<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1994 COMMISSION FILE NUMBER: 0-15925
J.M. PETERS COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
3501 JAMBOREE ROAD, SUITE 200
NEWPORT BEACH, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
95-2956559
(IRS EMPLOYER
IDENTIFICATION NUMBER)
92660
(ZIP CODE)
(714) 854-2500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK $.10 PAR VALUE
(TITLE OF EACH CLASS)
THE AMERICAN STOCK EXCHANGE
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At May 16, 1994, the aggregate market value of the voting stock held by
persons other than Capital Pacific Homes, Inc. and the directors and executive
officers of the Registrant was $6,648,075 as determined by the closing price on
the American Stock Exchange. The basis of this calculation does not constitute a
determination by the Registrant that all of its directors and executive officers
are affiliates as defined in Rule 405 under the Securities Act of 1933.
At May 16, 1994, there were 14,995,000 shares of Common Stock outstanding.
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<PAGE> 2
PART 1
ITEM 1. BUSINESS
GENERAL
J.M. Peters Company, Inc. ("the Company") is one of the leading
single-family homebuilders in Orange County, California and Las Vegas, Nevada,
where it builds and sells homes targeted to entry level and move-up buyers.
Since 1975, the Company has built and sold nearly 8,000 homes, principally in
Orange County, but also in the adjacent counties of Riverside, San Diego and Los
Angeles. Since 1969, Durable Homes, Inc. ("Durable"), a wholly owned subsidiary
that was acquired by the Company in 1993 (the "Durable Acquisition"), has built
and sold nearly 7,000 homes, principally in Las Vegas. According to The Meyers
Group, a real estate consulting firm, in 1993 the Company was the 10th largest
homebuilder in Orange County and Durable was the 8th largest homebuilder in Las
Vegas (in each case, based on unit sales). During the fiscal year ended February
28, 1994, the Company (including Durable's results on a pro forma basis for the
full fiscal year) closed 644 home sales at an average sales price of $159,000
(including 205 homes closed in California at an average sales price of $293,000
and 439 homes closed in Nevada at an average sales price of $96,000).
Recent market information indicates that the Orange County housing market
is improving and that the Las Vegas housing market remains quite strong.
According to statistics compiled by The Meyers Group, the number of sales of new
homes in Orange County was 15% higher during 1993 than during 1992, and the
overall inventory of unsold completed new homes in Orange County decreased from
a 40 week supply in September 1990 to a 13 week supply in December 1993. A
recent study by Kenneth Leventhal & Company determined that the percentage of
households in the Orange County area that can afford a median priced home
increased from 14% in December 1989 to 47% in December 1993. According to The
Meyers Group, Las Vegas, with an expanding job base and relatively low median
housing prices, was one of the fastest growing markets in the United States for
new home sales in 1993, with annual unit sales of 15,800, 40% greater than the
1992 level. The U.S. Census Bureau ranked Las Vegas as the number one
metropolitan area in percentage population growth between 1990 and 1992, with a
14% gain to 971,200 people. During the same period, Orange County gained 106,000
new residents, an increase of over 4%.
In August 1992, Capital Pacific Homes, Inc., a Delaware corporation
("CPH"), acquired control of the Company in a $47.25 million purchase (the
"Acquisition") from the Resolution Trust Corporation ("RTC"). At the time of the
Acquisition, the Company had an experienced management team in place and almost
2,000 entitled lots in California (a majority of which were still held by the
Company as of February 28, 1994). The Acquisition (and the Company's results of
operations for the first six months of fiscal 1993) allowed the Company to
improve significantly its balance sheet, as debt was reduced by $215 million
(from $263 million to $48 million), stockholders' equity increased by $76
million to $51 million and the book value of residential real estate inventories
was written down 51% from $225 million to $111 million. Prior to the
Acquisition, the Company had already taken significant writedowns to its land
inventory. Such write-downs aggregated approximately $140.3 million during
fiscal years 1991 and 1992. The Company believes that one of its competitive
advantages is that the carrying value of its land inventory is at or below
current market values.
During much of the period of RTC control, new construction and acquisition
activity was halted in California as the RTC followed a strategy essentially
limited to liquidating inventory. Closings in California decreased from a peak
of 775 homes in fiscal year 1990 (the year prior to RTC control) to 115 homes in
fiscal year 1993 (the last year that included any period of RTC control). At the
time of the Acquisition, California construction activity had virtually ceased
and there were only 13 completed and 15 partially completed homes remaining at
the Company. Because of the time required to recommence active building
operations after the Acquisition, the Company did not begin closing a
significant number of homes in California until the third and fourth quarters of
fiscal year 1994. Because of the 22 months of RTC control, the period required
to recommence California operations and the acquisition of Durable in mid fiscal
year 1994, management of the Company does not believe that its historical
operating results prior to the third and fourth quarters of fiscal year 1994 are
meaningful indicators of its future performance.
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Since the Acquisition, the Company has focused on: (i) recommencing
California building operations; (ii) diversifying its geographic markets to
include areas outside of Southern California; (iii) diversifying its product
offerings to include both entry level and move-up homes in order to appeal to a
broad customer base; (iv) improving and broadening its capital base and sources
of financial liquidity; (v) controlling costs while increasing operational
efficiency; and (vi) reducing land and inventory risk by avoiding speculative
building, constraining project sizes, avoiding entitlement risks and acquiring
land through the use of options, purchase contracts, development agreements and
joint ventures.
The Company has made substantial progress in implementing these strategic
goals. Since the Acquisition, the Company has: (i) recommenced active building
operations in Southern California; (ii) become a significant participant in the
Las Vegas, Nevada residential housing market through its acquisition of Durable;
(iii) reduced prices, largely as a result of its reduced land basis, on its
California products without adversely affecting its product design or quality;
(iv) obtained approximately $120 million of construction financing commitments,
which included approximately $66 million from the "CalPERS LP", which amounts
the Company has utilized in the past but are presently not available to the
Company as a result of the private placement of $100 million of senior notes;
(v) established new management control systems and reduced overhead, and (vi)
completed a private placement of $100 million of senior notes.
At February 28, 1994, the Company was in various stages of development with
respect to 21 active projects, including 11 projects located in the Orange and
Riverside Counties of Southern California and in 10 projects located in Las
Vegas and Laughlin, Nevada. The Company is actively selling homes in 15 of these
projects. At February 28, 1994, the Company owned approximately 1,673 building
sites (1,027 in California and 646 in Nevada) and controlled an additional 1,439
building sites (423 in California and 1,016 in Nevada) through options and
purchase contracts.
The Company expects to start construction on approximately 14 new projects
during fiscal year 1995 and also expects that substantially all of the projects
that generated closings during the third and fourth quarters of fiscal year 1994
will be generating closings throughout fiscal year 1995. At February 28, 1994,
the Company had a total backlog of 305 homes sold with an aggregate sales value
of $55.8 million, which is moderately higher than the backlog at the start of
the third and fourth quarters of fiscal year 1994. The backlog at February 28,
1994 included 124 homes sold with an aggregate sales value of $37.4 million in
California and 181 homes sold with an aggregate sales value of $18.4 million in
Nevada.
STRATEGY
The Company's long-term strategy includes the following key elements:
(1) Diversifying its geographic markets. The Company believes that
geographic market diversification is a key element in achieving long-term
stability and growth. By acquiring Durable, the Company has expanded its
geographic reach beyond its Southern California markets to include Las
Vegas and Laughlin, Nevada. While the Company has no current plans to
expand outside the Nevada and Southern California markets, it may consider
expansion to other markets in the future.
(2) Diversifying its product. The Company builds homes targeted for
entry level buyers as well as move-up buyers so that it is able to deliver
cost-effective and quality homes to a broad segment of its potential
customer base. Within Nevada, Durable historically focused on entry level
and first time move-up buyers. Through its formation of J.M. Peters Nevada,
Inc. ("JMPN") in September 1993, the Company positioned itself to deliver
higher-end products in Nevada. Within Southern California, the Company
historically focused on second and third time move-up buyers. Since the
Acquisition in August 1992, the Company has lowered its overall price point
in Southern California (from $347,000 average price in fiscal year 1992 to
$334,000 and $293,000 in fiscal years 1993 and 1994, respectively),
enabling the Company to sell to first-time move-up buyers in Southern
California as well as the higher-end segments of that market. The Company
may also expand to the entry level market in Southern California by
expanding its Durable operations to Southern California.
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During fiscal year 1993, the Company formed a new wholly-owned
subsidiary, Capital Pacific Communities, Inc. ("CPC"), to specialize in
acquiring and developing multi-family projects. The activities of CPC are
part of the Company's overall diversification strategy. Rental housing is a
significant component of the market for housing alternatives, representing
entry-level housing prior to, or as an alternative to, home ownership. The
Company currently anticipates that it will develop and hold its multi-
family projects, rather than pursuing a strategy of developing multi-family
projects that are sold to other parties or are packaged as part of a real
estate investment trust.
The Company currently expects to acquire or build one or two
multi-family housing projects (typically consisting of 150 to 200 units per
project) per fiscal year. The Company intends to finance these projects
through the use of non-recourse indebtedness.
(3) Enhancing the Company's capital base and sources of financial
liquidity. The Company is seeking to diversify its sources of financing. As
conventional real estate lending has decreased, the Company has expanded
its focus from traditional project specific financing to Company-wide
financing through public capital markets. Consistent therewith, in May,
1994 the Company successfully completed the sale of $100,000,000 of 12 3/4%
Senior Notes ("Notes") including 790,000 warrants to purchase common stock
(the "Offering"). The proceeds from the offering will be used to repay
certain debt of the Company, acquire certain properties and for general
working capital purposes. The Company has also obtained a $25 million
secured line of credit facility (the "Facility") with Bank One, Arizona, NA
("BOAZ") to provide additional flexibility. The Company intends to maintain
its traditional lending relationships as an additional source of liquidity
to the extent permitted by the indenture to which the Notes are subject
(the "Indenture"). The Company believes this financing strategy will allow
orderly growth and greater flexibility to react quickly to changing market
conditions.
(4) Controlling costs and maintaining operational efficiency. The
Company has implemented job cost, warranty tracking and construction
scheduling systems and other quality controls to control costs and to
reduce the effect of certain risks inherent in the homebuilding industry.
These systems and controls enable the Company to improve and monitor its
efficiencies.
(5) Minimizing land and inventory risk. The Company carefully manages
its land and inventory risk in a variety of ways. The Company monitors its
supply of owned, optioned and controlled land to ensure an adequate
pipeline of building lots in each of its markets while avoiding excess land
holdings. The Company purchases only entitled land, typically in parcels of
only 50 to 150 lots and makes use of options, seller financing and joint
ventures to reduce its capital commitment and exposure to risks. "Entitled"
land is generally defined as land that has received all necessary land use
approvals for residential development from the appropriate state, county
and local governments, including any required tract maps, subdivision
approvals, and grading and building permits. The Company generally tries to
limit its speculative building by commencing construction only after some
sales have been made and by limiting its construction to 10-15 units at a
time. The Company generally purchases and holds land in amounts sufficient
to support home production and sales over a 24 to 36 month period in
California, and in amounts sufficient to support home production and sales
over an 18 to 24 month period in Nevada. See "-- Joint Ventures."
GEOGRAPHIC MARKETS
At February 28, 1994, the Company was in various stages of development with
respect to 21 active projects, including 11 projects located in the Orange and
Riverside Counties of Southern California and ten projects located in Las Vegas
and Laughlin, Nevada. The Company is actively selling homes in 15 of these
projects. The Company's homes currently range in size from 1,443 to 3,710 square
feet in Southern California and from 867 to 2,287 square feet in Nevada. The
Company's homes are currently priced from $175,000 to $530,000 in Southern
California and from $77,000 to $147,000 in Nevada. At February 28, 1994, the
Company owned approximately 1,673 building sites (1,027 in California and 646 in
Nevada) and controlled an additional 1,439 building sites (423 in California and
1,016 in Nevada) through options and purchase contracts.
3
<PAGE> 5
CALIFORNIA
The Company believes that favorable supply and demand characteristics for
homes in California offer an attractive opportunity for experienced homebuilders
having access to sources of financing. California is both the most populous
state and the largest housing market (measured by permits issued for housing
starts) in the United States.
According to the U.S. Census Bureau, the population of California increased
from 23.8 million in 1980 to an estimated 31.2 million in 1993, an annual
compound growth rate of 2.1%, which was more than double the nationwide compound
annual growth rate of 1.0%. During the period from 1990 to 1992, the U.S. Census
Bureau determined that the Los Angeles/Riverside/Orange County consolidated area
gained over 516,000 residents, rising 4% to approximately 15 million residents.
The California unemployment rate increased from 5.5% in January 1990 to
8.3% in December 1993, compared to the national average which was relatively
stable, increasing slightly from 5.9% to 6.0% during the same period. The
recession has been particularly acute in Southern California where the
unemployment rate has increased more dramatically. For example, the unemployment
rate in Los Angeles County has risen from 5.9% in January 1990 to 8.9% in
December 1993, while in San Bernardino County the unemployment rate has
increased from 4.8% in January 1990 to 9.2% in November 1993. Currently, the
Company has no active projects in Los Angeles County or San Bernardino County.
However, the unemployment rate in Orange County, where the Company has
substantial operations, was 6.3% for 1993.
Single-family building permits for the decade 1980-1989 averaged 863,000
annual units for the United States compared to 113,000 annual units for
California during the same period, or 13.1% of the national total. California
accounted for approximately one in seven new homes sold in the United States
during the 1980s. Since 1989, California has experienced weakened economic
conditions which have adversely affected the California housing market.
Nonetheless, California has remained the state with the largest housing market
in the United States. California's single family building permits represented
8.4% of the national total for 1992 and 7.3% for the first nine months of 1993.
Nevertheless, the pace of sales in California is showing signs of improvement.
According to the California Association of Realtors, the seasonally adjusted
rate of sales of homes (which would include existing homes) has accelerated by
36%, from 399,000 units in December 1990 to 543,000 units in December 1993,
which exceeds the prior peak reached in 1989.
The Company believes that the supply of home sites in the California market
is constrained by (i) a substantial reduction in the availability of development
capital from savings and loan institutions and banks; (ii) a regulatory approval
process that is among the most burdensome in the nation; (iii) infrastructure
limitations; and (iv) a scarcity of available land near employment centers.
The depressed economic conditions in California have had the effect of
reducing the state's median home sales price and making homes more affordable in
California. According to the California Association of Realtors, the median
sales price of homes in California has decreased from $195,000 in January 1990
to $184,000 in December 1993, which, together with low mortgage rates, has
increased the percentage of California households able to afford a median-priced
single family detached home from 20% in December 1990 to 43% in November 1993.
The affordability index, defined as the percent of households that can afford
the median priced home, has risen in the combined Orange County/Riverside
County/San Bernardino County area from 24.6% in 1989 to 48.6% in 1993.
Orange County. Seven of the Company's eleven active Southern California
projects are located in Orange County. According to the California Department of
Finance, Orange County is the third most populous county in California.
According to the U.S. Census Bureau, between 1990 and 1992, the county's
population grew by 106,000 new residents to approximately 2.5 million. While the
population increased, the number of residential building permits issued declined
substantially from a high of 24,672 in 1987 to 5,946 in 1992, according to the
Construction Industry Research Board. The unemployment rate in Orange County was
only 6.1% in 1992, compared to 9.0% and 7.2% for California and the United
States, respectively, according to the California Employment Development
Department. The historically low interest rates and the reduction in real estate
prices since 1990 have led to a substantial increase in the affordability index
(a measure of the
4
<PAGE> 6
percentage of households that, based upon median household incomes, can afford
to purchase the median priced home). According to the California Association of
Realtors, the affordability index in Orange County was 47% in December 1993,
compared with 14% in 1989. As of February 28, 1994, the Company owned land in
sufficient quantities to construct and sell 731 homes in Orange County and had
options or contracts to purchase land in sufficient quantities to construct and
sell an additional 274 homes in Orange County.
Riverside County. The Company currently has four projects in cities located
in Riverside County. Riverside County's proximity to job markets in Los Angeles,
Orange, San Bernardino and San Diego counties, and its comparatively low housing
costs, make it a significant affordable housing market for the local workforce.
As of February 28, 1994, the Company owned land in sufficient quantities to
construct and sell 208 homes in Riverside County and had contracts to purchase
land in sufficient quantities to construct and sell an additional 365 homes in
Riverside County.
The population of Riverside County, which includes among other communities
the communities of Palm Springs, Palm Desert, La Quinta, Rancho Mirage and
Temecula, increased from 663,199 to 1,1709,413, or 76.5%, from 1980 to 1990,
making it California's seventh largest county. The San Bernardino and Riverside
Metropolitan Statistical Area was the second fastest growing Metropolitan
Statistical Area ("MSA") in the United States between 1990 and 1992, during
which period Riverside County's population grew 13.5% to 1,328,320 and San
Bernardino County's population grew 9.7% to 1,556,251; by comparison, the total
population of California grew only 6.0% during the same period. The State of
California Department of Finance projects that the population of Riverside
County will grow approximately 48.5% during the decade from 1990 to 2000, which
will make it among the fastest growing California counties during that period.
The average number of jobs in Riverside County increased from 230,400 in 1980 to
428,500 in 1990 and approximately 457,900 in 1993.
NEVADA
Las Vegas. The Company currently has 10 active projects in Las Vegas. The
Company believes that Nevada's favorable demand characteristics offer
substantial long-term prospects for homebuilders. Las Vegas is currently the
site of nine of the ten largest hotels in the world, including five hotels that
have opened within the last four years, of which three have opened within the
last year. According to the City of Las Vegas Center for Economic Development,
this increase of more than 17,000 hotel rooms translates into approximately
51,000 new jobs, which the Company expects will increase the demand for
affordable, entry-level homes. The University of Nevada at Las Vegas currently
estimates that the employment growth rate estimated percent change from 1990 to
2000 for the City of Las Vegas will be approximately 36%. In addition to the
growing population base, Las Vegas typically has a large number of visitors each
year. Over 22 million people visited Las Vegas during 1993 and the Las Vegas
Convention and Visitors Authority is currently estimating that the number will
increase to 25 million visitors during calendar year 1994. Total population in
the Las Vegas metropolitan area increased by 14% to 971,200, during the period
from 1990 through 1992. The Meyers Group estimates that there were approximately
15,800 new homes sold in the Las Vegas residential housing market during 1993,
compared to approximately 11,300 new homes sold during 1992. During 1993, the
median sales price of a single family detached home was $114,000. As of February
28, 1994, the Company owned land in sufficient quantities to construct and sell
646 homes in Nevada and had options or contracts to purchase land in sufficient
quantities to construct and sell an additional 1,016 homes in Nevada.
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DEVELOPMENTS IN PROCESS--CALIFORNIA
The following table below sets forth certain information regarding projects
under development in California as of February 28, 1994. Each of the projects is
described in greater detail below the table.
<TABLE>
<CAPTION>
HOMES AVAILABLE FOR
UNDER CONSTRUCTION FUTURE
NAME AND TOTAL UNITS AT 2/28/94 CONSTRUCTION UNITS
LOCATION OF UNITS REMAINING ------------------------- --------------- CLOSED IN AVG. PRICE START OF
PROJECT PLANNED AT 2/28/94 SOLD MODEL SPEC(A) SOLD UNSOLD FY 1994 OF HOMES(B) CONSTRUCTION
- - --------------- -------- ---------- ----- ------ -------- ----- ------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED:
The Courts
Palmia/Mission
Viejo
Orange
County......... 183 183 -- -- -- -- 183 -- $150,000(est.) FY95
Fullerton
Fullerton
Orange
County....... 143 143 -- -- -- -- 143 -- 380,000(est.) FY95
Newport Coast
Irvine
Orange
County....... 44 44 -- -- -- -- 44 -- N/A(c) FY95
The Villas
Palmia/Mission
Viejo
Orange
County......... 171 171 -- -- -- -- 171 -- 163,000(est.) FY95
Rancho Serrano
Temecula
Riverside
County....... 120 90 10 4 1 9 66 30 221,000 FY94
Cozumel
La Quinta
Riverside
County....... 300(d) 292 3 5 1 6 277 8 482,000 FY94
Cayman
La Quinta
Riverside
County....... 188(d) 188 6 4 6 4 168 -- 348,000(est.) FY94
Antigua
La Quinta
Riverside
County....... 76(d) 72 -- -- -- 10 62 -- 179,000(est.) FY94
Others(e)...... -- -- -- -- -- -- -- 12 226,000
-- --
-------- ----- ----- ----- ------- ---
SUBTOTAL
WHOLLY-
OWNED........ 1,225 1,183 19 13 8 29 1,114 50
-- --
-------- ----- ----- ----- ------- ---
JOINT VENTURES:
Crestmont(f)
Portola Hills
Orange
County....... 128 67 20 -- 10 -- 37 61 $293,000 FY94
Alicante
Rancho Santa
Margarita
Orange
County....... 62 36 13 4 16 1 2 26 202,000 FY94
Paragon
Rancho Santa
Margarita
Orange
County....... 94 65 15 4 2 11 33 28 312,000 FY94
Fairway Estates
Coto de Caza
Orange
County....... 62 22 15 -- 6 1 -- 40 375,000 FY94
-- --
-------- ----- ----- ----- ------- ---
SUBTOTAL JOINT
VENTURES..... 346 190 63 8 34 13 72 155
-- --
-------- ----- ----- ----- ------- ---
TOTALS......... 1,571 1,373 82 21 42 42 1,186 205
-- --
-- --
-------- ----- ----- ----- ------- ---
-------- ----- ----- ----- ------- ---
</TABLE>
- - ---------------
(a) Speculative units are unsold homes under construction.
