Company or the
Trust failed to provide the Remarketing Agent with a Prospectus (as defined in
the Supplemental Remarketing Agreement) for delivery, or (B) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereto (including any information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to paragraph (b) of Rule 430A under the 1933 Act, if
applicable), or the omission or alleged omission therefrom of
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<PAGE> 9
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus, or any amendment or supplement thereto, or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (D) any untrue statement or alleged untrue statement of a
material fact contained in any other information (whether oral or written) or
documents (including, without limitation, any documents incorporated or deemed
to be incorporated by reference in any such information or documents) provided
by the Company or the Trust for use in connection with the remarketing of the
Capital Securities or the Debentures, as the case may be, or any of the
transactions related thereto, or (E) any breach by the Company or the Trust of
any of the representations, warranties or agreements included or incorporated by
reference in this Agreement or the Supplemental Remarketing Agreement, or (F)
any failure by the Company or the Trust to make or consummate the remarketing of
the Capital Securities or the Debentures, as the case may be (including, without
limitation, any Failed Remarketing), or the withdrawal, recission, termination,
amendment or extension of the terms of such remarketing, or (G) any failure on
the part of the Company or the Trust to comply, or any breach by the Company or
the Trust of, any of the provisions included or incorporated by reference in
this Agreement, the Supplemental Remarketing Agreement, the Purchase Contract
Agreement, the Income PRIDES, the Growth PRIDES, the Pledge Agreement, the
Declaration, the Capital Securities, the Guarantee, the Indenture or the
Debenture (collectively, the "Operative Documents") or (H) the remarketing of
the Capital Securities or the Debentures, as the case may be, or any other
transaction contemplated by any of the Operative Documents, or the engagement of
the Remarketing Agent or the Reset Agent pursuant to, or the performance by the
Remarketing Agent or the Reset Agent of the respective services contemplated by,
this Agreement or the Supplemental Remarketing Agreement;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
related to, arising out of or based on any matter described in (i) above; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill Lynch),
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever related to, arising out or based on any
matter described in (i) above, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company or the Trust, to the extent that any such expense is
not paid under (i) or (ii) above;
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provided, however, that the Company and the Trust shall not be liable under
clause (i)(B), (i)(C) or (i)(D) to the extent any such loss, claim, damage,
liability or expense arises out of any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and conformity with written
information furnished to the Company or the Trust by the Remarketing Agent or
the Reset Agent expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or any other documents used in connection with
remarketing of the Capital Securities or the Debentures, as the case may be.
The Company and the Trust jointly and severally agree that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company or the Trust or their respective
security holders or creditors relating to or arising out of the engagement of
the Remarketing Agent or the Reset Agent pursuant to, or the performance by the
Remarketing Agent or the Reset Agent of their respective services contemplated
by, this Agreement or the Supplemental Remarketing Agreement except to the
extent that any loss, claim, damage, liability or expense is found in a final
judgment by a court of competent jurisdiction to have resulted from the willful
misconduct, gross negligence or bad faith of the Remarketing Agent or the Reset
Agent, as the case may be.
The Company and the Trust jointly and severally agree that, without
Merrill Lynch's prior written consent, neither of them will settle, compromise
or consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any action or claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 10 (whether
or not Merrill Lynch or any other Indemnified Party is an actual or potential
party to such claim, action or proceeding), unless such settlement, compromise
or consent (i) includes an unconditional release of each Indemnified Party from
all liability arising out of such litigation, investigation, proceeding, action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act by or on behalf of an Indemnified Party.
(b) If the indemnification provided for in Section 10(a) hereof is
for any reason unavailable to or insufficient to hold harmless an Indemnified
Party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then the Company and the Trust, jointly and severally,
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such Indemnified Party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Trust on the one hand and the Remarketing Agent and the
Reset Agent on the other hand from the remarketing of the Capital Securities or
the Debentures, as the case may be, contemplated hereby or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company
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and the Trust on the one hand and of the Remarketing Agent and the Reset Agent
on the other hand in connection with the statements, omissions or other matters
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Trust on the one hand and the Remarketing Agent and the
Reset Agent on the other hand in connection with the remarketing of the Capital
Securities or the Debentures, as the case may be, contemplated hereby shall be
deemed to be in the same respective proportions as the aggregate liquidation
amount of the Capital Securities or the aggregate principal amount of the
Debentures, as the case may be, which are or are to be remarketed bears to the
aggregate fees actually received by the Remarketing Agent and the Reset Agent
under Section 3 hereof. The relative fault of the Company and the Trust on the
one hand and the Remarketing Agent and the Reset Agent on the other hand (i) in
the case of an untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, shall be determined by reference
to, among other things, whether such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Trust on the one hand or by the
Remarketing Agent or the Reset Agent on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission and (ii) in the case of any other action or omission
shall be determined by reference to, among other things, whether such action or
omission was taken or omitted to be taken by the Company or the Trust, on the
one hand, or by the Remarketing Agent or the Reset Agent, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to prevent or correct such action or omission. The Company, the Trust, the
Remarketing Agent and the Reset Agent agree that it would not be just and
equitable if contribution pursuant to this Section 10(b) 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 Section 10(b). The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an Indemnified Party and referred to above in this Section 10(b) shall be
deemed to include any legal or other expenses incurred by such Indemnified Party
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or any such omission or alleged omission or any other such action or
omission; provided, however, that to the extent permitted by applicable law, in
no event shall the Remarketing Agent or the Reset Agent be required to
contribute any amount which, in the aggregate, exceeds the aggregate fees
received by them under Section 3 of this Agreement. No investigation or failure
to investigate by any Indemnified Party shall impair the foregoing
indemnification and contribution agreement or any rights an Indemnified Party
may have. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
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(c) In the event an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against the
Company or the Trust, the Company and the Trust, jointly and severally, agree to
reimburse the Remarketing Agent or the Reset Agent, as the case may be, for all
reasonable expenses, as incurred, which are incurred by the Remarketing Agent or
the Reset Agent, as the case may be, in connection with such Indemnified Party's
appearing and preparing to appear as such a witness, including, without
limitation, the reasonable fees and disbursements of its legal counsel, and to
compensate the Remarketing Agent or the Reset Agent, as the case may be, in an
amount to be mutually agreed upon. In addition, the Company and the Trust,
jointly and severally, agree to compensate the Remarketing Agent or the Reset
Agent, as the case may be, in an amount to be mutually agreed upon per person
per day for each day that an officer, director or employee of the Remarketing
Agent or the Reset Agent, as the case may be, or any of their respective
affiliates is involved in preparation, discovery or testimony pertaining to any
litigation, discovery or investigation in connection with this Agreement or the
Supplemental Remarketing Agreement.
(d) Promptly after receipt by an Indemnification Party of written
notice of any claim or commencement of an action or proceeding with respect to
which indemnification may be sought hereunder, such Indemnified Party will
notify the Company and the Trust in writing of such claim or of the commencement
of such action or proceeding, but failure so to notify the Company and the Trust
will not relieve the Company and the Trust from any liability which they may
have to such Indemnified Party under this indemnification and contribution
agreement, and in any event will not relieve the Company and the Trust from any
other liability that they may have to such Indemnified Party. Merrill Lynch
shall have the right to select counsel in connection with any transaction for
which any Indemnified Party may be entitled to indemnification or contribution
hereunder, provided that in no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all Indemnified Parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
(e) Anything herein or in the Supplemental Remarketing Agreement to
the contrary notwithstanding, the provisions of this Section 10, and the rights
of the Remarketing Agent, the Reset Agent and the other Indemnified Parties
hereunder, shall be in addition to, and not in limitation of, any rights or
benefits (including, without limitation, rights to indemnification or
contribution) which the Remarketing Agent, the Reset Agent or any other
Indemnified Party may have under any other instrument or agreement.
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
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Section 12. Term of Agreement. (a) Unless otherwise terminated in
accordance with the provisions hereof and except as otherwise provided herein,
this Agreement shall remain in full force and effect from the date hereof until
the first day thereafter on which no Capital Securities or Debentures are
outstanding, or, if earlier, the Business Day immediately following the Purchase
Contract Settlement Date. Anything herein to the contrary notwithstanding, the
provisions of the last section of Section 8 hereof and the provisions of
Sections 3, 9, 10 and 12(b) hereof shall survive any termination of this
Agreement and remain in full force and effect.