(b) Represents average price of homes closed for projects with units for sale on
February 28, 1994, and estimated average price for projects under
development on February 28, 1994.
(c) It is too early in the design development process for this project to
identify a specific average. Final approval is subject to master developer
approval.
(d) Includes 214 lots, 148 lots and 3 lots the Company has the right to acquire
under option contracts with the sellers for the Cozumel, Cayman and Antigua
projects, respectively. There can be no assurance that the Company will be
in a position to acquire or will choose to acquire such lots within the
option term.
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(e) Includes closings at the following: Portola Hills (2 closings); Palmia
Terraces (7 closings); Foothill Ranch (2 closings); Palmia Courts (1
closing). These closings are in projects in which all remaining units were
sold in 1994.
(f) Delivery of 34 units in this project requires that water service
commitments be obtained from a local water district (the "District"). While
there is currently a dispute between the master developer (which sold the
site to the Company) and the District that may affect the Company's ability
to obtain such water service commitments, the Company believes that an
arrangement will be reached in the near future for construction of certain
additional water facilities required by the district for such commitments
to be issued, but there can be no assurance that such an arrangement can be
reached or that the lack of a current commitment will not adversely delay
sales or closings or increase the Company's costs on this project.
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DEVELOPMENTS IN PROCESS -- NEVADA
The following table below sets forth certain information about projects
under development in Nevada as of February 28, 1994. Each of the projects is
described in greater detail below the table.
<TABLE>
<CAPTION>
AVAILABLE FOR
HOMES UNDER FUTURE UNITS
NAME AND TOTAL UNITS CONSTRUCTION AT 2/28/94 CONSTRUCTION CLOSED
LOCATION OF UNITS REMAINING ----------------------- -------------- IN AVG. PRICE START OF
PROJECT PLANNED AT 2/28/94 SOLD MODEL SPEC(A) SOLD UNSOLD FY 1994 OF HOMES(B) CONSTRUCTION
- - -------------------------- -------- ---------- ----- ------ -------- ----- ------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED:
Windchime
Las Vegas
Clark County.............. 167 40 22 2 5 10 1 103 $ 82,000 FY93
Echoes at Hidden Canyon
North Las Vegas
Clark County.............. 194 43 18 3 6 4 12 113 101,000 FY93
Rosewalk
Las Vegas
Clark County.............. 138 127 12 3 1 19 92 11 88,000 FY94
White Cliffs
Las Vegas
Clark County.............. 287(c) 287 5 3 9 270 -- 99,000(est.) FY94
The Falls at Hidden Canyon
North Las Vegas
Clark County.............. 241(d) 241 -- -- -- -- 241 -- 110,000(est.) FY95
Impressions
Las Vegas
Clark County.............. 202 --(e) -- -- -- -- -- 14 114,000 FY91
Tapestry
Las Vegas
Clark County.............. 73 --(e) -- -- -- -- -- 1 108,000 FY92
Spinnaker Bay
Laughlin
Clark County.............. 108 45 8 2 5 3 27 43 121,000 FY93
Tiara
Henderson
Clark County.............. 56 --(e) -- -- -- -- -- 31 131,000 FY93
-- --
-------- ----- ----- ----- ------- ---
SUBTOTAL WHOLLY-OWNED..... 1,466 783 65 13 26 36 643 316
-- --
-------- ----- ----- ----- ------- ---
JOINT VENTURES:
Taos Estates(f)
Las Vegas
Clark County.............. 91 91 -- -- -- -- 91 -- 238,000(est.) FY94
Portraits
Las Vegas
Clark County.............. 54 30 9 3 4 3 11 24 145,000 FY94
Plateau
Las Vegas
Clark County.............. 156 61 36 1 8 8 8 95 111,000 FY94
Las Hadas
Las Vegas
Clark County.............. 94 90 24 2 12 -- 52 4 85,000 FY94
-- --
-------- ----- ----- ----- ------- ---
SUBTOTAL JOINT VENTURES... 395 272 69 6 24 11 162 123
-- --
-------- ----- ----- ----- ------- ---
TOTALS.................... 1,861 1,055 134 19 50 47 805 439
-- --
-- --
-------- ----- ----- ----- ------- ---
-------- ----- ----- ----- ------- ---
</TABLE>
- - ---------------
(a) Speculative units are unsold homes under construction.
(b) Represents average price of homes closed for projects with units for sale on
February 28, 1994, and estimated average price for projects under
development on February 28, 1994.
(c) Durable owns 119 lots in the White Cliffs project, and holds options for the
remainder of the project anticipated to yield approximately 168 lots. There
can be no assurance that the Company will be in a position to acquire or
will choose to acquire such lots within the option term.
(d) At February 28, 1994, Durable held options anticipated to yield 241 lots.
Sixty of such lots were purchased on March 1, 1994. There can be no
assurance that the Company will be in a position to acquire or will choose
to acquire the remainder of such lots within the option term.
(e) Projects completed during fiscal year 1994 for which no units remain to be
sold.
(f) J.M. Peters Nevada, Inc. and Durable are general partners.
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JOINT VENTURES
The Company conducts its homebuilding operations as either wholly-owned
projects or through joint ventures in which the joint venture partner typically
provides capital financing and/or land required for the project. The Company has
utilized joint ventures in order to improve the financial condition of the
Company, to increase access to quality sites and to obtain construction
financing. Currently, the financial results of operations of all of the
Company's joint ventures are consolidated in the Company's financial statements.
The Company expects to utilize joint ventures in the future on a selective
basis, taking into account other available sources of financing, project risk
and the potential return to the Company.
At February 28, 1994, the Company's joint ventures were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
TOTAL UNITS CUMULATIVE UNITS UNITS REMAINING
PLANNED CLOSED AT 2/28/94 AT 2/28/94
----------- ----------------- ---------------
<S> <C> <C> <C>
PETERS RANCHLAND, INC.
Crestmont -- Orange County......................... 128 61 67
Alicante -- Orange County.......................... 62 26 36
Paragon -- Orange County........................... 94 29 65
Fairway Estates -- Orange County................... 62 40 22
--- --- ---
Sub-total.................................. 346 156 190
--- --- ---
DURABLE HOMES, INC.
Portraits -- Las Vegas............................. 54 24 30
Plateau -- Las Vegas............................... 156 95 61
Las Hadas -- Las Vegas............................. 94 4 90
--- --- ---
Sub-total.................................. 304 123 181
--- --- ---
J.M. PETERS NEVADA, INC.(A)
Taos Estates -- Las Vegas.......................... 91 -- 91
--- --- ---
Sub-total.................................. 91 -- 91
--- --- ---
Total................................................ 741 279 462
--- --- ---
--- --- ---
</TABLE>
- - ---------------
(a) Durable is also a general partner in Taos Estates, L.P.
Southern California Joint Ventures. The Company's most significant joint
venture relationship was established effective upon the closing date of the
Acquisition in August 1992. On the closing date, Peters Ranchland Company, Inc.,
a wholly-owned subsidiary of the Company ("Ranchland") formed for the purpose of
acting as general partner, entered into four limited partnership agreements with
the CalPERS LP for the purpose of developing four of the Company's residential
projects in Southern California. In each of the CalPERS Partnerships, Ranchland
is the sole general partner and the CalPERS LP is the sole limited partner. Upon
formation of the CalPERS Partnerships, the CalPERS LP invested an aggregate of
$16.6 million to initially capitalize the CalPERS Partnerships, which initial
capital was used by the CalPERS Partnerships to acquire the four properties from
the Company. In addition to its initial capital contribution, the CalPERS LP
also subsequently agreed to fund the projected construction financing for each
of the CalPERS Partnerships through additional contributions or construction
loans in an aggregate amount of up to $66 million for the four projects, subject
to phase budget approvals. The Company has prepaid CalPERS LP ($11.8 million)
with the proceeds of the Offering and under the terms of the Indenture the
Company is prohibited from obtaining any further construction financing from the
CalPERS LP with respect to the four CalPERS Partnerships. It is the Company's
intention to construct the balance of the units in the CalPERS Partnerships with
the proceeds from the offering.
Net proceeds from the sale of completed homes by the CalPERS Partnerships
are distributed on a project by project basis as follows: (1) first, to pay
outstanding interest and principal on any construction loans or advances by the
Company, (2) second, to pay a preferred return to the partners (on a pro rata
basis) on the capital contributed to the applicable CalPERS Partnership, (3)
third, to pay back the capital contributions made by the partners to the
applicable CalPERS Partnership on a pro rata basis, (4) fourth, to pay fees to
the CalPERS LP for the ongoing financing of certain model units for the CalPERS
Projects which have not been
9
<PAGE> 11
sold and leased-back by the CalPERS Partnership, which fees are approximately
$280,000 in the aggregate for the three CalPERS Projects that did not meet the
sale-leaseback deadline, and (5) fifth, any remaining proceeds to the partners
50% each, provided that the percentage payable to the CalPERS LP will be
increased to a maximum not to exceed 75% of such remaining proceeds of each
CalPERS Project to the extent necessary to maintain an internal rate of return
of 15% on all loans and capital contributions made by the CalPERS LP to the
CalPERS Partnerships on an aggregate basis (the "Minimum IRR Requirement").
Based upon current sales and projections, the Company anticipates that
Ranchland's share of proceeds from the CalPERS Partnerships will not be subject
to any reduction due to the CalPERS Minimum IRR Requirement. In connection with
each CalPERS Partnership, Ranchland and the Company have each guaranteed the
costs set forth in the approved project budgets.
Pursuant to the terms of each of the CalPERS Partnerships, Ranchland's
obligations under the four partnerships are cross-collateralized and
cross-defaulted. Under the applicable provisions, the default by Ranchland under
any one of the CalPERS Partnerships will constitute a default under all of the
CalPERS Partnerships. Under certain circumstances the CalPERS LP has the right
to use proceeds otherwise payable to Ranchland under any one of the CalPERS
Partnerships to (1) provide a reserve for anticipated project cost overruns for
any of the CalPERS Partnerships, (2) to pay anticipated shortfalls of interest
on construction loans to any of the CalPERS Partnerships, (3) to provide a
reserve as necessary to assure the return of CalPERS capital contributions and
preferred returns under any of the CalPERS Partnerships, (4) to provide a
reserve for the Minimum IRR Requirement (but only to the extent set forth in the
immediately preceding paragraph) or (5) to remedy any damages caused by any
default of Ranchland under any of the CalPERS Partnerships.
Under the current limited partnership agreement governing each of the
CalPERS Partnerships, provided that Ranchland is not in default, Ranchland is
entitled to a general partner overhead fee equal to 3% of the gross unit sales
prices for the CalPERS Projects. The overhead fees are pro rated by phases for
each CalPERS Project and paid in equal monthly installments throughout such
phase. The Company currently anticipates that the cash flows from each of the
CalPERS Projects will be sufficient to allow for distributions to Ranchland.
Nevada Joint Ventures. Durable is a party to four joint ventures, including
one in which JMPN also is a party, in the Las Vegas area.
Durable is the general partner of Las Hadas, L.P., a limited partnership
formed for the purpose of developing the Las Hadas project. In May 1993, the
limited partner contributed land valued at $564,000 to the partnership and is
entitled to be repaid for such contribution at the rate of $8,000 per unit from
the proceeds of each unit closed until all the capital and preferred return are
paid in full plus interest on the amount of such contribution which has not been
repaid at 8% per annum for six months following the first closing. The aggregate
balance of outstanding preferred return and unreturned capital to the limited
partner was $532,000 at February 28, 1994. All profit goes to Durable after the
limited partner's capital contribution and preferred return are paid. Durable is
responsible for acquiring third party financing and for any cash flow shortages.
Durable is also the general partner in Plateau Venture, L.P., a limited
partnership formed for the purpose of developing the Plateau project. In
February 1993, the limited partner contributed $1,000,000 and Durable
contributed land at an agreed-upon value of $200,000 to the joint venture. The
partners have been repaid their original capital contributions. Durable is
responsible for securing third party financing and for any cash flow shortages.
Any loans by Durable to the joint venture are entitled to repayment prior to
distributions to the limited partner. The limited partner is entitled to 45% and
Durable is entitled to 55% of net cash flow when it becomes available.
Durable is the general partner and two other persons (including Dean E.
Cederquist, son of an officer of Durable) are the limited partners of Portraits
Venture, L.P., a limited partnership formed for the purpose of developing the
Portraits project. The limited partners contributed $500,000 and Durable
contributed land at a deemed value of $500 to the joint venture in June 1993. At
February 28, 1994, the balance of the limited partners' original capital
contributions was $88,880 and the balance of Durable's original capital
contribution was $500. Durable is responsible for securing third party financing
for the project and for any cash flow
10
<PAGE> 12
shortages related to the joint venture. The limited partners are entitled to 31%
and Durable is entitled to 69% of net cash flow when it becomes available. See
"Certain Relationships and Related Party Transactions."
JMPN and Durable are general partners in Taos Estates L.P., a California
limited partnership formed to develop the Taos Estates project. Pursuant to the
terms of the partnership agreement for Taos Estates L.P., JMPN is required to
contribute 10% of the estimated capital needs of the partnership in an amount
anticipated not to exceed $188,800 and the limited partners are required to
contribute 90% of the estimated capital needs of the partnership up to a maximum
amount of $1,700,000. As of February 28, 1993, JMPN had made aggregate
contributions to the partnership of $100,000 and the limited partners had made
aggregate contributions of $500,000. In the event of capital needs in excess of
the foregoing amounts, the partners may make a loan to the partnership at a rate
of 2% over the Bank of America prime rate. Net proceeds from Taos Estates LP are
distributed after payment of third party acquisition and construction financing
as follows: (1) first, to repay principal and interest on any partner loans, (2)
second, to pay JMPN a management fee of 3% of the gross sales prices of closed
units, (3) third, to repay the capital contribution of JMPN and the limited
partners on a pro rata basis, (4) fourth, to pay the partners an accrued
preferred return of 10% on their contributed and unreturned capital on a pro
rata basis, and (5) fifth, any remaining proceeds are distributed 50% to the
limited partners, 45% to JMPN and 5% to Durable.
LAND ACQUISITION
The Company generally purchases and holds entitled land in California only
in amounts sufficient to support home production and sales over a 24 to 36 month
period. The Company also tries to maintain an additional 18 month supply of
entitled land through options and other means. The Company generally purchases
and holds entitled land in Nevada only in amounts sufficient to support home
production and sales over an 18 month to 24 month period. The Company also tries
to maintain an additional 12 to 18 month supply of entitled land in Nevada
through options, purchase agreements, development agreements and joint ventures.
The Company does not acquire and hold land for speculative investment.
The following table sets forth the estimated number of lots owned, under
option and controlled as of February 28, 1994 and the number of housing units
delivered during fiscal year 1994:
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF HOUSING UNITS THAT COULD
BE
CONSTRUCTED ON LAND CONTROLLED AS OF FEBRUARY
28, 1994(A)
---------------------------------------------
UNDER
REGION OWNED OPTION CONTROLLED(B) TOTAL
- - -------------------- ----- ------ ------------- ------
<S> <C> <C> <C> <C>
Southern
California........ 1,027 365 58 1,450
Nevada 646 409 607 1,662
----- ------ ------ ------
1,673 774 665 3,112
----- ------ ------ ------
----- ------ ------ ------
</TABLE>
- - ---------------
(a) Based upon current management estimates, which are subject to change.
Includes 171 owned lots subject to litigation. See "-- Default on Senior
Indebtedness."
(b) Controlled home sites include those properties for which the Company has
entered into a variety of contractual relationships including non-binding
letters of intent, binding purchase agreements with customary conditions
precedent and similar arrangements. There can be no assurance that the
Company will choose to acquire such properties.
The Company typically considers numerous factors including the following
when analyzing the suitability of land for acquisition and development:
proximity to existing developed areas; population growth patterns; availability
of existing community services (i.e., utilities, schools and transportation
facilities); employment growth rates; anticipated absorption rates for new
housing; and the estimated cost of development.
The Company currently does not have any unentitled land and does not expect
to purchase any unentitled land in the near future. The Company has agreed in
each of the limited partnership agreements with the CalPERS LP that it will not
acquire unentitled land without the prior written consent of the CalPERS LP,
which consent cannot be unreasonably withheld. The Company generally purchases
entitled land in order to reduce the risks associated with developing land for
which appropriate land use approval has not been
11
<PAGE> 13
obtained. Historically, the Company has purchased unfinished lots on entitled
land for which tentative or final maps have been approved. When favorable terms
are available, however, the Company will purchase finished lots. The Company
generally tries to negotiate into the purchase contract the right to enter upon
the land and commence development, marketing and sales before the close of
escrow in order to minimize the time between the closing of the land purchase
and the delivery of finished homes on the property.
The Company's profitability is affected by changing land prices, although
the Company attempts to minimize the risks caused by fluctuating land values by
acquiring a limited inventory of land. Owned land inventories generally are
limited to a level capable of providing a 24 to 36 month supply of lots in
California and an 18 to 24 month supply of lots in Nevada. However, there can be
no assurance that the Company's land inventories will not exceed a 36 month
supply as the Company is unable to accurately predict its future home sales.
Furthermore, the Company may, within the general parameters of its larger
operating strategy, choose to acquire parcels of land that might not be
developed within 36 months in certain special situations, for example when
management perceives land prices to be temporarily depressed. The Company also
has utilized rolling options and phased land purchases in order to control
larger amounts of land without the attendant financing and carrying costs. As a
result, the Company may from time to time "control" more than a 36 month supply
of land and thus may benefit from increasing land values.
The Company tries to avoid speculative building by constraining project
phase sizes to approximately 10-15 units, generally avoiding entitlement risks
by acquiring entitled properties and acquiring lots and land through the use of
options, development agreements and joint ventures with landowners when
appropriate. Additionally, by forming strategic alliances with equity partners,
the Company has been able to obtain access to additional capital and to spread
project risk, which has allowed the Company to minimize the risk of holding
undeveloped property and to preserve its capital.
In the past few years, land prices in the Company's Southern California
market have decreased because of economic recession, reduced availability of
credit caused by changing regulatory policies of financial institutions and the
demise of a number of savings and loan institutions. As a result, companies with
access to capital are in a position to take advantage of the availability of
lower priced land in attractive locations. Management believes that this will
allow the Company to achieve higher profit margins and more rapid inventory
turnover. Management believes that the proceeds of the Offering completed in May
1994 will permit the Company to capitalize on the opportunities created by the
current restrictive credit environment.
PRODUCT DESIGN
The Company, having received numerous industry design awards for its homes
and developments, is recognized as one of the premier homebuilders in Southern
California and Nevada. The Company's homes are noted for their innovative
design, attention to detail and quality construction.
Most of the Company's design work is performed by outside architects,
designers and engineers, whose work is overseen by the Company on a
project-by-project basis. While approximately ten of the Company's employees are
involved in the design process, the Company believes that the use of third
parties reduces its costs, increases design innovation and quality, and reduces
the risks of liability associated with the design process. The Company takes an
active role in monitoring and directing the work of outside architects,
designers and engineers. The Company believes it is critical to coordinate the
design process with the construction and sales and marketing efforts of the
Company to ensure an appropriate balance between market responsiveness, design
innovation and construction cost effectiveness.