(b) All representations and warranties included or incorporated by
reference in this Agreement, or the Supplemental Remarketing Agreement, or
contained in certificates of officers of the Company or trustees of the Trust
submitted pursuant hereto or thereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Remarketing Agent, the Reset Agent or any of their controlling persons, or by or
on behalf of the Company, the Trust or the Purchase Contract Agent, and shall
survive the remarketing of the Capital Securities or the Debentures, as the
case may be.
Section 13. Successors and Assigns. The rights and obligations of
the Company, the Trust and the Purchase Contract Agent (both in its capacity as
Purchase Contract Agent and as attorney-in-fact) hereunder may not be assigned
or delegated to any other person without the prior written consent of the
Remarketing Agent and the Reset Agent. The rights and obligations of the
Remarketing Agent and the Reset Agent hereunder may not be assigned or delegated
to any other person without the prior written consent of the Company, except
that the Remarketing Agent shall have the right to appoint additional
remarketing agents as provided herein. This Agreement shall inure to the benefit
of and be binding upon the Company, the Trust, the Purchase Contract Agent, the
Remarketing Agent and the Reset Agent and their respective successors and
assigns and the other Indemnified Parties (as defined in Section 10 hereof) and
the successors, assigns, heirs and legal representatives of the Indemnified
Parties. The terms "successors" and "assigns" shall not include any purchaser of
Securities, Capital Securities or Debentures merely because of such purchase.
Section 14. Headings. Section headings have been inserted in this
Agreement and the Supplemental Remarketing Agreement as a matter of convenience
of reference only, and it is agreed that such section headings are not a part of
this Agreement or the Supplemental Remarketing Agreement and will not be used in
the interpretation of any provision of this Agreement or the Supplemental
Remarketing Agreement.
Section 15. Severability. If any provision of this Agreement or the
Supplemental Remarketing Agreement shall be held or deemed to be or shall, in
fact, be invalid, inoperative or unenforceable as applied in any particular case
in any or all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule or
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public policy or for any other reason, then, to the extent permitted by law,
such circumstances shall not have the effect of rendering the provision in
question invalid, inoperative or unenforceable in any other case, circumstances
or jurisdiction, or of rendering any other provision or provisions of this
Agreement or the Supplemental Remarketing Agreement, as the case may be,
invalid, inoperative or unenforceable to any extent whatsoever.
Section 16. Counterparts. This Agreement and the Supplemental
Remarketing Agreement may be executed in counterparts, each of which shall be
regarded as an original and all of which shall constitute one and the same
document.
Section 17. Amendments. This Agreement and the Supplemental
Remarketing Agreement may be amended by any instrument in writing signed by the
parties hereto. The Company, the Trust and the Purchase Contract Agent agree
that they will not enter into, cause or permit any amendment or modification of
the Purchase Contract Agreement, the Declaration, the Indenture, the Pledge
Agreement, the Debentures, the Capital Securities, the FELINE PRIDES or any
other instruments or agreements relating to the Capital Securities, the
Debentures or the FELINE PRIDES which would in any way affect the rights, duties
or obligations of the Remarketing Agent or the Reset Agent without the prior
written consent of the Remarketing Agent or the Reset Agent, as the case may be.
Section 18. Notices. Unless otherwise specified, any notices,
requests, consents or other communications given or made hereunder or pursuant
hereto shall be made in writing or transmitted by any standard form of
telecommunication, including telephone or telecopy, and confirmed in writing.
All written notices and confirmations of notices by telecommunication shall be
deemed to have been validly given or made when delivered or mailed, registered
or certified mail, return receipt requested and postage prepaid. All such
notices, requests, consents or other communications shall be addressed as
follows: if to the Company, to Kaufman and Broad Home Corporation, 10990
Wilshire Blvd., Los Angeles, CA 90024, Attention: Chief Financial Officer, with
a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, Attention: Vincent J. Pisano; if to the Remarketing Agent or
Reset Agent, to Merrill Lynch & Co. at Merrill Lynch, Pierce, Fenner & Smith
Incorporated, World Financial Center, North Tower, New York, New York
10281-1209, Attention: Phil Jones, with a copy to Brown & Wood LLP, 555
California Street, San Francisco, CA 94104, Attention: Eric S. Haueter; and if
to the Purchase Contract Agent, to The First National Bank of Chicago, Corporate
Trust Services Division, One First National Plaza, Suite 0126, Chicago, IL
60670-0126, or to such other address as any of the above shall specify to the
other in writing.
Section 19. Information. The Company and the Trust agree to furnish
the Remarketing Agent and the Reset Agent with such information and documents as
the
14
<PAGE> 15
Remarketing Agent or the Reset Agent may reasonably request in connection with
the transactions contemplated by this Remarketing Agreement and the Supplemental
Remarketing Agreement, and make reasonably available to the Remarketing Agent,
the Reset Agent and any accountant, attorney or other advisor retained by the
Remarketing Agent or the Reset Agent such information that parties would
customarily require in connection with a due diligence investigation conducted
in accordance with applicable securities laws and cause the Company's officers,
directors, employees and accountants and the Trust's trustees to participate in
all such discussions and to supply all such information reasonably requested by
any such person in connection with such investigation.
Section 20. Other. Subject to the provisions of the next succeeding
paragraph, not later than 35 Business Days prior to the Purchase Contract
Settlement Date (or such earlier date as the Remarketing Agent may reasonably
request), the Company will deliver to the Remarketing Agent either (A) an
opinion of legal counsel (which counsel shall be reasonably acceptable, and
which opinion shall be in form and substance reason ably acceptable, to the
Remarketing Agent) to the effect that the Capital Securities or, if the
Debentures are being remarketed, the Debentures are not subject to, or are
exempt from, the usury provisions of Article XV, ss. 1 of the California
Constitution (together with any successor provisions thereto, the "Usury
Provisions") or (B) a certificate, signed by the Company's Chief Financial
Officer and General Counsel, to the effect that the Company has filed an
application for qualification of the Capital Securities under the California
Corporate Securities Law of 1968, as amended, or any successor thereto (the
"CSL"), which, if and when granted, will entitle the Capital Securities or, if
the Debentures are being remarketed, the Debentures to the exemption from the
Usury Provisions provided by Section 25116 (or any successor thereto) of the CSL
or (C) in the event that the Company is unable to deliver the opinion referred
to in clause (A) of this sentence and the exemption provided by Section 25116
(or any successor thereto) of the CSL is no longer available, a certificate,
signed by the Company's Chief Financial Officer and General Counsel, to the
effect that (i) the Company has been unable to obtain such opinion and that such
exemption is no longer available and (ii) the Reset Rate shall in no event
exceed the Maximum Rate (as defined below), and setting forth the Maximum Rate.
The Company and the Trust will use their best effort to obtain the opinion
referred to in clause (A) of the preceding sentence or, in the event that an
application contemplated by clause (B) of the preceding sentence is filed, the
Company and the Trust will use their best efforts to obtain such qualification
and the permit entitling the Capital Securities or the Debentures, as the case
may be, to the exemption from the Usury Provisions prior to the tenth Business
Day before the Purchase Contract Settlement Date.
The provisions of the immediately preceding paragraph shall not be
applicable if each of the Reset Agent and the Company shall determine, each in
its sole and absolute discretion, on the date which is 35 Business Days prior to
the Purchase Contract Settlement Date (or such earlier date as the Remarketing
Agent may reasonably request), that
15
<PAGE> 16
there is no reasonable likelihood that (i) the interest rate on the Two-Year
Benchmark Treasury (as defined in the Declaration) plus three hundred basis
points (3%) will, as of the Purchase Contract Settlement Date (as defined in the
Supplemental Remarketing Agreement attached hereto as Exhibit A), exceed the
maximum per annum rate (the "Maximum Rate") specified under Article XV, ss.1,
Section 1, Paragraph (2) of the California Constitution ("Paragraph (2)");
provided that, for purposes of determining the Discount Rate (as defined below)
for purposes of clause (b) of Paragraph (2), the parties shall use the lower of
the Discount Rate as of May 25, 1998 and the Discount Rate as of July 25, 2001.