The Company strives to create a variety of architectural styles within its
projects by offering numerous models and exterior styles. By doing so, the
Company hopes to enhance home values by creating diversified neighborhood looks
within its projects.
Generally, the Company designs the interior finish of homes sold. The
Company also offers home buyers the opportunity to engage interior design
consultants to personalize the interior of their homes. Such services are
offered at an additional cost to buyers through the Company's wholly owned
subsidiary, Newport Design
12
<PAGE> 14
Center, Inc. ("Newport Design"). During fiscal year 1994, Newport Design had
total revenues of $2.8 million and a net profit of $323,000.
DEVELOPMENT AND CONSTRUCTION
The Company acts as the general contractor for the construction of its
projects. Virtually all construction work for the Company is performed by
subcontractors. The Company's employees supervise the construction of each
project, coordinate the activities of subcontractors and suppliers, subject
their work to quality and cost controls and assure compliance with zoning and
building codes. Subcontractors typically are retained on a phase-by-phase basis
to complete construction at a fixed price. Agreements with the Company's
subcontractors are generally entered into after competitive bidding on an
individual basis. The Company has established long-term relationships with a
large number of subcontractors. The Company is not dependent to any material
extent upon the services of any one subcontractor and believes that, if
necessary, it can generally retain sufficient qualified subcontractors for each
aspect of construction. The Company believes that conducting its operations in
this manner enables it not only to readily and efficiently adapt to changes in
housing demand, but also to avoid fixed costs associated with retaining
construction personnel.
The Company generally negotiates volume discounts with manufacturers and
suppliers in order to take advantage of its volume of production. The Company
believes that this materials purchasing strategy gives it an advantage in
offering homes at a lower price than some of its smaller competitors.
The Company develops its projects in several phases averaging approximately
15 homes per phase. From market studies, the Company determines the number of
homes to be built in the first phase, the appropriate price range for the market
and other factors. The first phase of home sales is typically small to reduce
risk while the Company measures consumer demand. Construction generally does not
begin until some sales have occurred. Subsequent phases are generally not
started until at least 50% of the homes in the previous phase have been sold.
Sales prices in the second phase are then adjusted to reflect market demand as
evidenced by sales experience in the first phase. With each subsequent phase,
the Company continues to accumulate market data which, along with information
such as time of year, the local labor situation and the availability of
materials and supplies, enables the Company to determine the pricing, timing and
size of subsequent phases. Although the time required to complete a phase varies
from development to development depending on the above factors, the Company
typically completes construction of a phase within one of its California
developments in approximately five to six months and within its Nevada Division
developments within three to four months.
SALES AND MARKETING
The Company normally builds, decorates, furnishes and landscapes model
homes for each project and maintains on-site sales offices, which typically are
open seven days a week. Management believes that model homes play a particularly
important role in the Company's marketing efforts. Consequently, the Company
expends a significant effort in creating an attractive atmosphere at its model
homes. Interior decorations vary among the Company's models and are carefully
selected based upon the lifestyles of targeted buyers. Structural changes in
design from the model homes generally are not permitted, but home buyers may
select various other optional construction and design amenities.
The Company sells virtually all of its homes through sales representatives,
who typically work from the sales offices located at the model homes used in
each subdivision or in on-site sales trailers. To a lesser extent, the Company
also uses community, regional and cooperative brokers to sell its homes. Company
representatives are available to assist prospective buyers by providing them
with floor plans, price information and tours of model homes, and by assisting
them with the selection of options. Sales representatives attend periodic
meetings at which they are given information regarding other products in the
area, the variety of financing programs available, construction schedules and
marketing and advertising plans. Sales representatives at Southern California
projects are employed by the Company. Sales representatives at Nevada projects
are employed by a real estate brokerage firm retained by the Company for the
specific purpose of providing such sales representatives.
13
<PAGE> 15
The Company generally opens on-site sales offices before the construction
of the model homes is completed. These on-site sales offices are utilized to
begin building a reservation book of potential customers. Potential home buyers
submit a refundable deposit (a "reservation fee") ranging from $500 to $10,000.
The Company does preliminary research into the credit status of the potential
home buyer in order to "pre-qualify" the home buyer. Once the prospective home
buyer has been "pre-qualified" and there is a strong indication that the home
buyer will qualify for a mortgage (although final loan approval is still
pending), the home buyer must then make an "earnest money deposit" ranging from
$1,000 to $10,000 for the purchase of its home and a sales contract is executed.
The Company attempts to keep its contract cancellation rate low by
pre-qualifying prospective home buyers, allowing home buyers to customize their
homes at an early point in the purchase process, and building homes rapidly in
order to minimize customers' waiting periods. When home purchase contracts are
canceled, damages are usually limited to a percentage of the purchase price of
the home and may be less pursuant to applicable law or the purchase contract.
The Company generally determines whether to seek to obtain such a penalty on a
case by case basis. When home purchase contracts are canceled the Company is
usually able to identify alternate home buyers. As a result, only a small
percentage of homes are not sold and closed within a few days after construction
is completed.
A majority of the Company's current Nevada communities meet applicable
Federal Housing Administration ("FHA") or Veterans Administration ("VA")
requirements. FHA and VA financing generally enables homebuyers to purchase
homes with lower down payments than the down payments required by conventional
mortgage lenders. The FHA generally permits loans for up to 90-95% of the value
of a home and the VA generally permits loans up to 100% of the value of a home.
The Company believes that the availability of FHA and VA financing broadens the
group of potential purchasers for the Company's homes. In fiscal year 1994, a
majority of the homes the Company delivered in Nevada were financed with
VA-backed or FHA-backed mortgages. None of the Company's California projects
qualifies for FHA or VA financing.
The Company makes extensive use of advertising and other promotional
activities, including newspaper and magazine advertisements, brochures, direct
mail and the placement of strategically located sign boards in the immediate
areas of its projects. Because the Company usually offers multiple projects
within a single market area, it is able to utilize regional advertising that
highlights all Company projects within that same market area.
The Company provides flooring and other amenities and upgrades to its
homebuyers in California through its wholly-owned subsidiary, Newport Design.
BACKLOG AND INVENTORY
The Company typically presells homes prior to and during construction
through sales contracts requiring cash deposits ranging from $1,000 to $10,000.
Generally, these contracts are cancelable if the customers are unable to sell
their existing homes, qualify for financing or under certain other
circumstances. A home sale is placed in backlog status upon execution of the
above described contract and receipt of a deposit and is removed when such
contracts are canceled as described above or the home sale is closed. At
February 28, 1994, the Company had a backlog in California of 124 homes sold
with an aggregate sales value of $37.4 million, compared to a backlog of 92
homes sold with an aggregate sales value of $25.9 million at February 28, 1993.
At February 28, 1994, the Company had a total backlog in Nevada of 181 homes
sold with an aggregate sales value of $18.4 million, compared to Durable's
backlog of 162 homes sold with an aggregate sales value of $16.1 million at
February 28, 1993.
14
<PAGE> 16
The following table shows net orders (sales made less cancellation and
credit rejections), homes closed and ending backlog relating to sales of the
Company's homes and homes under contract for each quarter since the beginning of
fiscal year 1993. Management believes that the Company's backlog at any given
time is a good indicator of the number of units that will be closed in the four
months following such date:
<TABLE>
<CAPTION>
ENDING BACKLOG
NET NEW HOMES -----------------
ORDERS CLOSED UNITS ($000'S)
------- ----- ----- -------
<S> <C> <C> <C> <C>
Fiscal Year 1993
1st Quarter.................................... 26 45 62 $23,520
2nd Quarter.................................... 5 45 22 5,980
3rd Quarter.................................... 22 16 28 6,474
4th Quarter.................................... 73 9 92 25,853
------- -----
Total Fiscal Year 1993................. 126 115
------- -----
------- -----
Fiscal Year 1994 (Actual)
1st Quarter.................................... 46 17 121 $36,918
2nd Quarter.................................... 52 15 158 47,893
3rd Quarter.................................... 163 165 295(a) 54,054(a)
4th Quarter.................................... 217 207 305 55,816
------- -----
Total Fiscal Year 1994................. 478 404
------- -----
------- -----
Fiscal Year 1994 (Pro forma)(b)
1st Quarter.................................... 150 138 266 $51,236
2nd Quarter.................................... 165 134 297 61,618
3rd Quarter.................................... 163 165 295 54,054
4th Quarter.................................... 217 207 305 55,816
------- -----
Total Fiscal Year 1994 (Pro forma)..... 695 644
------- -----
------- -----
</TABLE>
- - ---------------
(a) Includes 139 homes in Durable's backlog at August 31, 1993.
(b) Includes 12 months of Durable's operations on a pro forma basis.
HOMEOWNER WARRANTY
The Company provides homeowners with a limited one year warranty wherein
the Company will correct deficiencies due to faulty workmanship, defective
materials, or significant construction flaws in the structural components of the
home or in the lot on which the home is located. The warranty does not, however,
include items that are covered by manufacturer's warranties (such as appliances
and air conditioning) or items that are not installed by employees or
contractors of the Company (such as flooring installed by an outside contractor
employed by the homeowner). The Company also provides most Nevada homebuyers
with policies issued by Homeowner's Warranty (HOW), a national program provided
by a third-party that extends protection beyond the Company's warranty period
through the national HOW underwriters. Statutory requirements in the states in
which the Company does business may grant to homebuyers rights in addition to
those provided by the Company. California law establishes a ten-year period
during which a home buyer may seek redress for latent defects resulting from the
architectural design or actual construction of its new home. Historically, the
Company has not incurred any material expenses relating to warranty claims or
defects in construction. The Company maintains appropriate reserves with respect
to each unit sold for the purpose of covering warranty claim expenses.
BONDS AND OTHER OBLIGATIONS
The Company frequently is required to obtain performance or maintenance
bonds for the construction and maintenance of public improvements that are to be
located within its projects. The amount of such obligations outstanding at any
time varies in accordance with the Company's pending development activities.
15
<PAGE> 17
Generally, the bonds are issued by insurance companies and backed by
certificates of deposit or other cash equivalents, guarantees or letters of
credit obtained from the Company's lenders. Once issued, the bonds are released
to the Company at the time the public improvements they are insuring are
completed in each community. If any such obligations were to be drawn upon, the
Company would be obligated to reimburse the issuing surety company. To date, the
Company has not had a performance or maintenance bond drawn upon by any
governmental agency.
ESCROW SERVICES
In addition to the various new entities formed or acquired in 1993, the
Company owns 50% of Bayhill Escrow, Inc. ("Bayhill"). Bayhill is the escrow
company through which the Company conducts most of its California escrow closing
activities.
COMPETITION
The homebuilding industry is highly competitive. In each of the areas in
which it operates, the Company competes in terms of location, design, quality
and price with numerous other residential construction firms, including large
national and regional firms, some of which have greater financial resources than
the Company. As the Company enters and until it develops a reputation in a new
market area, the Company can expect to face even more significant competitive
pressures.
REGULATION
The housing industry is subject to increasing environmental, building,
zoning and real estate sales regulations by various federal, state and local
authorities. Such regulations affect home building by specifying, among other
things, the type and quality of building materials that must be used, certain
aspects of land use and building design, as well as the manner in which the
Company conducts sales activities and otherwise deals with customers.
The Company must increasingly obtain the approval of numerous government
authorities which regulate such matters as land use and level of density, the
installation of utility services, such as water and waste disposal, and the
dedication of acreage for open space, parks, schools and other community
purposes. If such authorities determine that existing utility services will not
adequately support proposed development, building moratoriums may be imposed. As
a result, the Company devotes an increasing amount of time to evaluating the
impact of governmental restrictions imposed upon a new residential development.
Furthermore, as local circumstances or applicable laws change, the Company may
be required to obtain additional approvals or modifications of approvals
previously obtained. Such increasing regulation has resulted in a significant
increase in time between the Company's initial acquisition of land and the
commencement and completion of its developments.
EMPLOYEES
As of April 30, 1994, the Company employed 112 persons full-time, compared
to 62 persons at April 30, 1993. Of these, 10 were in executive positions, 15
were engaged in sales activities, 43 in project management activities and 44 in
administrative and clerical activities. None of the Company's employees are
represented by a union and the Company considers its employee relationships to
be good.
RAW MATERIALS
All of the raw materials and most of the components used in the Company's
business are readily available in the United States. Most are standard items
carried by major suppliers. However, a rapid increase in the number of houses
started could cause shortages in the availability of such materials, thereby
leading to delays in the delivery of homes under construction. In addition,
recent increases in the price of lumber have negatively impacted margins. In
order to maintain its quality standards while providing a product at good
values, the Company has used and is considering the further use of alternative
materials, such as metal studs and framing in some of its projects.
16
<PAGE> 18
DEFAULT ON SENIOR INDEBTEDNESS
During the period that the RTC controlled the Company, the Company
defaulted on most of its loans. Immediately prior to the Acquisition, the
Company had approximately $185.5 million in defaulted loans. Of these, only two
loans with a total principal balance of $10.4 million remained to be resolved at
February 28, 1994, which two loans were resolved as of May 16, 1994. All other
loans have been resolved since the Acquisition.
Of the two loans remaining at February 28, 1994, one is an acquisition and
development loan with an outstanding principal balance of $9.5 million that is
secured by 171 lots in Mission Viejo, California. The loan was originated on
March 14, 1989. West Coast Land Fund L.P. ("West Coast"), the lender that held
the loan, commenced an action in Orange County Superior Court on October 22,
1993 against the Company with respect to the loan (the "Action"). The Action
sought to collect the $9.5 million loan balance, plus interest and costs of
collection, owed by the Company to West Coast. The Company and West Coast have
executed a Loan Pay-Off Agreement (the "Settlement Agreement") pursuant to which
they agreed to settle the Action for $7 million. Pursuant to the Settlement
Agreement, the Company made an initial payment of $350,000 towards the
settlement amount and paid the balance of $6,650,000 on May 16, 1994 in exchange
for dismissal with prejudice of the Action, termination of nonjudicial
foreclosure proceedings and a reconveyance of the property to the Company
pursuant to West Coast's deed of trust.
The second loan, a construction loan with an outstanding principal balance
of approximately $900,000, was held by The Bank of California and secured by 15
lots with foundations in place and one completed home. The loan originated on
December 18, 1991. The Bank of California foreclosed on the property on April 5,
1994, an action that the Company chose not to dispute. Although the Company
believed that it would not be economical to develop the property, the Company
believed that the value of the property exceeds the loan amount and the Company
thus does not anticipate any adverse financial impact from the foreclosure.
REINCORPORATION MERGER
The Company reincorporated under Delaware law on April 7, 1993.
ITEM 2. PROPERTIES
The Company leases two facilities in California. Its principal offices
currently are located at 3501 Jamboree Road, Suite 200, Newport Beach,
California 92660, where the Company occupies approximately 22,313 square feet of
space. The Company's lease expires February 28, 1995. The Company also maintains
a 2,600 square foot design center in Newport Beach.
On May 25, 1994, the Company closed on the acquisition of a 45,389 square
foot headquarters building for a total purchase price of $3.2 million. The
Company will occupy approximately 20,000 square feet and approximately 22,800 of
the remaining 25,389 square feet are currently leased to tenants.
The Company leases one facility in Nevada where it occupies approximately
6,819 square feet of space.
ITEM 3. LEGAL PROCEEDINGS
The Company settled, on May 16, 1994, litigation with West Coast regarding
a defaulted loan. See "Business -- Default on Senior Indebtedness" above.
On September 19, 1990, the Bay Ridge Park Homeowners Association filed suit
in Orange County Superior Court against the Bayridge Partnership (comprised of
the Company and Downey Savings (LOGO) Loan Service Company) alleging the
existence of certain construction defects with respect to the Bay Ridge Park
Condominiums in Newport Beach, California. The suit seeks an unspecified amount
of damages. Construction on this project was completed in 1987, several years
before the Acquisition. While discovery is ongoing with respect to the alleged
defects and while the outcome of litigation is always uncertain, Company
management is of the opinion that the suit will not have a material adverse
impact on the Company's financial condition or results of operations.
17
<PAGE> 19
The Company is also involved in routine litigation arising in the ordinary
course of its business. While the outcome of litigation cannot be predicted with
certainty, in the opinion of management, none of the pending litigation will
have a material adverse effect on the Company's financial condition or the
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
<PAGE> 20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock was traded in the over-the-counter market
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the symbol "JMPC", and was quoted in the NASDAQ National
Market System from the Company's initial public offering in September 1987,
until April 29, 1988, when the Common Stock began trading on the American Stock
Exchange (AMEX: Peters "JMP"). The following table sets forth the quarterly high
and low sales prices for the Common Stock for the periods indicated.
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW
------ -----
<S> <C> <C>
First Quarter (through May 16, 1994)...................... $ 3.94 $2.63
FISCAL 1994
Fourth Quarter............................................ 4.00 2.75
Third Quarter............................................. 3.75 2.38
Second Quarter............................................ 3.00 2.50
First Quarter............................................. 3.75 2.69
FISCAL 1993
Fourth Quarter............................................ 3.50 1.88
Third Quarter............................................. 3.25 2.25
Second Quarter............................................ 4.00 2.00
First Quarter............................................. 4.25 1.25
FISCAL 1992
Fourth Quarter............................................ 4.00 2.00
Third Quarter............................................. 3.00 2.13
Second Quarter............................................ 3.00 1.88
First Quarter............................................. 4.50 1.88
</TABLE>
Payment of dividends is within the discretion of the Company's Board of
Directors and holders of shares of Common Stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds legally
available therefor. The Company's present intention is not to pay dividends in
the foreseeable future, but rather to retain any earnings. During the last two
years, no dividends have been paid.
On April 30, 1994, the Company had approximately 1,800 beneficial holders
of its Common Stock.
19
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information of the Company is
presented for the fiscal years ended February 28, 1994, February 28, 1993,
February 29, 1992, February 28, 1991 and February 28, 1990. The selected
financial information and other data should be read in conjunction with the
Company's audited Consolidated Financial Statements and the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, both of which are included elsewhere in this report. Certain
reclassifications have been made to the prior years balances to conform to the
current year presentation.
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS AND OPERATING DATA)
------------------------------------------------------
LAST DAY OF FEBRUARY
------------------------------------------------------
1990 1991 1992 1993 1994
-------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues............................. $315,726 $ 215,535 $184,944 $ 75,702 $ 91,066
Cost and expenses:
Cost of homes and land................... 241,037 184,672 170,329 68,257 73,348
Adjustments to carrying value of real
estate projects and investments in
partnerships.......................... 1,055 84,327 56,016 75,476 --
Adjustment to costs in excess of net
assets acquired....................... -- 18,951 -- -- --
Interest expense......................... 353 12,006 14,691 8,538 418
Selling, general and administrative...... 29,010 26,213 15,579 9,764 12,322
-------- --------- -------- --------- --------
Total costs and expenses......... 271,455 326,169 256,615 162,035 86,088
Minority interest.......................... -- -- -- -- 4,332
-------- --------- -------- --------- --------
Income (loss) before income taxes and
extraordinay gain........................ 44,271 (110,634) (71,671) (86,333) 646
Income tax (benefit) expense............... 18,937 (2,653) (13,895) (1,792) --
-------- --------- -------- --------- --------
Income (loss) before extraordinary gain.... 25,334 (107,981) (57,776) (84,541) 646
Extraordinary gain....................... -- -- -- -- 4,268
-------- --------- -------- --------- --------
Net income (loss)........................ $ 25,334 $(107,981) $(57,776) $(84,541) $ 4,914
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
Net income (loss) per common share:
Before extraordinary gain................ $(1.81) $(7.72) $(4.13) $(6.05) $ .04
Extraordinary gain....................... -- -- -- -- .30
------ ------ ------ ------ -----
Net income (loss) per share(1)............. $(1.81) $(7.72) $(4.13) $(6.05) $ .34
------ ------ ------ ------ -----
------ ------ ------ ------ -----
</TABLE>
<TABLE>
<CAPTION>
AT THE LAST DAY OF FEBRUARY
-----------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Residential inventories.................. $474,687 $395,484 $224,566 $ 99,636 $105,696
Total assets............................. 594,759 410,963 250,822 115,551 121,954
Notes payable............................ 232,549 160,638 59,165 38,433 34,709
Due to parent............................ 193,840 205,121 204,138 1,702 --
Stockholders' equity..................... 140,150 32,169 (25,607) 48,015 55,594
OPERATING DATA (in units):
Homes closed............................. 775 541 395 115 404
Homes contracted for..................... 759 430 326 126 478
Homes in backlog......................... 261 150 81 92 305
</TABLE>
- - ------------
(1) The weighted average number of shares outstanding is 14,488,000 for the year
ended February 28, 1994 and 13,980,000 for the years ended February 28,
1993, February 29, 1992, February 28, 1991 and February 28, 1990.