Notwithstanding the foregoing, if, prior to the tenth Business Day prior to the
Purchase Contract Settlement Date, either the Reset Agent or the Company shall
determine, in its sole and absolute discretion, that there is a possibility that
the rate of interest on the Two-Year Benchmark Treasury plus the actual Reset
Spread (as defined in the Declaration) as determined by the Reset Agent will in
fact exceed the Maximum Rate, then, upon notice from the Reset Agent, the
Company will, as soon as possible, either deliver the opinion of counsel
contemplated by clause (A), or file the application for qualification and
deliver the officers' certificate contemplated by clause (B), or deliver the
officers' certificate contemplated by clause (C), of the immediately preceding
paragraph, in which case the provisions of the immediately preceding paragraph
shall be applicable and the Company shall otherwise comply with the requirements
of the immediately preceding paragraph. As used in this paragraph, the term
"Discount Rate" means the rate of interest prevailing on the 25th day of the
applicable month established by the Federal Reserve Bank of San Francisco on
advances to member banks under Sections 13 and 13a of the Federal Reserve Act as
now in effect or hereafter from time to time amended (or if there is no such
single determinable rate of advances, the closest counterpart of such rate as
shall be designated by the Superintendent of Banks of the State of California
unless some other person or agency is delegated such authority by the California
Legislature.)
16
<PAGE> 17
IN WITNESS WHEREOF, each of the Company, the Trust, the Purchase
Contract Agent and the Remarketing Agent has caused this Agreement to be
executed in its name and on its behalf by one of its duly authorized signatories
as of the date first above written.
KAUFMAN AND BROAD
HOME CORPORATION
By: /s/ Dennis Welsch
---------------------------------------------
Name: Dennis Welsch
Title: Vice President
KBHC FINANCING I
By: /s/ Dennis Welsch
---------------------------------------------
Name: Dennis Welsch
Title: Vice President
CONFIRMED AND ACCEPTED:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Matthew M. Pendo
---------------------------------------------
Authorized Signatory
THE FIRST NATIONAL BANK OF CHICAGO
not individually but solely as Purchase
Contract Agent and as attorney-in-fact
for the holders of the Purchase Contracts
By: /s/ Mark J. Frye
---------------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
<PAGE> 18
Exhibit A to
Remarketing Agreement
Form of Supplemental Remarketing Agreement
Supplemental Remarketing Agreement dated August __, 2001 among Kaufman and
Broad Home Corporation, a Delaware corporation (the "Company"), [delete
reference to the Trust if Debentures are being remarketed] KBHC Financing I, a
Delaware statutory business trust (the "Trust"), Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Remarketing Agent"), and The
First National Bank of Chicago, as Purchase Contract Agent and attorney-in-fact
for the Holders of the Purchase Contracts (as such terms are defined in the
Purchase Contract Agreement referred to in Schedule I hereto)
NOW, THEREFORE, for and in consideration of the covenants herein made, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used and not defined in this Agreement
shall have the meanings assigned to them in the Remarketing Agreement dated as
of July __, 1998 (the "Remarketing Agreement") among the Company, KBHC Financing
I, a Delaware statutory business trust, the Purchase Contract Agent and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or, if not
defined in the Remarketing Agreement, the meanings assigned to them in the
Purchase Contract Agreement (as defined in Schedule I hereto).