20
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Management of the Company believes that its historical operating results
prior to the third and fourth quarters of fiscal year 1994 are not meaningful
indicators of its future performance primarily because of (i) RTC's control
during fiscal year 1992 and most of fiscal year 1993, (ii) the period of time
needed to recommence California building operations in late fiscal year 1993 and
early fiscal year 1994 following the acquisition of the Company from the RTC
during fiscal year 1993 and (iii) the Durable Acquisition which occurred in the
middle of fiscal year 1994.
Throughout the 22-month period of the RTC's control of the Company (from
November 1990 to August 1992), the Company's operations were essentially limited
to liquidating inventory and the Company's construction and acquisition activity
was virtually halted. Immediately following the Acquisition, the Company began
the process of reactivating California operations stalled by the RTC. While the
RTC's liquidation strategy left the Company with only 13 completed homes and 15
homes under construction at the time of the Acquisition, the Company did have
substantial assets including almost 2,000 owned and entitled lots, 365 lots
under option, an experienced staff of 68 persons and operating and information
systems to support ongoing homebuilding operations. The Company was able to
commence meaningful construction on reactivated projects during the first two
quarters of fiscal year 1994, marketing the homes in advance of completion of
construction. The process of recommencing construction can be seen in the low
number of deliveries (completion of construction of a home as evidenced by the
receipt of a certificate of occupancy) in the three fiscal quarters immediately
after the Acquisition when there were only 13 home deliveries in California. The
Company's sales efforts were impaired during this period as a result of the lack
of completed inventory and the significant amount of time that buyers were
required to wait for construction to be started and completed.
The Company's current average construction period for a California home is
approximately six months. As a result, most of the home sales made during the
first and second quarters of fiscal year 1994 were not closed until the third
and fourth quarters of fiscal year 1994, when construction was completed and
closings occurred. The impact of this construction cycle is seen in the very low
number of units closed in California in the first two quarters of fiscal year
1994 (32 units) compared to the third and fourth quarters of fiscal year 1994
(173 units). The Company's revenues from home sales, which are recognized at
closing, increased significantly in the third and fourth quarters of fiscal year
1994 as construction was completed on projects recommenced during the first half
of the fiscal year.
Importantly, the Company's current backlog is at a level consistent with
the level of third and fourth quarter closings in fiscal year 1994. See
"Business -- Backlog and Inventory." Additionally, the same projects that
generated substantially all of the closings in fiscal year 1994 are still
actively selling homes at the start of fiscal year 1995. The Company expects to
start construction on approximately 14 new projects in fiscal year 1995 that
were not under construction during fiscal year 1994, 11 of which are currently
owned or in escrow. See "Business -- Developments in Process -- California" and
"Business -- Developments in Process -- Nevada."
21
<PAGE> 23
Although Durable, which was acquired by the Company as of September 1, 1993
(the start of the third quarter of fiscal year 1994), was a significant
contributing factor to the Company's performance during the last two quarters of
fiscal year 1994, the Company's California results of operations showed
significant improvements and a return to profitability on a stand-alone basis
during these two quarters, as shown below:
CALIFORNIA DIVISION
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED FISCAL YEAR
----------------------------------------------------- ENDED
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, FEBRUARY 28,
1993 1993 1993 1994 1994
-------- ---------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total revenues.......................... $ 4,004 $ 8,250 $29,122 $28,498 $ 69,874
-------- ---------- ------------- ------------- ------------
-------- ---------- ------------- ------------- ------------
Gross profit............................ $ (157) $ (26) $ 4,864 $ 5,205 $ 9,886
Interest and other income, net.......... 400 597 900 976 2,873
Selling, general and administrative
expenses.............................. 1,918 1,986 2,287 2,740 8,931
Minority interest....................... -- -- 2,095 1,838 3,933
-------- ---------- ------------- ------------- ------------
Operating income (loss)................. (1,675) (1,415) 1,382 1,603 (105)
Interest expense........................ 276 142 -- -- 418
-------- ---------- ------------- ------------- ------------
Income (loss) before provision (benefit)
for income taxes and extraordinary
gains................................. (1,951) (1,557) 1,382 1,603 (523)
Provision (benefit) for income taxes.... -- -- -- -- --
-------- ---------- ------------- ------------- ------------
Income before extraordinary gain........ (1,951) (1,557) 1,382 1,603 (523)
Extraordinary gain...................... -- -- 4,268 -- 4,268
-------- ---------- ------------- ------------- ------------
Net income (loss)....................... $ (1,951) $ (1,557) $ 5,650 $ 1,603 $ 3,745
-------- ---------- ------------- ------------- ------------
-------- ---------- ------------- ------------- ------------
</TABLE>
In addition to the Company's California operations, Durable had 199 home
closings and $21.1 million in revenue in the last two quarters of fiscal year
1994 (following the Durable Acquisition) compared to 240 home closings and $21.2
million in revenues during the first two quarters of fiscal year 1994, (prior to
the Durable Acquisition). The actual results of the Company's operations for
fiscal year 1994, including Durable's results of operations for only the third
and fourth quarters of fiscal year 1994, are set forth in the table below:
THE COMPANY(A)
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED FISCAL YEAR
----------------------------------------------------- ENDED
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, FEBRUARY 28,
1993 1993 1993 1994 1994
-------- ---------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total revenues.......................... $ 4,004 $ 8,250 $37,343 $41,469 $ 91,066
-------- ---------- ------------- ------------- ------------
-------- ---------- ------------- ------------- ------------
Gross profit............................ $ (157) $ (26) $ 6,750 $ 8,225 $ 14,792
Interest and other income, net.......... 400 597 918 1,011 2,926
Selling, general and administrative
expenses.............................. 1,918 1,986 3,505 4,913 12,322
Minority interest....................... -- -- 2,308 2,024 4,332
-------- ---------- ------------- ------------- ------------
Operating income (loss)................. (1,675) (1,415) 1,855 2,299 1,064
Interest expense........................ 276 142 -- -- 418
-------- ---------- ------------- ------------- ------------
Income (loss) before provision (benefit)
for income taxes and extraordinary
gain.................................. (1,951) (1,557) 1,855 2,299 646
Provision (benefit) for income taxes.... -- -- -- -- --
-------- ---------- ------------- ------------- ------------
Income before extraordinary gain........ (1,951) (1,557) 1,855 2,299 646
Extraordinary gain...................... -- -- 4,268 -- 4,268
-------- ---------- ------------- ------------- ------------
Net income (loss)....................... $ (1,951) $ (1,557) $ 6,123 $ 2,299 $ 4,914
-------- ---------- ------------- ------------- ------------
-------- ---------- ------------- ------------- ------------
</TABLE>
- - ---------------
(a) Reflects Durable's results of operations for only the third and fourth
quarters of fiscal year 1994.
22
<PAGE> 24
BACKLOG AND INVENTORY
The Company typically presells homes prior to and during construction
through sales contracts requiring cash deposits ranging from $1,000 to $10,000.
Generally, these contracts are cancelable if the customers are unable to sell
their existing homes, unable to qualify for financing or under certain other
circumstances. A home sale is placed in backlog status upon execution of the
above described contract and receipt of a deposit, and is removed from backlog
status when such contract is canceled as described above or the home sale is
closed. At February 28, 1994, the Company had a total backlog of 305 homes with
an aggregate sales value of $56 million, which is moderately higher than the
backlog of the Company at the start of the third and fourth quarters of fiscal
year 1994. The Company had a backlog of 297 homes with an aggregate sales value
of $62 million at the end of the second quarter of fiscal year 1994 and 295
homes with an aggregate sales value of $54 million at the end of the third
fiscal quarter of fiscal year 1994.
Management believes that because of the Company's typical construction,
marketing and closing cycle, the Company's backlog is generally a good indicator
of the number of units that will be closed in the four months following a
particular measurement date. The following table shows net new orders (sales
made less cancellations and credit rejections) and the ending backlog relating
to the Company and Durable for each quarter since the middle of fiscal year
1993, including the four fiscal quarters prior to the Durable Acquisition:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FISCAL QUARTER ENDED(A) FISCAL QUARTER ENDED FISCAL YEAR
----------------------------------------------------------------- ------------------------------- ENDED
NOVEMBER 30, FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, FEBRUARY 28,
1992 1993 1993 1993 1993 1994 1994(A)
-------------- -------------- -------------- -------------- -------------- -------------- -------------
(UNITS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C> <C>
California
Starts(b)... 13 2 101 64 78 65 308
Deliveries(c)... 0 0 13 25 77 111 226
Closings(d)... 16 9 17 15 87 86 205
Net new
orders... 22 73 46 52 46 93 237
Ending
backlog... 28 92 121 158 117 124 124
Ending
backlog
($000)... $ 6,474 $ 25,853 $ 36,918 $ 47,893 $ 36,478 $ 37,450 $37,450
Nevada(a)
Starts(b)... 106 52 127 105 140 120 492
Deliveries(c)... 113 112 109 124 51 127 411
Closings(d)... 100 100 121 119 78 121 439
Net new
orders... 146 72 104 113 117 124 458
Ending
backlog... 190 162 145 139 178 181 181
Ending
backlog
($000)... $ 18,525 $ 16,119 $ 14,318 $ 13,725 $ 17,576 $ 18,366 $18,366
Total Ending
backlog
Units..... 218 254 266 297 295 305 305
Dollars
($000)... $ 24,999 $ 41,972 $ 51,236 $ 61,618 $ 54,054 $ 55,816 $55,816
</TABLE>
- - ---------------
(a) Includes information with respect to Durable's backlog on a pro forma basis
for the periods prior to consummation of the Durable Acquisition.
(b) Represents start of construction on a unit.
(c) Represents completion of construction and issuance of a certificate of
occupancy.
(d) Represents the close of escrow and delivery of the deed to the buyer of a
unit.
The same 13 projects that generated substantially all of the closings in
fiscal year 1994 were still actively selling homes at the start of fiscal year
1995. The Company expects to start construction on approximately 14 new projects
in fiscal year 1995 that were not under construction during fiscal year 1994, 11
of which are currently owned or in escrow. See "Business -- Developments in
Process -- California" and "Business -- Developments in Process -- Nevada."
23
<PAGE> 25
VARIABILITY OF RESULTS AND SEASONALITY
The Company's results of operations reflect the cyclical nature of the
homebuilding industry and the Company's historical focus on the Southern
California housing market. The most recent peak in the industry cycle occurred
in 1988 and 1989, which was followed by a downturn in 1990 coinciding with the
national recession. California entered the recession later than other portions
of the country and, as a result, the Company's performance in fiscal year 1990
was quite strong. However, economic and real estate conditions in California and
Southern California in particular have been depressed during 1991, 1992 and
1993. The Company commenced a geographic diversification strategy in fiscal year
1993 in order to reduce its dependence on the Southern California real estate
market. Despite the national recession, the Las Vegas metropolitan area has
experienced significant growth in recent years, with unit sales and population
increases from year to year during the period from 1990 to 1992 according to The
Meyers Group.
The Company's results of operations for any period are affected by a number
of factors, including the number of home developments under construction, the
length of the development cycle of its projects, product mix, weather,
availability of financing, costs of materials and economic conditions in the
areas in which the Company operates. Product mix (both product line and size of
home) has a substantial effect on the average sales price of homes and the gross
margin from home sales because smaller homes generally have lower sales prices
and gross margins than larger homes. The average sales price of homes from
period to period fluctuates based on product line, home size, geographic mix and
changes in the market price of housing.
The homebuilding industry in California, and to a lesser extent Nevada, is
seasonal. Generally, new orders are higher in the spring and summer months,
constituting the Company's first and second fiscal quarters, with closings, and
therefore revenues, being higher in the fall and winter months, which represent
the Company's third and fourth fiscal quarters. While the Company's increased
revenue levels during the third and fourth quarters of fiscal year 1994 were
principally related to delivery of completed homes not previously available
rather than seasonality, the Company expects that seasonal variations will
continue in the future.
RESULTS OF OPERATIONS -- GENERAL
The results of operations of the Company for the fiscal year ended February
28, 1994 do not include the full year of Durable's results of operations due to
the fact that the Durable Acquisition did not occur until the start of the third
quarter of fiscal year 1994. Additionally, the results of operations of the
Company for the fiscal years ended February 29, 1992 and February 28, 1993
include the period of RTC control of the Company. Accordingly, Company
management believes that the historical operating results for those periods are
not meaningful indicators of future performance.
A separate discussion and analysis of Durable's results of operations for
its three most recently completed fiscal years prior to its acquisition by the
Company is also included below. For federal and certain state income tax
purposes, prior to the Durable Acquisition, Durable had elected to be treated as
an S Corporation and, therefore, was not generally subject to tax on its
earnings. See Note 1 to the Consolidated Financial Statements of Durable
included elsewhere in this Memorandum. The Company and Durable are generally not
discussed separately in the discussions of liquidity and capital resources,
inflation and taxes included below.
RESULTS OF OPERATIONS -- THE COMPANY
Because revenues from home sales are not recognized until the sales are
closed, the recommencement of building operations by the Company following the
Acquisition did not result in material levels of home closings until the third
quarter of fiscal year 1994. Additionally, the Company's results of operations
for the periods prior to September 1, 1993 do not reflect the Durable
Acquisition. Accordingly, the Company believes that the historical operating
results for the full fiscal year presented herein are not as meaningful as the
quarterly results for the last two quarters of fiscal year 1994. The Company
incurred operating losses of $1.9 million and $1.6 million during the first two
quarters of fiscal year 1994 and returned to profitability in the third quarter
of fiscal year 1994 as home closings began to occur following completion of the
construction recommenced after the Acquisition. The Company's net income
(excluding extraordinary items) for the third and fourth quarters of fiscal year
1994 was $1.8 million and $2.3 million, respectively.
24
<PAGE> 26
FISCAL YEAR 1994 (YEAR ENDED FEBRUARY 28, 1994) COMPARED TO FISCAL YEAR 1993
(YEAR ENDED FEBRUARY 28, 1993)
Net Income. The Company returned to profitability in fiscal year 1994
having net income of $4.9 million, or $0.34 per share, compared to a net loss of
$84.5 million, or $6.05 per share, for fiscal year 1993. These results were due
to the factors discussed below.
Revenues from Sales of Homes. Revenues from housing sales for fiscal year
1994 of $81.2 million increased $42.8 million, or 112%, from fiscal year 1993.
This increase was due to a greater number of home closings during the fiscal
year. Home closings for fiscal year 1994 were 404, compared to 115 homes for
fiscal year 1993, an increase of 289 homes. This increased activity was
primarily due to the Durable Acquisition, which contributed $21.1 million of
revenues and 199 home closings during the period from September 1, 1993, the
effective date of the Durable Acquisition, through February 28, 1994, and the
home closings from the projects developed by the four CalPERS Partnerships,
which contributed 155 home closings and approximately $46.8 million in revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal year 1994 of $12.3 million increased $2.6
million over fiscal year 1993. This increase was primarily due to the effect of
the Durable Acquisition, which was consummated as of September 1, 1993.
Interest Expense. Interest expense of $418,000 for fiscal year 1994 was
approximately $8.1 million less than fiscal year 1993. This decrease was due
primarily to an increase in the amount of interest able to be capitalized as a
result of the increased level of construction activity and the Company's lower
level of debt as a result of the Acquisition and the associated restructuring of
debt.
Extraordinary Gain and Valuation Adjustments. During the fiscal year ended
February 28, 1994, the Company recorded a one-time gain of $4.3 million due to
the resolution of project financing at less than the face amount of the debt.
The Company's pre-tax net loss of $86.3 million for fiscal year 1993 was
primarily due to adjustments to the realizable value of assets of $75.5 million
resulting from the closing of the Acquisition.
During the fiscal year ended February 28, 1994, the Company recorded 478
net orders (home sales contracted for less cancellations), which was 352 homes
higher than fiscal year 1993. The Company had 305 homes in its backlog (homes
under contract but not closed) at February 28, 1994, which was an increase of
213 homes over the Company's backlog at February 28, 1993.
FISCAL YEAR 1993 (YEAR ENDED FEBRUARY 28, 1993) COMPARED TO FISCAL YEAR 1992
(YEAR ENDED FEBRUARY 29, 1992).
Net Income (Loss)/Valuation Adjustments. The Company had a net loss of
$84.5 million, or $6.05 per share, compared to a net loss of $57.8 million, or a
loss of $4.13 per share, for fiscal year 1992. This net loss was primarily as a
result of downward adjustments to the net realizable value of assets resulting
from the closing of the Acquisition and a $10.9 million operating loss.
Revenues from Sales of Homes. For the first three quarters of fiscal year
1993, the Company liquidated standing inventory and had virtually no
construction activity. Housing starts in the fourth fiscal quarter had not yet
begun to close by the end of the quarter and as a result revenue from housing
sales was down from $137.2 million in fiscal year 1992 to $38.4 million in
fiscal year 1993. There was a 71% reduction in the number of homes closed in
fiscal year 1993 compared to fiscal year 1992, which reduction resulted from the
RTC-controlled Board of Directors' direction that the Company liquidate
inventory and not commence any new construction activity.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $9.8 million for fiscal year 1993, down
from $15.6 million for fiscal year 1992. This decrease resulted primarily from
reduced efforts at marketing inventory during the RTC's control of the Company
and from extensive overhead reduction measures taken in order to conserve cash,
including the closure of the Los Angeles and San Diego divisions of the Company
at the direction of the RTC.
25
<PAGE> 27
Interest Expense. Interest expense was $8.5 million for the fiscal year
ended February 28, 1993, compared to $14.7 million for the fiscal year ended
February 29, 1992. This reduction stems from debt reduction associated with
sales of land and inventory.
During the fiscal year ended February 28, 1993, the Company had 126 net new
orders (home sales contracted for less cancellations) which was lower than the
comparable period of fiscal year 1992 by 200 homes. However, the Company had 92
homes in its backlog at February 28, 1993 (homes under contract but not closed),
compared to 81 homes in its backlog at February 29, 1992.
RESULTS OF OPERATIONS -- DURABLE
The following table summarizes certain information regarding revenues,
gross margins, average home selling prices, selling, general and administrative
expenses and homes closed for each of the three years ended December 31, 1993
for Durable only. See "Selected Consolidated Financial and Operating
Data -- Durable." For federal and certain state tax purposes, prior to the
Durable Acquisition, Durable had elected to be treated as an S Corporation and,
therefore, was not generally subject to tax on its earnings. See note 1 to the
Consolidated Financial Statements of Durable included elsewhere in this
Memorandum.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------
DECEMBER 31, 1991 DECEMBER 31, 1992 DECEMBER 31, 1993
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total revenues........................... $31,495 $36,184 $38,678
Housing revenues......................... 31,461 35,977 38,458
Housing gross profit..................... 7,106 7,407 8,363
Selling, general & administrative
expenses............................... 4,587 5,082 5,924
Net income............................... 2,553 2,532 2,199
Housing gross margin..................... 22.6% 20.6% 21.7%
Selling, general and administrative
expenses as a percent of housing
revenues............................... 14.6% 14.1% 15.4%
Average home selling price............... $ 90 $ 99 $ 94
Homes closed (units)..................... 348 363 410
</TABLE>
FISCAL YEAR 1993 (YEAR ENDED DECEMBER 31, 1993) COMPARED TO FISCAL YEAR 1992
(YEAR ENDED DECEMBER 31, 1992)
Net Income. Durable's net income for fiscal year 1993 was $2.2 million,
compared to net income of $2.5 million for fiscal year 1992, a decrease of 13%.
These results were due to the factors discussed below.
Revenues from Sales of Homes. Revenues from housing sales for fiscal year
1993 of $38.5 million increased $2.5 million, or 7%, from fiscal year 1992. This
increase was due to a greater number of home closings during the year. Home
closings for fiscal year 1993 were 410 homes compared to 363 homes for fiscal
year 1992, an increase of 47 homes. This increased activity was primarily due to
the formation of three joint ventures during fiscal year 1993, which contributed
89 home closings and approximately $10.4 million in revenue in fiscal year 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal year 1993 of $5.9 million increased by $.8
million over the corresponding period of fiscal year 1992, primarily as a result
of broker participation and increased professional fees. As a percentage of
total revenues, such expenses increased by 1.3%.