2. Registration Statement and Prospectus. The Company and the Trust have
filed with the Securities and Exchange Commission, and there has become
effective, a registration statement on Form S-3 (Nos. 333-51825 and
333-51825-01), including a prospectus, relating to the Securities (as such term
is defined on Schedule I hereto). Such Registration Statement, as amended, and
including the information deemed to be a part thereof pursuant to Rule 430A
under the Securities Act of 1933, as amended (the "1933 Act"), and the documents
incorporated or deemed to be incorporated by reference therein, are hereinafter
called, collectively, the "Registration Statement"; [the related preliminary
prospectus dated __________, including the documents incorporated or deemed to
be incorporated by reference therein, [and preliminary prospectus supplemented
dated ________] are hereinafter called, [collectively] the "preliminary
prospectus";] and the related prospectus dated, including the documents
incorporated or deemed to be incorporated by reference therein, [and prospectus
supplement dated ] are hereinafter called, [collectively,] the "Prospectus". The
Company and the Trust have provided copies of the Registration Statement [, the
preliminary prospectus] and the Prospectus to the Remarketing Agent, and hereby
consent to the use of the [preliminary prospectus] and the
<PAGE> 19
Prospectus in connection with the remarketing of the Securities. [In the event
that a Registration Statement is not required, insert the following: The Company
and the Trust have provided to the Remarketing Agent, for use in connection with
remarketing of the Securities (as such term is defined on Schedule I hereto), a
[preliminary remarketing memorandum and] remarketing memorandum and [describe
other materials, if any]. Such remarketing memorandum (including the documents
incorporated or deemed to be incorporated by reference therein, [and] [describe
other materials] are hereinafter called, collectively, the "Prospectus", [and
such preliminary marketing memorandum (including the documents incorporated or
deemed to be incorporated by reference therein) is hereinafter called a
"preliminary prospectus")]. The Company and the Trust hereby consent to the use
of the Prospectus [and the preliminary prospectus] in connection with the
remarketing of the Securities]. All references in this Agreement to amendments
or supplements to the Registration Statement [, the preliminary prospectus] or
the Prospectus shall be deemed to mean and include the filing of any document
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is
incorporated or deemed to be incorporated by reference in the Registration
Statement [, the preliminary prospectus] or the Prospectus, as the case may be.
3. Provisions Incorporated by Reference.
(a) Subject to Section 3(b), the provisions of the Underwriting
Agreement (other than Section 2, Section 6, Section 7 and Section 10 thereof)
are incorporated herein by reference, mutatismutandis, and the Company and the
Trust hereby make the representations and warranties, and agree to comply with
the covenants and obligations, set forth in the provisions of the Underwriting
Agreement incorporated by reference herein, as modified by the provisions of
Section 3(b) hereof.
(b) With respect to the provisions of the Underwriting Agreement
incorporated herein, for the purposes hereof, (i) all references therein to the
"Underwriter" or "Underwriters" shall be deemed to refer to the Remarketing
Agent and all references to the "Representative" or the "Representatives" shall
be deemed to refer to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
("Merrill Lynch"); (ii) all references therein to the "Securities" shall be
deemed to refer to the Securities as defined herein; (iii) all references
therein to the "Closing Time" shall be deemed to refer to the Remarketing
Closing Date specified in Schedule I hereto; (iv) all references therein to the
"Registration Statement" [, any "preliminary prospectus"] or the "Prospectus"
shall be deemed to refer to [the Registration Statement, the preliminary
prospectus and] the Prospectus, respectively, as defined herein; (v) all
references therein to this "Agreement," the "Underwriting Agreement," "hereof,"
"herein" and all references of similar import, shall be deemed to mean and refer
to this Supplemental Remarketing Agreement; (vi) all references therein to "the
date hereof," "the date of this Agreement" and all similar references shall be
deemed to refer to the date of this Supplemental Remarketing Agreement; (vii)
all references therein to the Date of Delivery shall be disregarded; (viii)
Section
A-2
<PAGE> 20
5(e) of the Underwriting Agreement shall be amended to refer solely to the
Securities (as defined herein) and the ratings set forth therein shall be o from
Moody's and o from S&P; (ix) the references in Section 1(a)(iv) of the
Underwriting Agreement to the "Registration Statement" and the "Prospectus"
shall be deemed to refer to [the Registration Statement (as defined herein and]
the Prospectus (as defined herein) in the form first provided to the Remarketing
Agent for use in connection with the remarketing of the Securities,
[respectively], (x) the reference in Section 9(a)(i) of the Underwriting
Agreement to the "Registration Statement" shall be deemed to refer to the
Prospectus in the form first provided to the Remarketing Agent for use in
connection with the remarketing of the Securities; (xi) Section 9(a)(iv) of the
Underwriting Agreement shall be deemed to also include a reference to the
Securities (as defined herein); and (xii) [other changes].
4. Remarketing. Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth or incorporated by reference
herein and in the Remarketing Agreement, the Remarketing Agent agrees to use its
reasonable efforts to remarket, in the manner set forth in Section 2(b) of the
Remarketing Agreement, the aggregate stated liquidation or principal amount, as
the case may be, of Securities set forth in Schedule I hereto at a purchase
price not less than 100% of the aggregate stated liquidation amount or aggregate
principal amount, as the case may be, of the Securities plus any accrued and
unpaid distributions or interest, as applicable, thereon. In connection
therewith, the registered holder or holders thereof agree, in the manner
specified in Section 5 hereof, to pay to the Remarketing Agent a Remarketing Fee
equal to an amount not exceeding 50 basis points (.50%) of such aggregate stated
liquidation or principal amount, as the may be, payable by deduction from any
amount received in connection from such Remarketing in excess of the aggregate
stated liquidation amount or aggregate principal amount, as the case may be, of
the Securities plus accrued and unpaid distribution or interest, as the case
may be. The right of each holder of Securities to have Securities tendered for
purchase shall be limited to the extent set forth in the last sentence of
Section 2(b) of the Remarketing Agreement (which is incorporated by reference
herein). As more fully provided in Section 2(c) of the Remarketing Agreement
(which is incorporated by reference herein), the Remarketing Agent is not
obligated to purchase any Securities in the remarketing or otherwise, and
neither the Trust, any Trustee, the Sponsor nor the Remarketing Agent shall be
obligated in any case to provide funds to make payment upon tender of Securities
for remarketing.
5. Delivery and Payment. Delivery of payment for the remarketed Securities
by the purchasers thereof identified by the Remarketing Agent and payment of the
Remarketing Fee shall be made on the Remarketing Closing Date at the location
and time specified in Schedule I hereto (or such later date not later than five
Business Days after such date as the Remarketing Agent shall designate), which
date and time may be postponed by agreement between the Remarketing Agent, the
Company and the Trust. Delivery of the remarketed Securities and payment of the
Remarketing Fee shall be made to the Remarketing Agent against payment by the
respective purchasers of the remarketed
A-3
<PAGE> 21
Securities of the consideration therefor as specified herein, which
consideration shall be paid to the Collateral Agent for the account of the
persons entitled thereto by certified or official bank check or checks drawn on
or by a New York Clearing House bank and payable in immediately available funds
or in immediately available funds by wire transfer to an account or accounts
designated by the Collateral Agent.
If the Securities are not represented by a Global Security held by or on
behalf of The Depositary Trust Company, certificates for the Securities shall be
registered in such names and denominations as the Remarketing Agent may request
not less than one full Business Day in advance of the Remarketing Closing Date,
and the Company, the Trust, the Collateral Agent and the registered holder or
holders thereof agree to have such certificates available for inspection,
packaging and checking by the Remarketing Agent in New York, New York not later
than 1:00 p.m. on the Business Day prior to the Remarketing Closing Date.
6. Notices. Unless otherwise specified, any notices, requests, consents or
other communications given or made hereunder or pursuant hereto shall be made in
writing or transmitted by any standard form of telecommunication, including
telephone or telecopy, and confirmed in writing. All written notices and
confirmations of notices by telecommunication shall be deemed to have been
validly given or made when delivered or mailed, registered or certified mail,
return receipt requested and postage prepaid. All such notices, requests,
consents or other communications shall be addressed as follows: if to the
Company, to Kaufman and Broad Home Corporation, 10990 Wilshire Blvd., Los
Angeles, CA 90024, Attention: Chief Financial Officer, with a copy to Skadden,
Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022,
Attention: Vincent J. Pisano; if to the Remarketing Agent, to Merrill Lynch &
Co. at Merrill Lynch, Pierce, Fenner & Smith Incorporated, at World Financial
Center, North Tower, 250 Vesey Street, New York, NY 10281, Attention: __; with a
copy to Brown & Wood LLP, 555 California Street, San Francisco, CA 94104,
Attention: Eric S. Haueter; and if to the Purchase Contract Agent, to The First
National Bank of Chicago, Corporate Trust Services Division, One First National
Plaza, Suite 0126, Chicago, IL 60670-0126, or to such other address as any of
the above shall specify to the other in writing.