Minority Interest. Minority interest in the earnings of joint ventures was
$460,000 for fiscal year 1993; there was no minority interest expense for
1992.
Gross Margins. Gross margins increased from 20.6% in fiscal year 1992 to
21.7% in fiscal year 1993. The gross margin increased due to changes in product
mix and lower developer's fees.
26
<PAGE> 28
During the fiscal year ended December 31, 1993, Durable recorded 436 net
new orders (homes contracted for less cancellations), which was three homes
higher than fiscal year 1992. Durable had 164 homes in its backlog (homes under
contract but not closed) at December 31, 1993, which was an increase of 26 homes
over its backlog at December 31, 1992.
FISCAL YEAR 1992 (YEAR ENDED DECEMBER 31, 1992) COMPARED TO FISCAL YEAR 1991
(YEAR ENDED DECEMBER 31, 1991)
Net Income. Durable's net income for fiscal year 1992 was $2.5 million,
compared to net income of $2.6 million for fiscal year 1991. These results were
due to the factors discussed below.
Revenues from Sales of Homes. Revenues from housing sales for fiscal year
1992 of $36.0 million increased $4.5 million, or 14%, from 1991. This increase
was due to a higher average selling price of homes closed during the fiscal
year. Home closings for fiscal year 1992 were 363 homes compared to 348 homes
for fiscal year 1991. The increased prices were primarily due to a different mix
of products sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal year 1992 of $5.1 million increased by $0.5
million over the corresponding period of fiscal year 1991. The increase in
selling, general and administrative expenses was primarily attributable to
increased broker participation.
Gross Margins. Gross margins decreased from 22.6% in fiscal year 1991 to
20.6% in fiscal year 1992. The decrease in gross margins was attributable to a
1991 project that had a margin of 28% due to a very low land basis.
During the fiscal year ended December 31, 1992, the Company recorded 433
net new orders (home sales contracted for less cancellations), which was 95
homes higher than in fiscal year 1991. The Company had 138 homes in its backlog
(homes under contract) at December 31, 1992, an increase of 70 homes over the
Company's backlog at December 31, 1991.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements are for the acquisition,
development, construction and marketing of its residential projects. The need to
stage the acquisition and use of raw materials such as land and finished lots
and the need, on certain projects, to construct community facilities ahead of
the start of home construction requires homebuilders such as the Company to
commit working capital for longer periods than many traditional manufacturing
companies. When building inventory, the Company uses substantial amounts of cash
that are generally obtained from borrowings, available cash flow from operations
and partners' contributions to joint ventures.
The principal uses of cash resources by the Company since the Acquisition
have been to recommence building operations in California, cure defaulted loans
and undertake land acquisition for future projects. Because there was very
little standing inventory and completed construction activity until the third
quarter of fiscal year 1994, the Company has principally relied upon borrowings
since the Acquisition due to the fact that cash flow from operations only began
to become significant in the third and fourth quarters of fiscal year 1994. The
Company's construction activities since the Acquisition have been constrained to
some extent by the amount of funds available to it for acquisition, development
and construction.
To date, the Company has principally used secured bank financing and
financing provided by the CalPERS LP for acquisition, development and
construction, with borrowings for individual projects or phases of projects
secured by such projects. In connection with the CalPERS Partnerships, the
CalPERS LP provided equity of $16.6 million and agreed to provide construction
financing for the four projects (with 346 originally planned units) owned by the
CalPERS Partnerships in an aggregate amount up to $66 million (the "CalPERS
Construction Financing"). Through February 28, 1994, the CalPERS LP had advanced
an aggregate of $37 million of the CalPERS Construction Financing. Under the
terms of the Indenture relating to the sale of Notes and warrants discussed
below, the Company is prohibited from obtaining any further financing from the
CalPERS LP with respect to the four CalPERS Partnerships.
27
<PAGE> 29
In May, 1994 the Company successfully completed the sale of $100,000,000 of
12 3/4% Senior Notes including 790,000 warrants to purchase common stock. The
proceeds from the offering will be used to repay certain debt of the Company,
acquire certain properties and for general working capital purposes. The
proceeds are expected to provide sufficient available liquidity, when combined
with additional financing permitted under the Indenture and cash flow from
operations, to fund the Company's current and projected acquisition, development
and construction activities for a period of at least two years.
The Company has also obtained a $25 million secured line of credit facility
with Bank One, Arizona, NA. The initial term of the Facility will expire on June
30, 1996. Borrowings under the Facility will bear interest at BOAZ prime plus
one percent. The Facility will be secured by liens on various completed or under
construction homes and lots held by the Company (but not on homes or lots held
by Durable or any other Company subsidiary). The credit agreement contains
certain covenants, including covenants that require the Company to comply with
certain operating and reporting requirements and maintain certain financial
levels and ratios. The credit agreement also defines certain events that
constitute events of default. BOAZ is entitled to payment out of the proceeds of
its collateral prior to any holders of unsecured indebtedness, including the
Notes.
Subject to the restrictions contained in the Indenture, the Facility will
be available to augment cash flow from operations and the proceeds of the
Offering to fund the Company's operations.
INTEREST RATES AND INFLATION
The long-term impact of inflation on the Company is manifested in increased
land, land development, construction and overhead costs, as well as in increased
sales prices. For several years prior to fiscal year 1989, the Company was able
to raise sales prices by amounts at least equal to its cost increases. Since
fiscal year 1989, however, overall sales prices have declined and the Company's
costs, including land acquisition costs, have generally decreased.
The Company generally contracts for land significantly before development
and sales efforts begin and, accordingly, to the extent land acquisition costs
are fixed, increases or decreases in the sales prices of homes may affect the
Company's profits. Since the sales prices of homes are fixed at the time of sale
and the Company generally sells its homes prior to commencement of construction,
any inflation of costs in excess of those anticipated may result in lower gross
margins. The Company generally attempts to minimize that effect by entering into
fixed-price contracts with its subcontractors and material suppliers for
specified periods of time, which generally do not exceed one year.
Housing demand, in general, is adversely affected by increases in interest
costs, as well as in housing costs. Interest rates, the length of time that land
remains in inventory and the proportion of inventory that is financed affect the
Company's interest costs. If the Company is unable to raise sales prices enough
to compensate for higher costs, which had generally been the condition during
prior years, or if mortgage interest rates increase significantly, affecting
prospective buyers' ability to adequately finance a home purchase, the Company's
revenues, gross margins and net income would be adversely affected. Increases in
sales prices, whether the result of inflation or demand, may affect the ability
of prospective buyers to afford a new home.
TAXES
The Company is part of the CPH consolidated tax group. No written tax
sharing agreement with respect to taxes existed between the member companies of
the CPH consolidated tax group as of December 31, 1993. The CPH consolidated tax
group files on a calendar year basis, whereas the Company's financial statements
reflect a fiscal year ending on the last day of February. As of December 31,
1993, the Company estimates that it had a small federal and California tax
liability and a net operating loss carryforward to 1994, which the Company can
utilize to offset regular taxable income that may be generated after the 1993
tax year. The Indenture requires the merger of the Company with CPH, as a result
of which the Company will no longer be part of a consolidated group and will
file its own tax returns.
28
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
J.M. PETERS COMPANY, INC.
Reports of Independent Public Accountants
Consolidated Balance Sheets as of February 28, 1993 and 1994
Consolidated Statements of Operations for the years ended February 29, 1992,
February 28, 1993 and February 28, 1994
Consolidated Statements of Stockholders' Equity for the years ended February 29,
1992, February 28, 1993 and February 28, 1994
Consolidated Statements of Cash Flows for the years ended February 29, 1992,
February 28, 1993 and February 28, 1994
Notes to Consolidated Financial Statements
DURABLE HOMES, INC.
Reports of Independent Public Accountants
Consolidated Statements of Income for the years ended December 31, 1991, 1992 and
1993
Consolidated Statements of Cash Flows for the years ended December 31, 1991, 1992
and 1993
Notes to Consolidated Financial Statements
</TABLE>
29
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of J.M. Peters Company, Inc.:
We have audited the accompanying consolidated balance sheets of J.M. PETERS
COMPANY, INC. and subsidiaries, (a Delaware corporation) as of February 28, 1993
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of the Joint Ventures (Note 1), which statements
reflect 18 percent of consolidated assets at February 28, 1993 and assets and
revenues of 15 and 33 percent, respectively, of the consolidated totals at
February 28, 1994. Those statements were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to the amounts
included for those entities, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of J.M. Peters Company, Inc. and subsidiaries as of
February 28, 1993 and 1994, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN & CO.
Orange County, California
March 11, 1994
30
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Partners
Ranchland Montilla Development, L.P.
We have audited the accompanying balance sheets of Ranchland Montilla
Development, L.P. (the "Partnership"), a California limited partnership, as of
December 31, 1992 and 1993, and the related statements of operations, partners'
capital and cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ranchland Montilla
Development, L.P. as of December 31, 1992 and 1993, and the results of its
operations and its cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993 in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Orange County, California
February 14, 1994
31
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To the Partners
Ranchland Alicante Development, L.P.
We have audited the accompanying balance sheets of Ranchland Alicante
Development, L.P. (the "Partnership"), a California limited partnership, as of
December 31, 1992 and 1993, and the related statements of operations, partners'
capital and cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ranchland Alicante
Development, L.P. as of December 31, 1992 and 1993, and the results of its
operations and its cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993 in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Orange County, California
February 14, 1994
32
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
To the Partners
Ranchland Portola Development, L.P.
We have audited the accompanying balance sheets of Ranchland Portola
Development, L.P. (the "Partnership"), a California limited partnership, as of
December 31, 1992 and 1993, and the related statements of operations, partners'
capital and cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ranchland Portola
Development, L.P. as of December 31, 1992 and 1993, and the results of its
operations and its cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993 in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Orange County, California
February 14, 1994
33
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
To the Partners
Ranchland Fairway Development, L.P.
We have audited the accompanying balance sheets of Ranchland Fairway
Development, L.P. (the "Partnership"), a California limited partnership, as of
December 31, 1992 and 1993, and the related statements of operations, partners'
capital and cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ranchland Fairway
Development, L.P. as of December 31, 1992 and 1993, and the results of its
operations and its cash flows for the period August 12, 1992 (inception) through
December 31, 1992 and the year ended December 31, 1993 in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Orange County, California
February 14, 1994
34
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of J. M. Peters Company, Inc. (the
"Company") for the year ended February 29, 1992. These financial statements are
the responsiblity of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our report dated May 15, 1992, we disclaimed an opinion on the February
29, 1992 financial statements because of the possible material effects that the
outcome of an 85.8% change in the Company's ownership coupled with substantial
doubt about the Company's ability to continue as a going concern may have had on
those financial statements. As discussed in Note 1 -- Organization, an 85.8%
ownership interest was purchased by Capital Pacific Homes, Inc. on August 12,
1992 and approximately $98 million of indebtedness was contributed to equity.
Accordingly, our present opinion on the February 29, 1992 financial statements,
as presented herein, differs from that previously expressed.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of the Company for the year ended February 29, 1992, in
conformity with generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Newport Beach, California
May 15, 1992, except as to the second paragraph
above and Note 1 -- Organization, which are as
of March 11, 1994
35
<PAGE> 37
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1993 1994
------------ ------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS........................................... $ 9,454 $ 10,001
RESTRICTED CASH..................................................... 1,888 1,483
ACCOUNTS AND NOTES RECEIVABLE....................................... 1,905 1,650
REAL ESTATE PROJECTS................................................ 99,636 105,696
PREPAID EXPENSES AND OTHER ASSETS................................... 2,668 3,124
------------ ------------
TOTAL ASSETS......................................... $ 115,551 $ 121,954
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES............................ $ 7,754 $ 17,692
NOTES PAYABLE....................................................... 38,433 34,709
DUE TO CAPITAL PACIFIC HOMES, INC................................... 1,702 --
------------ ------------
Total liabilities......................................... 47,889 52,401
------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN JOINT VENTURES................................. 19,647 13,959
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share;
15,000,000 shares authorized;
14,995,000 and 13,980,000 issued and outstanding
in 1994 and 1993, respectively................................. 1,398 1,500
Additional paid-in capital........................................ 207,824 210,387
Accumulated deficit............................................... (161,207) (156,293)
------------ ------------
Total stockholders' equity................................ 48,015 55,594
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $ 115,551 $ 121,954
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 38
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Sales of homes and land............................... $182,670 $ 72,148 $ 88,140
Interest and other income, net........................ 2,274 3,554 2,926
------------ ------------ ------------
184,944 75,702 91,066
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of homes and land................................ 170,329 68,257 73,348
Adjustments to carrying value of real estate projects
and investments in partnerships.................... 56,016 75,476 --
Selling, general and administrative................... 15,579 9,764 12,322
Minority interest..................................... -- -- 4,332
Interest.............................................. 14,691 8,538 418
------------ ------------ ------------
256,615 162,035 90,420
------------ ------------ ------------
Income (loss) before provision (benefit) for income
taxes and extraordinary gain.......................... (71,671) (86,333) 646
PROVISION (BENEFIT) FOR INCOME TAXES.................... (13,895) (1,792) --
------------ ------------ ------------
Income (loss) before extraordinary gain................. (57,776) (84,541) 646
EXTRAORDINARY GAIN...................................... -- -- 4,268
------------ ------------ ------------
Net income (loss)....................................... $(57,776) $(84,541) $ 4,914
------------ ------------ ------------
------------ ------------ ------------
NET INCOME (LOSS) PER COMMON SHARE:
Before extraordinary gain............................. $ (4.13) $ (6.05) $ .04
Extraordinary gain.................................... -- -- .30
------------ ------------ ------------
Net income (loss)..................................... $ (4.13) $ (6.05) $ .34
------------ ------------ ------------
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES....................... 13,980 13,980 14,488
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 39
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED FEBRUARY 28, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ ---------- --------- --------
<S> <C> <C> <C> <C>
BALANCE, February 28, 1991...................... $1,398 $ 49,661 $ (18,890) $ 32,169
Net loss...................................... -- -- (57,776) (57,776)
------ ---------- --------- --------
BALANCE, February 29, 1992...................... 1,398 49,661 (76,666) (25,607)
Capital contribution related to purchase debt
restructuring.............................. -- 97,510 -- 97,510
Capital contribution related to tax sharing
claims..................................... -- 60,653 -- 60,653
Net loss...................................... -- -- (84,541) (84,541)
------ ---------- --------- --------
BALANCE, February 28, 1993...................... 1,398 207,824 (161,207) 48,015
Shares issued in connection with acquisition
of
Durable Homes, Inc......................... 102 2,563 -- 2,665
Net income.................................... -- -- 4,914 4,914
------ ---------- --------- --------
BALANCE, February 28, 1994...................... $1,500 $ 210,387 $(156,293) $ 55,594
------ ---------- --------- --------
------ ---------- --------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 40
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $ (57,776) $(84,541) $ 4,914
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Extraordinary gain..................................... -- -- (4,268)
Depreciation and amortization.......................... 281 195 131
Adjustments to carrying value of real estate projects
and investments in partnerships...................... 56,016 75,476 --
Adjustment to state tax liability...................... (13,895) -- --
Changes in Assets and Liabilities
Net of the Effects of the Purchase of Durable Homes,
Inc.:
Decrease in accounts and notes receivable............ 116 1,562 259
Decrease in real estate projects..................... 115,367 49,454 226
(Increase) decrease in prepaid expenses and other
assets............................................ 1,067 (15) (12)
(Decrease) increase in accounts payable and accrued
liabilities....................................... 3,386 (2,478) 6,209
Gain related to debt restructuring................... -- (1,225) --
------------ ------------ ------------
Net cash provided by operating activities......... 104,562 38,428 7,459
------------ ------------ ------------
INVESTING ACTIVITIES:
Acquisition of Durable Homes, Inc......................... -- -- (1,500)
Purchases of property and equipment, net.................. (2) (56) (68)
(Increase) decrease in investments in partnerships........ 493 (139) (45)
------------ ------------ ------------
Net cash provided by (used in) investing
activities...................................... 491 (195) (1,613)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from construction notes.......................... 32,266 6,241 39,374
Principal payments of construction notes.................. (133,739) (28,642) (35,574)
Advances from San Jacinto................................. 12,821 3,025 --
Payments to San Jacinto................................... (3,204) -- --
Principal payments to Capital Pacific Homes, Inc.......... -- (47,298) (1,702)
Minority interest in Joint Ventures....................... -- 19,647 (7,802)
------------ ------------ ------------
Net cash used in financing activities............. (91,856) (47,027) (5,704)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 13,197 (8,794) 142
CASH AND CASH EQUIVALENTS, beginning of year................ 6,939 20,136 11,342
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year...................... $ 20,136 $ 11,342 $ 11,484
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH AND NONCASH ACTIVITIES:
Distribution of property from partnership................. $ 24,248 -- --
Amount paid during the year for interest, net of amount
capitalized............................................ 3,583 $ 878 $ 1,101
Income tax refund and related interest.................... -- 3,150 --
San Jacinto contribution of capital....................... -- 158,163 --
Decrease in due to San Jacinto (tax-sharing claims)....... -- 60,653 --
Decrease in due to San Jacinto advances................... -- 145,499 --
Increase in due to Capital Pacific Homes.................. -- 49,000 --
Residential inventory surrendered in exchange for debt
forgiveness............................................ -- -- 9,980
Note payable reduced by debt forgiveness.................. -- -- 14,248
Common stock issued in connection with the acquisition of
Durable Homes, Inc..................................... -- -- 2,665
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE> 41
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On July 1, 1992, Capital Pacific Homes, Inc. (CPH), a Delaware corporation,
entered into a definitive purchase agreement (the Purchase Agreement), pursuant
to which CPH acquired from San Jacinto F.A. (San Jacinto) (i) 12,000,000 shares
of J.M. Peters, Inc. and subsidiaries the Company) common stock (the Purchased
Shares) representing 85.8 percent of the total outstanding shares of common
stock of the Company and (ii) all debt of the Company owed to San Jacinto which,
at the time of the closing and after giving effect to debt restructuring,
equaled $49,000,000. Utilizing the proceeds from the sale of real estate
projects to third parties, cash received from the joint ventures discussed below
and cash on hand, the Company has repaid this debt to CPH at February 28, 1994.
The closing of the purchase transaction occurred on August 12, 1992. The
indebtedness of the Company to San Jacinto equaled approximately $146,000,000
prior to the purchase transaction. Pursuant to a debt restructuring agreement,
and prior to the closing, San Jacinto contributed to the capital of the Company
$97,510,000 of the indebtedness.
Acquisition of Durable Homes, Inc.
Effective September 1, 1993, the Company acquired all of the common stock
of Durable Homes, Inc. (Durable) for a total purchase price, including direct
costs of the acquisition, of $4.2 million. The Company paid $1.5 million cash
and issued 1,015,000 shares of its common stock to the seller. The transaction
was accounted for as a purchase. The income of Durable has been included in the
consolidated financial statements of the Company from the effective date of the
acquisition through February 28, 1994. Durable builds single family homes and
condominiums in Nevada.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Durable had been acquired as of the
beginning of the fiscal years presented, after including the impact of certain
adjustments, including the reduction of interest income attributable to the cash
paid, tax provision of Durable which was an S corporation and the tax benefit
attributable to filing a consolidated tax return with the Company, including the
utilization of certain net operating losses. The information set forth below
includes Durable data for its fiscal years ended December 31, 1992 and 1993.
<TABLE>
<CAPTION>
1993 1994
(UNAUDITED) (UNAUDITED)
----------- -----------
(EXPRESSED IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Sales and revenues.................................. $ 111,886 $ 108,552
----------- -----------
----------- -----------
Net income (loss):
Before extraordinary gain......................... $ (82,320) $ 1,427
Net income (loss)................................. $ (82,320) $ 5,312
----------- -----------
----------- -----------
Net income (loss) per share:
Before extraordinary gain......................... $ (5.49) $ .09
Net income (loss) per share....................... $ (5.49) $ .35
----------- -----------
----------- -----------
</TABLE>
The proforma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented, nor are they intended to be a reflection of future results.
Principles of Consolidation and Minority Interest
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries and investments for which it has control. All
other investments (See Note 5) are accounted for on
40
<PAGE> 42
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the equity method. All significant intercompany balances and transactions have
been eliminated in consolidation.
Effective upon the closing date of the purchase transaction with San
Jacinto, Peters Ranchland Company, Inc., a wholly owned subsidiary of the
Company, as general partner, entered into four limited partnership agreements
with IHP Investment Fund I, L.P. (a CalPERS advisor), as limited partner (Joint
Ventures) to pursue the development of various real properties of the Company,
with such properties transferred to the joint ventures concurrently with the
closing. Approximately $16,610,000 in proceeds from the transfer of the
foregoing properties to the Joint Ventures was applied by the Company against
repayment of the Company's note and CPH delivered these proceeds to San Jacinto,
which were applied against repayment of the CPH note payable to San Jacinto.
Prior to the transfer of these four properties to the joint ventures, the
properties were written down by $25,336,000. Peters Ranchland Company, Inc. and
IHP Investment Fund I, L.P.(IHP), each have a 50% interest in each Joint
Venture. The financial statements of the Joint Ventures have been consolidated
herein.
The partnership agreements provide that profits from the Joint Ventures are
allocated first, to the partners to recover previous net loss allocations;
second, to the extent of any preferred return; the balance to the partners in
accordance with their percentage interests. Net losses are generally allocated
first, to the partners in accordance with percentage interests until the limited
partner's capital account is reduced to zero; the balance is allocated to the
general partner.
The partnership agreements provide that distributions from the Joint
Ventures are generally allocated first, to the partners for preferred return on
additional capital and for additional capital contributions; second, for payment
of limited partner preferred returns; third, for payment of limited partner
capital contributions; the balance is allocated to the partners in accordance
with their respective percentage interests.
The Partnership Agreement provides, among other things, that the partners
shall be entitled to receive a preferred return on contributed capital computed
at prime plus three percent. As of February 28, 1993, the Partnership had
unaccrued and unpaid preferred returns on capital contributions of $889,000 to
IHP. Payments for preferred returns were $2,854,000 during fiscal year ended
February 28, 1994.
Commitment fees totaling $988,000 and $1,033,000 were paid to IHP and
capitalized to the real estate being developed by joint ventures during the
period August 12, 1992 (inception) through February 28, 1993 and fiscal 1994,
respectively. These capitalized fees are included in cost of sales as the units
are sold.
Property and Equipment
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives using the straight-line method. Total property and
equipment were $222,000 and $159,000 (net of accumulated depreciation of
$2,074,000 and $2,152,000, respectively) as of February 28, 1993 and 1994,
respectively, and are included in prepaid expenses and other assets in the
consolidated balance sheets.
Real Estate Projects
Real estate projects are carried at the lower of cost or estimated net
realizable value. Estimated net realizable value represents management's
estimates, based on management's present plans and intentions, of sale prices
less development and disposition costs, assuming that the development and
disposition occurs in the normal course of business. It is the Company's policy
to exclude postcompletion carrying costs in the calculation of net realizable
value. Net realizable values for real estate projects under or held for
development are generally based on an assumption of the completion of housing
units within a project and the sale of such units to home buyers or, to a lesser
extent, sale of lots to other home builders.
41
<PAGE> 43
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
All direct and indirect land costs, offsite and onsite improvements and
applicable interest and carrying charges are capitalized to real estate projects
under development; marketing costs are expensed in the period incurred. Land and
land development costs are accumulated by project and are allocated to
individual phases using the relative sales value method.
Revenue Recognition
The Company's accounting policies follow specific provisions of the
Statement of Financial Accounting Standards No. 66, "Accounting for Sales of
Real Estate," which specifies minimum down payment requirements, financing terms
and other certain requirements for sales of real estate.
Income from sales is recognized when title has passed, the buyer has met
minimum down payment requirements and the terms of any notes received by the
Company satisfy continuing investment requirements. At the time of sale,
accumulated costs are relieved from real estate projects and charged to cost of
sales on a relative sales value basis.
Income Taxes
Effective March 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109. Accordingly, for the year ended
February 28, 1994, all disclosures are in accordance with SFAS No. 109. Under
the provisions of SFAS No. 109, the Company elected not to restate prior years'
consolidated financial statements. The cumulative effect of initial adoption on
prior years' retained earnings deficit was not significant. Additionally, the
effect of the adoption of SFAS No. 109 upon income before taxes for fiscal 1994
was not significant.
The Company files a consolidated federal and combined state income tax
return with CPH. As of February 28, 1993 and 1994, the Company has substantial
NOL carryforwards, the utilization of which will be insignificant due to the
purchase transaction by CPH on August 12, 1992 and the application of federal
income tax regulations.
No written tax sharing agreement with respect to taxes exists between the
member companies of the CPH consolidated tax group as of December 31, 1993. The
CPH consolidated tax group files on a calendar year basis, whereas the Company's
financial statements reflect a February 28 fiscal year end. As of December 31,
1993, the Company estimates that it has a small federal and California tax
liability and a net operating loss carryforward to 1994, which the Company can
utilize to offset regular taxable income that may be generated after the 1993
tax year.
Prior to August 12, 1992, San Jacinto and its subsidiaries, including the
Company, were members of a consolidated federal income tax return group. Prior
to February 28, 1993, the Company had recorded income tax payable as due to San
Jacinto. During fiscal year 1993, San Jacinto reduced the amount payable under
the tax sharing arrangement by $60,653,000. This amount is reflected as a
capital contribution in the accompanying consolidated financial statements.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, short-term
investments which have a maturity of 90 days or less from the date of purchase
are considered cash equivalents.
Reclassifications
Reclassifications have been made to certain prior year balances in order to
conform with the current year presentation.
42
<PAGE> 44
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RESTRICTED CASH
The Company has restricted cash totaling $1,888,000 and $1,483,000 as of
February 28, 1993 and 1994, respectively. Included in these amounts is
$1,000,000 and $750,000 as of February 28, 1993 and 1994, respectively, which is
held as collateral for the Company's bonding obligations.
3. REAL ESTATE PROJECTS
Real estate projects consist of the following at February 28, 1993 and 1994
(in thousands):
<TABLE>
<CAPTION>
1993 1994
------- --------
<S> <C> <C>
Land and improvements under construction................ $92,251 $ 91,763
Completed residential homes............................. 1,430 6,472
Completed model homes................................... 5,955 7,461
------- --------
$99,636 $105,696
------- --------
------- --------
</TABLE>
Total interest cost incurred during the years ended February 29, 1992,
February 28, 1993 and February 29, 1994, was $21,383,000, $8,871,000 and
$2,532,000, respectively, of which $6,692,000, $333,000, and $2,114,000,
respectively, was capitalized.
4. DHI JOINT VENTURES
During 1993 Durable entered into three joint venture arrangements as a
general partner for the development of various real properties. The Company
shares in the cash flows and the profits of these joint ventures in accordance
with the percentages set forth in the respective agreements, which range from
100 percent to 55 percent. The limited partners receive a preferred return or a
return of capital prior to the Company's receipt of cash from these joint
ventures. The Company accrues for its respective share of profits, after any
preferred returns to the limited partner, in accordance with its percentage
interest in each of the joint ventures.
5. INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company is a general partner and has a 50 percent ownership in two
unconsolidated entities. The Company's investments are as follows at February
28, 1993 and 1994 (in thousands):
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
P.B. Partners................................................. $ 23 $ 65
Bay Hill Escrow............................................... 144 147
---- ----
$167 $212
---- ----
---- ----
</TABLE>
The Company uses the equity method of accounting for its investments in
unconsolidated 50 percent-owned entities. The accounting policies of the
entities are substantially the same as those of the Company. Investments in
entities are included in prepaid expenses and other assets in the consolidated
balance sheets.
43
<PAGE> 45
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Following is summarized, unaudited combined financial information for the
unconsolidated entities at February 28, 1993 and 1994 (in thousands):
ASSETS
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Cash....................................................... $376 $345
Accounts receivable........................................ 29 --
Other assets............................................... 56 68
---- ----
$461 $413
---- ----
---- ----
LIABILITIES AND EQUITY
Accounts payable and other liabilities..................... $110 $ 5
---- ----
Equity
The Company.............................................. 167 212
Others................................................... 184 196
---- ----
351 408
---- ----
$461 $413
---- ----
---- ----
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at
February 28, 1993 and 1994 (in thousands):
<TABLE>
<CAPTION>
1993 1994
------ -------
<S> <C> <C>
Accounts payable...................................... $1,091 $10,809
Compensation.......................................... 170 345
Litigation............................................ 557 536
Warranty.............................................. 701 450
Interest.............................................. 2,862 2,137
Property taxes........................................ 1,045 1,618
Other................................................. 1,328 1,797
------ -------
$7,754 $17,692
------ -------
------ -------
</TABLE>
7. NOTES PAYABLE
Notes payable consist of the following at February 28, 1993 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Construction notes matured............................... $24,495 $10,402
Construction notes maturing in one to two years.......... -- 9,229
Promissory notes collateralized by deeds of trust,
including interest at prime plus one percent due
quarterly.............................................. 13,938 11,123
Promissory note collateralized by deed of trust,
including interest at prime plus 1.5 percent........... -- 2,015
Model loans collateralized by deeds of trust including
interest at prime plus 3.0 percent..................... -- 1,940
------- -------
$38,433 $34,709
------- -------
------- -------
</TABLE>
44
<PAGE> 46
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At February 28, 1993 and 1994, the aggregate carrying value of assets
collateralizing the above notes was $17,407,000 and $61,379,000, respectively.
Construction notes maturing in one to two years have interest rates ranging
from the prime rate plus .75 percent to the prime rate plus 3.0 percent and
notes aggregating $1.8 million are at a fixed rate of 20%. The prime rate was 6
percent at February 28, 1993 and 1994. Notes are collateralized by deeds of
trust on real property.
The construction loans which have matured in the amount of $24.5 million
and $10.4 million at February 28, 1993 and 1994, respectively, are acquisition
and development loans which originated in 1989, were previously restructured and
extended and matured in early 1992. During fiscal 1994, the Company surrendered
certain real estate collateral in settlement of approximately $14 million of
debt in default at February 28, 1993. The Company recorded an extraordinary gain
of approximately $4.3 million in connection with this transaction. Two loans,
aggregating approximately $10.4 million, remain in default as of February 28,
1994.
An assignee of one of the lenders holding a note in the amount of
approximately $9.5 million, has filed a judicial foreclosure action against the
Company. The Company is continuing to negotiate with the lenders, or their
assignees, in an effort to resolve the defaults. If the Company cannot repay,
renegotiate, restructure or otherwise settle these loans in default, the lenders
or assignees may enforce their rights under the loan agreements, including the
right of foreclosure.
Prior to February 28, 1993, the Company entered into an agreement with its
lender which modified the terms of its promissory notes. As a result of the
agreement, the maturity date of the notes was extended from December 26, 1993
and August 14, 1994, respectively to January 8, 1995 for both notes. All
remaining unpaid principal is due January 8, 1995 for both notes. Additionally,
accrued interest totaling $2,949,000 was forgiven by the lender, resulting in a
gain of $1,225,000. This transaction has been accounted for as a troubled debt
restructuring. Accordingly, the obligation as shown as of February 28, 1993 and
1994, reflects the total cash to be paid to the lender. Under the accounting for
a troubled debt restructuring, no interest expense will be recorded by the
Company on this obligation through maturity. The gain of $1,225,000 is included
in interest and other income in the accompanying 1993 consolidated financial
statements.
During the years ended February 29, 1992, February 28, 1993 and 1994, the
highest month-end balance on construction loans was $139,482,000, $46,709,000
and $38,030,000, respectively, and the weighted average outstanding balance was
$80,964,000, $33,027,000 and $23,804,000, respectively. The weighted average
interest rates on construction loans during the years ended February 29, 1992,
February 28, 1993 and 1994, were 9.3 percent, 8.8 percent and 10.6 percent,
respectively. The weighted average interest rates on construction loans at
February 29, 1992, February 28, 1993 and 1994, were 7.39 percent, 8.76 percent
and 10.9 percent, respectively.
The aggregate scheduled principal maturities of notes payable are as
follows (in thousands):
<TABLE>
<S> <C>
Years ending February 28:
Notes matured.................... $10,402
1995............................. 19,582
1996............................. 2,795
Thereafter....................... 1,930
-------
$34,709
-------
-------
</TABLE>
45
<PAGE> 47
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
The expense (benefit) for income taxes consists of the following for the
years ended February 29, 1992, February 28, 1993 and 1994 (in thousands):
<TABLE>
<CAPTION>
1992 1993 1994
-------- ------- -----
<S> <C> <C> <C>
Current
Federal.................................... $ -- $ -- $ 100
State...................................... (13,895) (1,792) 210
-------- ------- -----
(13,895) (1,792) 310
-------- ------- -----
Deferred
Federal.................................... -- -- (100)
State...................................... -- -- (210)
-------- ------- -----
-- -- (310)
-------- ------- -----
$(13,895) $(1,792) $ 0
-------- ------- -----
-------- ------- -----
</TABLE>
The deferred income tax benefit at February 28, 1994 results from the
following temporary differences between financial and tax reporting (in
thousands):
<TABLE>
<S> <C>
Accrued expenses..................................................... $ (3)
Construction period expenses......................................... 9
Utilization of NOL carryforward...................................... (265)
Decrease in valuation allowance...................................... (53)
State taxes (net of federal effect).................................. 2
-----
$(310)
-----
-----
</TABLE>
The income tax benefit for the year ended February 28, 1993, represents a
refund received during the year for state income taxes paid in a previous year.
Associated interest income of $1,358,000 was also received in connection with
this refund and is included in interest and other income in the 1993
consolidated statement of operations.
The state income tax benefit of $13,895,000, for the year ended February
29, 1992, represents a reversal of accrued state income taxes. The Company
previously provided for state income taxes assuming that it would be taxed by
the state on a stand-alone basis. During the year ended February 29, 1992, the
Franchise Tax Board examined the combined franchise tax returns of the former
parent and its subsidiaries, including the Company, for the tax years ended in
1987, 1988 and 1989, and advised the Company that the former parent and its
subsidiaries, including the Company, were found to be engaged in a single
unitary business. Based on such examination and finding, the Company believes
that it is not liable for the previously accrued state income taxes.
46
<PAGE> 48
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of income taxes (benefit) computed at the federal
statutory rate and the income tax benefit for financial reporting purposes for
the years ended February 29, 1992, February 28, 1993 and 1994, is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
--- --- ---
<S> <C> <C> <C>
Income taxes at statutory rate......................... (34)% (34)% 34%
State income taxes, net of federal tax benefit......... (19) (2) 6
Loss for which no benefit is allowed................... 34 34 0
Utilization of net operating loss carryforwards........ -- -- (39)
Increase in valuation allowance........................ -- -- (1)
--- --- ---
(19)% (2)% 0%
--- --- ---
--- --- ---
</TABLE>
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
No. 109), effective for fiscal years beginning after December 15, 1992. The
Company adopted SFAS No. 109 on March 1, 1993. Under SFAS No. 109, deferred
taxes are based on a balance sheet approach whereby the ending deferred
liability and/or asset is determined by applying the enacted tax rates to the
difference between the tax basis of assets and liabilities and their basis for
financial reporting purposes.
9. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is based upon the weighted average
number of common shares outstanding of 13,980,000, 13,980,000 and 14,488,000 at
February 29, 1992, February 28, 1993 and 1994, respectively. The effect of stock
options was antidilutive in all years presented, and has not been included in
the computation of net income (loss) per common share.
10. STOCK OPTION PLAN
In April 1987, the Company adopted its 1987 Stock Option Plan (the Plan),
covering options to purchase a maximum of 1,350,000 shares of its common stock.
On October 5, 1993, the Plan was amended to provide that the maximum number of
shares that may be issued under the Plan be reduced to 5,000 shares. Under the
Plan, directors and key employees of the Company, former parent and any of its
subsidiaries are eligible to receive options to purchase common stock under
either incentive or non incentive stock options. No option may exceed a term of
10 years. The option price for incentive stock options may not be less than the
fair market value of the shares at the time the option is granted.
Stock option activity under the plan is as follows for the years ended
February 29, 1992, February 28, 1993 and February 28, 1994, respectively.
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Exercised........................................ -- -- --
Expired or forfeited............................. 145,620 109,060 488,925
Outstanding at end of year....................... 597,985 488,925 --
Exercisable at end of year....................... 522,925 488,925 --
Available for grant at end of year............... 254,300 254,300 5,000
Exercise price of options outstanding............ $ 6.00 $ 6.00 $ --
</TABLE>
47
<PAGE> 49
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RELATED PARTY TRANSACTIONS
During fiscal 1994, the Company reimbursed CPH for expenses aggregating
$150,000 in connection with the acquisition of Durable.
During fiscal 1993, the Company acquired an unimproved lot from CPH. The
acquisition cost of the lot was $1,550,000 and the Company issued a note payable
to CHP in the amount of $1,050,000. This note was subsequently assigned by CPH
to the chairman of the board of the Company. All principal and accrued interest
were paid by the Company in full at February 28, 1993. During fiscal 1994, this
lot was sold for $1,710,000.
A key employee of the Company purchased a home from the Company for
$368,000 in fiscal 1993. The Company carried back a second trust deed in the
amount of $36,800. The note, which the Company believes was on market terms, is
due and payable in November 1997.
An officer of the Company purchased a home from the Company in fiscal year
1994 for $425,000 (the market price at that time).
12. COMMITMENTS AND CONTINGENCIES
General
Approximately $21,467,000 and $23,185,000 of performance bonds were
outstanding at February 28, 1993 and 1994, respectively. The beneficiaries of
these bonds are certain municipalities. The Company has outstanding letters of
credit totaling $672,000 and $552,000 to ensure performance on various
agreements at February 28, 1993 and 1994, respectively. The Company has pledged
a certificate of deposit in a like amount as collateral for the obligation under
the letter of credit.
The Company has entered into agreements to lease certain office facilities
under operating leases which expire at various dates through fiscal year 1995.
The leases generally provide that the Company shall pay property taxes,
insurance and other items. Minimum payments under noncancelable leases at
February 28, 1994, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING FEBRUARY 28 (IN THOUSANDS):
----------------------------------------------
<S> <C>
1995............................ $704
1996............................ 7
Thereafter........................ --
----
$711
----
----
</TABLE>
Total rent expense was $632,000, $599,000 and $629,000 for the years ended
February 29, 1992, February 28, 1993 and 1994, respectively.
As discussed in Notes 1, 4 and 5, the Company is a general partner in
several joint venture partnerships. As a general partner, the Company is liable
for all debts of the partnerships without limitation to the respective
partnership interest.
Dividends
No dividends were declared or paid for the years ended February 29, 1992,
February 28, 1993 or 1994.
Legal Proceedings
The Company is named as a defendant in lawsuits filed from time to time
involving claims arising in the ordinary course of the Company's business. While
certain of these matters involve substantial amounts,
48
<PAGE> 50
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
management believes such claims and lawsuits as are currently pending will not
have a materially adverse effect on the Company's financial position or results
of operations.
13. UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data for the years ended February 28, 1993
and 1994 is as follows (in thousands except for per share data):
<TABLE>
<CAPTION>
QUARTER
-------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1994:
Total revenues............................... $ 4,004 $ 8,250 $37,343 $41,469 $ 91,066
Gross profit on sales of homes and land...... (157) (26) 6,750 8,225 14,792
Extraordinary gain........................... -- -- 4,268 -- 4,268
Net income (loss)............................ $(1,951) $ (1,557) $ 6,123 $ 2,299 $ 4,914
------- -------- ------- ------- --------
------- -------- ------- ------- --------
Net income (loss) per common share
Before extraordinary gain............... $ (0.14) $ (.11) $ 0.12 $ .15 $ .04
Extraordinary gain...................... -- -- .29 -- .30
Net income (loss)....................... $ (0.14) $ (.11) $ 0.41 $ .15 $ .34
------- -------- ------- ------- --------
------- -------- ------- ------- --------
1993:
Total revenues............................... $16,675 $ 37,547 $13,873 $ 7,607 $ 75,702
Gross profit on sales of homes and land...... 3,247 1,343 2,373 (3,072) 3,891
Adjustment to carrying value of real
estate.................................... -- (75,036) -- (440) (75,476)
Net income (loss)............................ $(2,297) $(79,314) $ 1,991 $(4,921) $(84,541)
------- -------- ------- ------- --------
------- -------- ------- ------- --------
Net income (loss) per common share........... $ (0.16) $ (5.67) $ 0.14 $ (0.36) $ (6.05)
------- -------- ------- ------- --------
------- -------- ------- ------- --------
</TABLE>
49
<PAGE> 51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholder of Durable Homes, Inc.:
We have audited the accompanying consolidated statements of income and cash
flows of DURABLE HOMES, INC. and subsidiaries (a Nevada corporation) for the
year ended December 31, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Durable
Homes, Inc. and subsidiaries for the year ended December 31, 1993, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Orange County, California
March 7, 1994
50
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder
of Durable Homes, Inc.:
In our opinion, the accompanying statements of income and of cash flows
present fairly, in all material respects, the results of operations and cash
flows of Durable Homes, Inc. for the years ended December 31, 1991 and 1992, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Durable Homes, Inc. for
any period subsequent to December 31, 1992.