7. Conditions to Obligations of Remarketing Agent. Anything herein to the
contrary notwithstanding, the parties hereto agree (and the holders and
beneficial owners of the Securities will be deemed to agree) that the
obligations of the Remarketing Agent under this Agreement and the Remarketing
Agreement are subject to the satisfaction of the conditions set forth in Section
7 of the Remarketing Agreement (which are incorporated herein by reference), and
to the satisfaction, on the Remarketing Closing Date, of the conditions
incorporated by reference herein from Section 5 of the Underwriting Agreement
as modified by Section 3(b) hereof (including, without limitation, the delivery
of opinions of counsel, officers' certificates and accountants' comfort letters
in form and substance satisfactory to the Remarketing Agent, the accuracy as of
the Remarketing
A-4
<PAGE> 22
Closing Date of the representations and warranties of the Company and the Trust
included and incorporated by reference herein and the performance by the Company
and the Trust of their respective obligations under the Remarketing Agreement
and this Agreement as and when required hereby and thereby). In addition,
anything herein or in the Remarketing Agreement to the contrary notwithstanding,
the Remarketing Agreement and this Agreement may be terminated by the
Remarketing Agent, by notice to the Company at any time prior to the time of
settlement on the Remarketing Closing Date, if any of the events or conditions
set forth in Section 9 of the Underwriting Agreement, as modified by Section
3(b) hereof, shall have occurred or shall exist.
8. Indemnity and Contribution. Anything herein to the contrary
notwithstanding, the Remarketing Agent shall be entitled to indemnity and
contribution on the terms and conditions set forth in the Remarketing Agreement.
A-5
<PAGE> 23
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Trust and the Remarketing Agent.
Very truly yours,
KAUFMAN AND BROAD HOME CORPORATION
By:
---------------------------------------
Name:
Title:
[KBHC Financing I]
By:
---------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Authorized Signatory
[Add other Remarketing Agents, if any]
THE FIRST NATIONAL BANK OF CHICAGO
not individually but solely as Purchase
Contract Agent and as attorney-in-fact
for the holders of the Purchase Contracts
By:
---------------------------------------
A-6
<PAGE> 24
Name:
Title:
SCHEDULE I
Securities subject to the remarketing: 8% Capital Securities of the Trust/8%
Debentures due August 16, 2003 of the Company (the "Securities")
Purchase Contract Agreement, dated as of July 7, 1998 (the "Purchase Contract
Agreement") by and between Kaufman and Broad Home Corporation, a Delaware
corporation, and The First National Bank of Chicago, a national banking
association
Pledge Agreement dated as of July 7, 1998 (the "Pledge Agreement") by and
between Kaufman and Broad Home Corporation, a Delaware corporation, The
First National Bank of Chicago, a national banking association, and The
Bank of New York
Amended and Restated Declaration of Trust dated as of July 7, 1998 (the
"Declaration") of KBHC Financing I, a Delaware statutory business trust
Indenture dated as of June 30, 1998 (the "Base Indenture") by and between
Kaufman and Broad Home Corporation, a Delaware corporation, and The First
National Bank of Chicago
First Supplemental Indenture, dated as of June 30, 1998 (the "Supplemental
Indenture" and, together with the Base Indenture, the "Indenture") by and
between Kaufman and Broad Home Corporation, a Delaware corporation, and The
First National Bank of Chicago
Aggregate [Liquidation Amount/Principal Amount] of Securities: $_______________
Underwriting Agreement, dated June 30, 1998 (the "Underwriting Agreement") among
Kaufman and Broad Home Corporation, KBHC Financing I, and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation.
Remarketing Closing Date, Time and Location:
A-7