PRICE WATERHOUSE
Salt Lake City, Utah
February 25, 1993
51
<PAGE> 53
DURABLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1993
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES (Note 1)
Sales............................................... $ 31,461 $ 35,977 $ 38,458
Other............................................... 34 207 220
------------ ------------ ------------
31,495 36,184 38,678
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales....................................... 24,121 28,395 29,921
Developer fees (Note 2)............................. 234 175 174
Selling, general and administrative................. 4,494 4,955 5,844
Depreciation (Note 1)............................... 93 127 80
Minority interest (Note 1).......................... -- -- 460
------------ ------------ ------------
28,942 33,652 36,479
------------ ------------ ------------
INCOME BEFORE TAXES................................... 2,553 2,532 2,199
PROVISION FOR INCOME TAXES (Note 1)................... -- -- --
------------ ------------ ------------
NET INCOME............................................ $ 2,553 $ 2,532 $ 2,199
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
52
<PAGE> 54
DURABLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 2,553 $ 2,532 $ 2,199
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Depreciation....................................... 93 127 80
Loss on sale of property and equipment............. -- 22 --
Gain on sale of other assets....................... (29) -- --
Change in assets and liabilities
(Increase) decrease in receivables.............. 14 (206) 157
(Increase) decrease in inventories.............. 1,588 (5,174) (2,829)
(Increase) decrease in prepaid expenses and
deposits...................................... 36 (80) --
Decrease in other assets........................ -- 50 --
Increase (decrease) in construction payables.... (581) 1,578 (57)
Decrease in accounts payable and accrued
expenses...................................... (379) (12) (49)
------------ ------------ ------------
Net cash (used in) provided by operating
activities................................. 3,295 (1,163) (499)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..................... (233) (138) (80)
Proceeds from sale of other assets...................... 218 38 --
Purchase of other assets................................ (49) (38) --
Payments received on notes receivable................... 79 -- --
Issuance of notes receivable............................ (77) (24) --
------------ ------------ ------------
Net cash provided by (used in) investing
activities................................. (62) (162) (80)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings................................ 24,779 33,382 31,789
Repayment of borrowings................................. (26,186) (30,616) (30,796)
Distributions to shareholder............................ (2,198) (2,481) (1,915)
Minority interest....................................... -- -- 2,007
------------ ------------ ------------
Net cash provided by (used in) financing
activities................................. (3,605) 285 1,085
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH........................... $ (372) $ (1,040) $ 506
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Distributions to the shareholder of the Company during the year ended
December 31, 1992 include receivables of $139,000, other assets of $35,000 and
property and equipment of $56,000.
Distributions to the former shareholder of the Company during the year
ended December 31, 1993 include non cash amounts of $788,000.
The accompanying notes are an integral part of these consolidated statements.
53
<PAGE> 55
DURABLE HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Durable Homes, Inc. (Durable) is engaged in the development, construction
and sale of residential real estate. Effective September 1, 1993, all of the
outstanding common stock of Durable was acquired by J.M. Peters Company, Inc.
(J.M. Peters).
During 1993, Durable entered into three joint venture arrangements as a
general partner for the development of various real properties. Durable shares
in the cash flows and the profits of these joint ventures in accordance with the
percentages set forth in the respective agreements, which range from 100 percent
to 55 percent. The limited partners receive a preferred return or a return of
capital prior to Durable's receipt of cash from these joint ventures. Durable
accrues for its respective share of profits, after any preferred returns to the
limited partner, in accordance with its percentage interest in each of the joint
ventures.
The consolidated financial statements include the accounts of Durable and
the three joint ventures. All significant intercompany balances have been
eliminated in the consolidated financial statements. A summary of significant
accounting policies follows:
Inventories
Inventories, comprising land held for development and single-family homes
and condominiums under construction, are stated at the lower of cost or market.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is determined using accelerated methods over the useful lives of
the assets which range from three to seven years. Expenditures for maintenance
and repairs are charged to expense as incurred.
Revenue recognition
Revenue from the sale of residential properties is recognized when legal
title passes to the purchaser at closing.
Capitalized interest
Interest on construction loans is capitalized in inventory during the
development and construction period and relieved through cost of sales when the
real estate is sold. During the years ended December 31, 1992 and 1993, total
interest of $592,000 and $1,580,000, respectively, was incurred and capitalized.
Income taxes
For 1991 and 1992, Durable was taxed as a S-corporation whereby the income
tax effects of Durable's activities accrued directly to the shareholder.
Commencing September 1, 1993, the effective date of the acquisition of the
common stock of Durable by J.M. Peters, Durable's taxable income is offset by
the tax operating losses and net operating loss carry forwards of J.M. Peters.
2. DEVELOPER FEES
Durable purchased certain undeveloped land from a corporation during the
time that a director of Durable was a shareholder. As partial consideration for
the purchase, Durable assigned to the corporation an undivided interest in the
net profits derived from the sale of certain real estate. The corporation's
share of net profits for the years ended December 31, 1991, 1992 and 1993 was
$166,000, $115,000 and $174,000, respectively, and is included in developer
fees.
54
<PAGE> 56
DURABLE HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1991, Durable purchased the escrow position in certain undeveloped
land from a corporation in which the brother of the shareholder of Durable was a
shareholder. As partial consideration, Durable assigned to the corporation an
undivided 20 percent interest in the net profits derived from the sale of
certain inventories. All of the real estate was sold at December 31, 1992. The
corporation's share of net profits for the year ended December 31, 1991 and 1992
was $68,000 and $60,000, respectively, and is included in developer fees.
3. PROFIT SHARING PLAN
Durable administers a defined contribution profit sharing plan for eligible
employees. Employees begin participating in the plan after completing one year
of service and attaining the age of 21. Under the provisions of the plan, the
Board of Directors determines the annual contribution to the plan. Profit
sharing expense for each of the years ended December 31, 1991, 1992 and 1993 was
$125,000, $125,000 and $75,000, respectively.
4. RELATED PARTY TRANSACTIONS
Prior to the acquisition of Durable by J.M. Peters, Durable contracted for
advertising services with an advertising agency in which shareholders had a
minority interest. Advertising costs incurred for services rendered by the
advertising agency for the years ended December 31, 1991, 1992 and 1993 were
$235,000, $477,000 and $427,000, respectively.
During 1993, prior to the acquisition of Durable by J.M. Peters, Durable
distributed non-cash assets, aggregating $788,000, to the previous shareholder.
The non cash assets distributed included advances and investments unrelated to
the residential home building business, certain related party notes receivable
and automobile equipment. The distribution was reflected as a reduction of
shareholder's equity.
55
<PAGE> 57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements. The following Consolidated Financial
Statements, together with the Notes thereto and Independent
Auditors' Report thereon, are included in Part II, Item 8 of this
report.
<TABLE>
<S> <C>
J.M. PETERS COMPANY, INC.
Reports of Independent Public Accountants................................
Consolidated Balance Sheets as of February 28, 1993 and 1994.............
Consolidated Statements of Operations for the years ended February 29,
1992, February 28, 1993 and February 28, 1994.........................
Consolidated Statements of Stockholders' Equity for the years ended
February 29, 1992, February 28, 1993 and February 28, 1994............
Consolidated Statements of Cash Flows for the years ended February 29,
1992, February 28, 1993 and February 28, 1994.........................
Notes to Consolidated Financial Statements...............................
DURABLE HOMES, INC.
Reports of Independent Public Accountants................................
Consolidated Statements of Income for the years ended December 31, 1991,
1992 and 1993.........................................................
Consolidated Statements of Cash Flows for the years ended December 31,
1991, 1992 and 1993...................................................
Notes to Consolidated Financial Statements...............................
</TABLE>
2. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------
<S> <C>
3.1 Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4.1 See the Articles of Incorporation and Bylaws of the Registrant (Exhibits 3.1 and
3.2).
10.1 Agreement of Limited Partnership of Ranchland Fairway Development L.P., a
California limited partnership, dated as of August 12, 1992 by and between Peters
Ranchland Company Inc., a Delaware corporation, and IHP Investment Fund I, L.P., a
California limited partnership. (Incorporated by reference to Exhibit 26 of
Schedule 13D*).
10.2 Agreement of Limited Partnership of Ranchland Montilla Development L.P., a
California limited partnership, dated as of August 12, 1992 by and between Peters
Ranchland Company Inc., a Delaware corporation, and IHP Investment Fund I, L.P., a
California limited partnership. (Incorporated by reference to Exhibit 27 of
Schedule 13D*).
10.3 Agreement of Limited Partnership of Ranchland Portola Development L.P., a
California limited partnership, dated as of August 12, 1992 by and between Peters
Ranchland Company Inc., a Delaware corporation, and IHP Investment Fund I, L.P., a
California limited partnership. (Incorporated by reference to Exhibit 28 of
Schedule 13D*).
10.4 Agreement of Limited Partnership of Ranchland Alicante Development L.P., a
California limited partnership, dated as of August 12, 1992 by and between Peters
Ranchland Company Inc., a Delaware corporation, and IHP Investment Fund I, L.P., a
California limited partnership. (Incorporated by reference to Exhibit 29 of
Schedule 13D*).
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------
<S> <C>
10.5 First Amended and Completely Restated Agreement of Limited Partnerhsip of
Ranchland Fairway Development L.P., a California Limited Partnership, dated as of
May 19, 1993 by and between Peters Ranchland Company, Inc., a Delaware
Corporation, and IHP Investments Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.8 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).
10.6 First Amended and Completely Restated Agreement of Limited Partnership of
Ranchland Montilla Development L.P., a California Limited Partnership, dated as of
May 19, 1993 by and between Peters Ranchland Company, Inc., a Delaware
Corporation, and IHP Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.9 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).
10.7 First Amended and Completely Restated Agreement of Limited Partnership of
Ranchland Portola Development L.P., a California Limited Partnership, dated as of
May 19, 1993 by and between Peters Ranchland Company, Inc., a Delaware
Corporation, and IHP Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.10 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).
10.8 First Amended and Completely Restated Agreement of Limited Partnership of
Ranchland Alicante Development L.P., a California Limited Partnership, dated as of
May 19, 1993 by and between Peters Ranchland Company, Inc., a Delaware
Corporation, and IHP Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.11 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993).
10.9 Form of Construction Loan Agreement by and between Ranchland Portola Development
L.P., a California Limited Partnership and IHP Investment Fund I, L.P., a
California Limited Partnership (incorporated by reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended February 28,
1993).
10.10 Form of Construction Loan Promissory Note by and between Ranchland Portola
Development L.P., a California Limited Partnership and IHP Investment Fund I,
L.P., a California Limited Partnership (incorporated by reference to Exhibit 10.13
of the Registrant's Annual Report on Form 10-K for the fiscal year ended February
28, 1993).
10.11 Form of Construction Deed of Trust, Assignment of Leases and Security Agreement by
and between Ranchland Portola Development L.P., a California Limited Partnership
and IHP Investment Fund I, L.P., a California Limited Partnership (incorporated by
reference to Exhibit 10.14 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1993).
10.12 Form of Land Loan Agreement by and between Ranchland Portola Development L.P., a
California Limited Partnership and IHP Investment Fund I, L.P., a California
Limited Partnership (incorporated by reference to Exhibit 10.15 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended February 28,
1993).
10.13 Form of Land Loan Promissory Note by and between Ranchland Portola Development
L.P., a California Limited Partnership and IHP Investment Fund I, L.P., a
California Limited Partnership (incorporated by reference to Exhibit 10.16 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended February 28,
1993).
10.14 Form of Land Deed of Trust, Assignment of Leases and Security Agreement by and
between Ranchland Portola Development L.P., a California Limited Partnership and
IHP Investment Fund I, L.P., a California Limited Partnership (incorporated by
reference to Exhibit 10.17 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1993).
10.15 Indenture agreement by and between J.M. Peters Company, Inc., as Issuer; Durable
Homes, Inc., J.M. Peters Nevada, Inc., and Peters Ranchland, Inc., as Guarantors,
and United States Trust Company of New York, as Trustee, dated as of May 13, 1994.
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.16 Warrant Agreement by and between J.M. Peters Company, Inc., and United States
Trust Company of New York, Warrant Agent, dated as of May 13, 1994.
10.17 Warrant Registration Rights Agreement by and between J.M. Peters Company, Inc.,
and Morgan Stanley & Co. Incorporated dated as of May 13, 1994.
10.18 Notes Registration Rights Agreement by and between J.M. Peters Company, Inc., and
Morgan Stanley & Co. Incorporated dated as of May 13, 1994.
21.1 Subsidiaries of the Registrant.
</TABLE>
- - ---------------
* "Schedule 13D" means the Schedule 13D filed with the Securities and Exchange
Commission on August 21, 1992 by Capital Pacific Homes, Inc., Hadi
Makarechian, Barbara Makarechian and Dale Dowers, as a group, reporting
beneficial ownership of J.M. Peters Company, Inc. in excess of 5%.
(b) Reports on Form 8-K.
On October 26, 1993, Registrant filed a report on Form 8-K dated October
15, 1993. Items reported on this Form 8-K were:
-- Item 2. Acquisition or Disposition of Assets.
-- Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
58
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Newport
Beach, State of California, on May 27, 1994.
J.M. PETERS COMPANY, INC.
By /s/ HADI MAKARECHIAN
________________________________
Hadi Makarechian
Chairman of the Board and
Chief Executive Officer
Date: May 27, 1994
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Hadi Makarechian and Gregory R. Petersen, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for each person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments to
this report on Form 10-K, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully and to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue of the powers herein granted.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------------- --------- -----------
<C> <S> <C>
/s/ HADI MAKARECHIAN
_____________________________________________ Chairman of the Board May 27, 1994
Hadi Makarechian and Chief Executive Officer
(Principal Executive Officer)
/s/ DALE DOWERS
_____________________________________________ Director, President and May 27, 1994
Dale Dowers Chief Operating Officer
/s/ GREGORY R. PETERSEN
_____________________________________________ Vice President, Chief Financial May 27, 1994
Gregory R. Petersen Officer and Secretary
(Principal Financial and
Accounting Officer)
/s/ JAMES M. PETERS
_____________________________________________ Director May 27, 1994
James M. Peters
_____________________________________________ Director May , 1994
Allan L. Acree
/s/ KARL KAISER
_____________________________________________ Director May 27, 1994
Karl Kaiser
</TABLE>
59
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- - ------ ------------------------------------------------------------------ ---------------
<S> <C> <C>
3.1 Articles of Incorporation of the Registrant.......................
3.2 Bylaws of the Registrant..........................................
4.1 See the Articles of Incorporation and Bylaws of the Registrant
(Exhibits 3.1 and 3.2)............................................
10.1 Agreement of Limited Partnership of Ranchland Fairway Development
L.P., a California limited partnership, dated as of August 12,
1992 by and between Peters Ranchland Company Inc., a Delaware
corporation, and IHP Investment Fund I, L.P., a California limited
partnership. (Incorporated by reference to Exhibit 26 of Schedule
13D*).............................................................
10.2 Agreement of Limited Partnership of Ranchland Montilla Development
L.P., a California limited partnership, dated as of August 12,
1992 by and between Peters Ranchland Company Inc., a Delaware
corporation, and IHP Investment Fund I, L.P., a California limited
partnership. (Incorporated by reference to Exhibit 27 of Schedule
13D*).............................................................
10.3 Agreement of Limited Partnership of Ranchland Portola Development
L.P., a California limited partnership, dated as of August 12,
1992 by and between Peters Ranchland Company Inc., a Delaware
corporation, and IHP Investment Fund I, L.P., a California limited
partnership. (Incorporated by reference to Exhibit 28 of Schedule
13D*).............................................................
10.4 Agreement of Limited Partnership of Ranchland Alicante Development
L.P., a California limited partnership, dated as of August 12,
1992 by and between Peters Ranchland Company Inc., a Delaware
corporation, and IHP Investment Fund I, L.P., a California limited
partnership. (Incorporated by reference to Exhibit 29 of Schedule
13D*).............................................................
10.5 First Amended and Completely Restated Agreement of Limited
Partnerhsip of Ranchland Fairway Development L.P., a California
Limited Partnership, dated as of May 19, 1993 by and between
Peters Ranchland Company, Inc., a Delaware Corporation, and IHP
Investments Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.8 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.6 First Amended and Completely Restated Agreement of Limited
Partnership of Ranchland Montilla Development L.P., a California
Limited Partnership, dated as of May 19, 1993 by and between
Peters Ranchland Company, Inc., a Delaware Corporation, and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.9 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.7 First Amended and Completely Restated Agreement of Limited
Partnership of Ranchland Portola Development L.P., a California
Limited Partnership, dated as of May 19, 1993 by and between
Peters Ranchland Company, Inc., a Delaware Corporation, and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.10 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.8 First Amended and Completely Restated Agreement of Limited
Partnership of Ranchland Alicante Development L.P., a California
Limited Partnership, dated as of May 19, 1993 by and between
Peters Ranchland Company, Inc., a Delaware Corporation, and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.11 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- - ------ ----------------
<S> <C> <C>
10.9 Form of Construction Loan Agreement by and between Ranchland
Portola Development L.P., a California Limited Partnership and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.12 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.10 Form of Construction Loan Promissory Note by and between Ranchland
Portola Development L.P., a California Limited Partnership and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.13 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.11 Form of Construction Deed of Trust, Assignment of Leases and
Security Agreement by and between Ranchland Portola Development
L.P., a California Limited Partnership and IHP Investment Fund I,
L.P., a California Limited Partnership (incorporated by reference
to Exhibit 10.14 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1993)......................
10.12 Form of Land Loan Agreement by and between Ranchland Portola
Development L.P., a California Limited Partnership and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.15 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.13 Form of Land Loan Promissory Note by and between Ranchland Portola
Development L.P., a California Limited Partnership and IHP
Investment Fund I, L.P., a California Limited Partnership
(incorporated by reference to Exhibit 10.16 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1993).............................................................
10.14 Form of Land Deed of Trust, Assignment of Leases and Security
Agreement by and between Ranchland Portola Development L.P., a
California Limited Partnership and IHP Investment Fund I, L.P., a
California Limited Partnership (incorporated by reference to
Exhibit 10.17 of the Registrant's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993)..........................
10.15 Indenture agreement by and between J.M. Peters Company, Inc., as
Issuer; Durable Homes, Inc., J.M. Peters Nevada, Inc., and Peters
Ranchland, Inc., as Guarantors, and United States Trust Company of
New York, as Trustee, dated as of May 13, 1994....................
10.16 Warrant Agreement by and between J.M. Peters Company, Inc., and
United States Trust Company of New York, Warrant Agent, dated as
of May 13, 1994...................................................
10.17 Warrant Registration Rights Agreement by and between J.M. Peters
Company, Inc., and Morgan Stanley & Co. Incorporated dated as of
May 13, 1994......................................................
10.18 Notes Registration Rights Agreement by and between J.M. Peters
Company, Inc., and Morgan Stanley & Co. Incorporated dated as of
May 13, 1994......................................................
21.1 Subsidiaries of the Registrant....................................
</TABLE>
- - ---------------
* "Schedule 13D" means the Schedule 13D filed with the Securities and Exchange
Commission on August 21, 1992 by Capital Pacific Homes, Inc., Hadi
Makarechian, Barbara Makarechian and Dale Dowers, as a group, reporting
beneficial ownership of J.M. Peters Company, Inc. in excess of 5%.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
J.M. PETERS COMPANY, INC.
The undersigned, being members of the initial Board of Directors of
J.M. Peters Company, Inc., a corporation organized under that name by virtue of
a Certificate of Incorporation filed with the Secretary of State of Delaware on
February 19, 1993 (the "Corporation"), hereby duly adopts this Amended and
Restated Certificate of Incorporation in accordance with the provisions of
Sections 241 and 245 of the General Corporation Law of the State of Delaware
for the purpose of amending and restating the Corporation's original
Certificate of Incorporation. The undersigned hereby certify that, as of the
date hereof, the Corporation has not received any payment for any of its stock
and that no officers of the Corporation have been appointed. The undersigned
further certify that they are directors designated by the Board of Directors of
the Corporation to execute this instrument.
The undersigned, for the purposes of forming a corporation pursuant
to Section 101 of the Delaware General Corporation Law, hereby certify that:
1st. The name of the corporation is J.M. PETERS COMPANY, INC.
2nd. The location of the registered office of the corporation within
the State of Delaware is at 1013 Centre
<PAGE> 2
Road, City of Wilmington, County of New Castle 19805. The resident
agent at this address is Corporation Service Company.
3rd. The corporation may engage in any lawful activity without
limitation.
4th. The aggregate number of shares which the corporation shall have
authority to issue is Fifteen Million (15,000,000), all of which shall be
shares of common voting stock of $.10 par value (the "Common Stock"). A holder
of record of one or more shares of the Common Stock shall have one (1) vote on
any matter submitted to a stockholder vote for each share of the Common Stock
held. Holders of the Common Stock are entitled to the entire voting power, all
dividends declared, and all assets of the corporation upon liquidation.
Holders of the Common Stock shall not be entitled to any preemptive or other
subscription rights.
5th. The members of the governing board of the corporation shall be
styled "directors" and the number thereof shall not be less than three (3) nor
more than nine (9), the exact number to be fixed by resolution of the Board of
Directors of the corporation, provided that the number so fixed by the
Directors may be increased or decreased from time to time.
6th. The capital stock and the holders thereof, after the amount of
the subscription price has been paid in, shall
- 2 -
<PAGE> 3
not be subject to any assessment to pay the debts of the corporation or for
any other purpose.
7th. The names and mailing addresses of the persons who are to serve
as directors of the corporation until the first annual meeting of stockholders
or until their successors are elected and qualify are:
<TABLE>
<CAPTION>
Directors Mailing Address
--------- ---------------
<S> <C>
Allan L. Acree 9205 Mistwood Drive
Potomac, MD 20854
Dale Dowers 13161 Contessa Drive
Tustin, CA 92680
David L. Inman 6655 West Sahara, Suite E-100
Las Vegas, NV 89102
Hadi Makarechian c/o J.M. Peters Company, Inc.
3501 Jamboree Road, Suite 200
Newport Beach, CA 92660
James M. Peters, Jr. c/o J.M. Peters Company, Inc.
3501 Jamboree Road, Suite 200
Newport Beach, CA 92660
</TABLE>
8th. The corporation is to have perpetual existence.
9th. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter, amend and rescind the By-Laws of the corporation,
to fix the amount to be reserved as working capital, to fix the times
for the declaration and payment of dividends, and to authorize and
cause to be executed mortgages and liens upon the real and personal
property of the corporation.
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In order to promote the interests of the corporation and to
encourage the utilization of the corporation's lands and other
property, to sell, assign, transfer, lease and in any lawful manner
dispose of such portions of said property as the Board of Directors
shall deem advisable, and to use and apply the funds received in
payment therefor to the surplus account for the benefit of the
corporation, or to the payment of dividends, or otherwise; and
further provided that the capital stock shall not be decreased except
in accordance with the laws of the State of Delaware.
10th. The personal liability of a director of the corporation to the
corporation or its stockholders for damages for breach of fiduciary duty as a
director shall be limited to an amount not exceeding said director's
compensation for services as a director during the twelve-month period
immediately preceding such breach, (the "Liability Amount"), except that a
director's liability shall not be limited for (i) any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) any actions in violation of Section 174 of the Delaware
General Corporation Law or (iv) any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the full extent permitted by law,
except as to the Liability Amount.
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For purposes of this Article 10, the Liability Amount shall not
involve amounts received as reimbursement for expenses, or for services as an
officer, employee or agent.
Any repeal or modification of all or any portion of the provisions of
this Article by the stockholders of the corporation shall not adversely affect
any right or protection of a director of the corporation existing at the time
of such repeal or modification.
11th. The corporation reserves the right to amend, alter or repeal
any provisions contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders or
directors herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned duly authorized Directors of the
corporation have hereunto set affixed their signatures and seal this 6th day
of April , 1993.
/s/ HADI MAKARECHIAN
---------------------
HADI MAKARECHIAN
/s/ DALE DOWERS
---------------------
DALE DOWERS
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EXHIBIT 3.2
BYLAWS
OF
J.M. PETERS COMPANY, INC.
(A Delaware Corporation)
May 7, 1993
* * *
ARTICLE I
STOCKHOLDERS
Section 1. PLACE OF HOLDING ANNUAL MEETINGS. Annual meetings of
the stockholders shall be held at the principal office of the Corporation in
Newport Beach, California, or at such other place or places within or without
the State of Delaware as the directors shall from time to time determine.
Section 2. ANNUAL ELECTION OF DIRECTORS. The annual meeting of
stockholders for the election of directors and the transaction of other
business shall be held following the end of the fiscal year, at such time and
on such day as designated by the Board of Directors and stated in the notice of
the meeting. At each annual meeting, the stockholders entitled to vote shall,
by plurality vote, elect the members of the Board of Directors then standing
for election, and then may transact such other corporate business as shall be
stated in the notice of the meeting.
Failure to hold the annual meeting at the designated time shall
not work a dissolution of the Corporation.
Section 3. VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these Bylaws shall be entitled to one (1) vote, in
person or by proxy, for each share of stock entitled to vote held by such
stockholder. Except where a date shall have been fixed as the record date for
the determination of the stockholders of the Corporation entitled to vote, as
hereinafter provided in Section 4 of Article VI, no share of stock shall be
voted on at any election for directors which shall have been transferred on the
books of the Corporation within twenty (20) days next preceding such election.
All elections shall be had and all questions decided by plurality vote except
as otherwise provided by the Certificate of Incorporation and/or by the laws of
the State of Delaware. Voting by ballot shall not be required for any
corporate action other than the election of
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directors, except as otherwise provided by the Delaware General
Corporation Law.
Section 4. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business.
Section 5. ACTION WHICH MAY BE TAKEN WITHOUT MEETING. Any action
that may be taken at a meeting of the stockholders may be taken without a
meeting if authorized by a writing signed by all of the holders of shares who
would be entitled to vote at a meeting for such purpose, and filed with the
Secretary of the Corporation.
Section 6. ADJOURNMENT OF MEETINGS. If less than a quorum shall
be in attendance at any time for which the meeting shall have been called, the
meeting may, after a lapse of at least half an hour, be adjourned from time to
time by a majority of the stockholders present or represented and entitled to
vote thereat, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 7. SPECIAL MEETINGS: HOW CALLED. Special meetings of
the stockholders for any purpose or purposes may be called by the President or
Secretary, and shall be called upon a request in writing therefor, stating the
purpose or purposes thereof, delivered to the President or Secretary, signed by
a majority of the directors or by fifty-one percent (51%) in interest of the
stockholders entitled to vote, or by resolution of the directors.
Section 8. NOTICE OF STOCKHOLDERS' MEETINGS. Written or printed
notice, stating the place, date and time of the meeting, and the general nature
of the business to be considered, shall be delivered personally by the
Secretary or mailed, postage prepaid, to each stockholder entitled to vote
thereat at his last known post office address, at least ten (10) but not more
than sixty (60) days before the meeting. Notice by mail shall be deemed to be
given when deposited in the United States mail, postage prepaid. The notice of
a special meeting shall in all instances state the purpose or purposes for
which the meeting is called. If any action is
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proposed to be taken which would, if taken, entitle stockholders to
receive payment for their shares of stock, the notice shall include a statement
of that purpose and to that effect. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an
announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Section 9. STOCKHOLDER LIST. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city or other municipality
or community where the meeting is to be held, which place shall be specified in
the notice of the meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place where the meeting is to be held during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this section or the books of the Corporation, or
to vote at any meeting of stockholders.
Section 10. CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting: the Chairman of the Board, the Chief
Executive Officer, the Vice-Chairman of the Board, the President, the
Treasurer, a Vice-President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present, the Chairman of the meeting shall appoint a
secretary of the meeting.
Section 11. INSPECTORS AND JUDGES. The directors, in advance of
any meeting will appoint one or more inspectors of election or judges of the
vote, as the case may be, to act at the meeting or any adjournment thereof and
make a written report thereof. If an inspector or inspectors or judge or
judges are not appointed, the person presiding at the meeting
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will appoint one or more inspectors or judges. In case any person who may be
appointed as an inspector or judge fails to appear or act, the vacancy may be
filled by appointment made by the directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector or judge, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector or judge at such meeting with
strict impartiality and according to the best of his ability. The inspectors
or judges shall determine the number of shares of stock outstanding and the
voting power of each, the shares of stock represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors or judge or
judges shall make a report in writing of any challenge, question or matter
determined by him or them and execute a certificate of any fact found by him or
them.
ARTICLE II
DIRECTORS
Section 1. NUMBER: ELECTION AND TERM OF OFFICE. A director
need not be a stockholder, a citizen of the United States, or a resident of the
State of Delaware. The number of directors of the Corporation will be not
fewer than three (3) nor more than nine (9), the total number and the number in
each class to be fixed from time to time by the Board of Directors. No
decrease in the number of directors will have the effect of shortening the term
of an incumbent director. Except as provided herein, directors of the class to
be elected in a particular year will be elected at the annual meeting of
stockholders for such year, or at a special meeting of stockholders called for
purposes that include the election of directors. Each director, except in case
of death, resignation, retirement, disqualification or removal, will serve
until the next meeting at which directors are elected and thereafter until his
successor has been elected and has qualified.
Section 2. QUORUM. A majority of the directors shall constitute
a quorum for the transaction of business, except when a vacancy or vacancies
prevents such majority, whereupon a majority of the directors in office shall
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constitute a quorum, provided, that such majority shall constitute at least
one-third of the whole Board. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof
need be given other than by announcement at said meeting which shall be so
adjourned.
Section 3. FIRST MEETING. The directors named in the Amended
and Restated Certificate of Incorporation of the Corporation shall hold their
first meeting for the purpose of organization and the transaction of business,
at such time and place as may be fixed by consent in writing of a majority of
the directors.
Section 4. ELECTION OF OFFICERS. At the first meeting or at any
subsequent meeting called for the purpose, the directors shall elect a
President, a Treasurer, a Secretary, and such other officers as may be deemed
necessary, who need not be directors. Such officers shall hold office until
their successors have been elected and have qualified.
Section 5. REGULAR MEETINGS. Regular meetings of the directors
may be held without notice at such places and times as shall be determined from
time to time by resolution of the directors.
Section 6. SPECIAL MEETINGS: HOW CALLED; NOTICE. Special
meetings of the board may be called by the President or by the Secretary or by
any director on (2) days' notice to each director.
Section 7. PLACE OF MEETING. The directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
outside the State of Delaware, at any office or offices of the Corporation or
at any other place as they may from time to time by resolution determine;
provided, however that certified copies of the Certificate of Incorporation and
Bylaws and all amendments thereto, and a stock ledger or duplicate stock ledger
(revised annually), or a statement setting out the name and address of the
custodian thereof, shall be kept at the principal office in California.
Section 8. CHAIRMAN OF THE MEETING. The Chairman of the Board,
if any and if present and acting, shall preside at all meetings. Otherwise,
the President, if any and if present and acting, or any other director chosen
by the Board, shall preside.
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Section 9. REMOVAL OF DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation or Bylaws, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors.
Section 10. GENERAL POWERS OF DIRECTORS. The business and
affairs of the Corporation shall be managed by the Board of Directors. In
addition to the powers and authority expressly conferred upon it by these
Bylaws, the Board of Directors may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by law, by any legal
agreement among stockholders, by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Section 11. SPECIFIC POWERS OF DIRECTORS. Without prejudice to
such general powers, it is hereby expressly declared that the directors shall
have the following powers, to-wit:
(1) To adopt and alter a common seal of the Corporation.
(2) To make and change regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
(3) To purchase or otherwise acquire for the Corporation any
property, rights, or privileges which the Corporation is authorized to acquire.
(4) To pay for any property purchased for the Corporation either
wholly or partly in money, stock, bonds, debentures, or other securities of the
Corporation.
(5) To borrow money and to make and issue notes, bonds, and
other negotiable and transferable instruments, mortgages, deeds of trust, and
trust agreements, and to do every act and thing necessary to effectuate the
same.
(6) To remove any officer for cause or summarily without cause,
and in their discretion from time to time, to devolve the powers and duties of
any officer upon any other person for the time being.
(7) To appoint and remove of suspend such subordinate officers,
agents or factors as they may deem necessary and to determine their duties and
fix, and from time to time change, their salaries or remuneration, and to
require security as and when they think fit.
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<PAGE> 7
(8) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, agents and factors.
(9) To determine who shall be authorized on the Corporation's
behalf to make and sign bills, notes, acceptances, endorsements, checks,
releases, receipts, contracts and other instruments.
(10) To determine who shall be entitled to vote in the name and
behalf of the Corporation upon, or to assign and transfer, any shares of stock,
bonds, or other securities of other corporations held by this Corporation.
(11) To delegate any of the powers of the board in relation to
the ordinary business of the Corporation to any standing or special committee,
or to any officer or agent (with power to sub-delegate), upon such terms as
they think fit.
(12) To call special meetings of the stockholders for any purpose
or purposes.
Section 12. COMPENSATION OF DIRECTORS. Directors may receive
such compensation for their services as directors as may from time to time be
fixed by vote of the Board of Directors. A director may also serve the
Corporation in a capacity other than that of director and receive compensation,
as determined by the Board of Directors, for services rendered in such other
capacity.
Section 13. VOTE REQUIRED FOR ACTION. Except as otherwise
provided in these Bylaws and by the Delaware General Corporation Law, the act
of a majority of the directors present at a meeting at which a quorum is
present at the time shall be the act of the Board of Directors.
Section 14. PARTICIPATION BY CONFERENCE TELEPHONE. Members of
the Board of Directors, or members of any committee designated by the Board of
Directors, may participate in a meeting of the Board or of such committee by
means of conference telephone or similar communications equipment through which
all persons participating in the meeting can hear and speak with each other.
Participation in a meeting pursuant to this Section 14 shall constitute
presence in person at such meeting.
Section 15. ACTION BY DIRECTORS WITHOUT A MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any action which may be taken at a meeting of a committee of directors may be
taken without a
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meeting if a written consent thereto shall be signed by all the directors, or
all of the members of the committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or the
committee. Such consent shall have the same force and effect as a unanimous
vote of the Board of Directors or the committee.
ARTICLE III
COMMITTEES
Section 1. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in such resolution or resolutions or
in these Bylaws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may have power to authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
No such committee, however, shall have the power or authority to
amend the Certificate of Incorporation, to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, to recommend
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or to amend the Bylaws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Section 2. The committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
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ARTICLE IV
OFFICERS
Section 1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents as determined
and designated by the Board of Directors, a Secretary, a Treasurer, and one or
more Assistant Secretaries, which Assistant Secretaries may be designated by
the Chairman of the Board, and one or more Assistant Treasurers, as may be
determined by the Board of Directors. The Board of Directors may from time to
time create and establish the duties of such other officers and elect or
provide for the appointment of such other officers as it deems necessary for
the efficient management of the Corporation, but the Corporation shall not be
required to have at any time any officers other than a President, Secretary,
and a Treasurer. Any two or more offices may be held by the same person,
except the offices of President and Secretary.
Section 2. ELECTION AND TERM. All officers shall be elected by
the Board of Directors and shall serve at the will of the Board of Directors
and until their successors have been elected and have qualified or until the
earlier of their death, resignation, removal or retirement.
Section 3. REMOVAL. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever in
its judgment the best interests of the Corporation will be served thereby.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall call to order meetings of the stockholders and of the Board of Directors,
and shall act as chairman of such meetings except as may otherwise be provided
by the Board of Directors. The Chairman of the Board shall perform such other
duties and have such other powers as the Board of Directors may determine from
time to time.
Section 5. PRESIDENT. In the absence of the Chairman of the
Board, the President shall perform the duties and exercise the powers specified
in these Bylaws of the Chairman. The President shall perform such other duties
and have such other powers as the Board of Directors may determine from time to
time.
Section 6. VICE PRESIDENTS. A Vice President shall in the
absence or disability of the President, or at the direction of the President,
perform the duties and exercise the powers, whether such duties and powers are
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specified by these Bylaws or otherwise, of the President. If the Corporation
has more than one Vice President, the one so designated by the Board of
Directors shall act in lieu of the President. Vice Presidents shall perform
whatever duties and have whatever powers the Board of Directors may determine
from time to time.
Section 7. SECRETARY. The Secretary shall be responsible for
causing there to be maintained accurate records of the acts and proceedings of
all meetings of stockholders and directors. He shall have authority to give
all notices required by law or these Bylaws. He shall be responsible for the
custody of the corporate books, records, contracts, and other documents. The
Secretary may affix the corporate seal to any lawfully executed documents
requiring it and shall sign instruments as may require his signature. The
Secretary shall perform such other duties and have such other powers as the
Board of Directors may determine from time to time.
Section 8. TREASURER. The Treasurer shall be responsible for
the custody of all funds and securities belonging to the Corporation and for
the receipt, deposit or disbursement of such funds and securities under the
direction of the Board of Directors. The Treasurer shall cause full and true
accounts of all receipts and disbursements to be maintained and shall make such
reports of the same to the Board of Directors and President upon request. The
Treasurer shall perform such other duties and have such other powers as the
Board of Directors may determine from time to time. In the absence of a
Treasurer elected by the Board of Directors to serve these purposes, the
Secretary shall fulfill the duties of Treasurer.
Section 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary and Assistant Treasurer (or if there be more that one of
either such officer, the one so designated by the Board of Directors) shall, in
the absence of disability, or at the direction, of the Secretary or the
Treasurer, respectively, perform the duties and exercise the powers, whether
such duties and powers are specified in these Bylaws or otherwise, of those
offices. Each Assistant Secretary and Assistant Treasurer shall perform such
other duties and have such other powers as the Board of Directors may determine
from time to time, and each Assistant Secretary may affix the corporate seal to
all corporate documents and attest the signature of any officer of the
Corporation.
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Section 10. SALARIES. The salaries of all corporate officers
and agents shall be fixed from time to time as may be authorized by the Board
of Directors. No officer shall be prevented from receiving such salary by
reason of being a director.
ARTICLE V
RESIGNATIONS: FILLING OF VACANCIES:
INCREASE OR DECREASE OF DIRECTORS
Section 1. RESIGNATIONS. Any director, member of a committee or
other officer may resign at any time. Such resignations shall be made in
writing and shall take effect at the time specified therein, and, if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 2. FILLING OF VACANCIES. If the office of any director,
member of a committee, or other officer becomes vacant, the remaining directors
in office, though less than a quorum, by a majority vote, may appoint any
qualified person to full such vacancy, who shall hold office for the unexpired
term and until his successor shall be duly chosen.
Section 3. INCREASE OF NUMBER OF DIRECTORS. The Board of
Directors may elect or appoint any qualified person or persons to the Board of
the number of directors is increased as provided in Section I of Article II of
these Bylaws. Any director elected or appointed as provided in this Section 3
shall hold office until the next meeting of the stockholders called for the
purpose of electing directors in such director's class and until a successor is
elected and qualified.
ARTICLE VI
CAPITAL STOCK
Section 1. CERTIFICATE OF STOCK. Certificates of stock,
numbered and with the seal of the Corporation affixed, signed by the President
or Vice President, and the Treasurer or Secretary, shall be issued to each
stockholder certifying the number of shares owned by him in the Corporation.
When such certificates are signed by a transfer agent, or an assistant transfer
agent, or by a transfer clerk acting on behalf of the Corporation and a
registrar, the signatures of such officers may be facsimiles. In case any
officer,
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transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his
legal representatives, to give the Corporation a bond, in such sum as they may
direct, not exceeding double the value of the stock to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss of any such certificate or the issuance of such new certificate.
Section 3. TRANSFER OF SHARES. Subject to the restrictions
contained in the Certificate of Incorporation, the shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or lead representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books
and ledgers or to such other person as the directors may designate, by whom
they shall be canceled, and new certificates shall thereupon be issued. Upon
compliance with provisions restricting the transfer or registration of transfer
of shares of stock, if any, transfers or registration of transfers of shares of
stock of the Corporation shall be made on the stock ledger of the Corporation
by the registered holder thereof, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation
or with a transfer agent or a registrar, if any, and on surrender of the
certificate or certificates for such shares of stock properly endorsed and the
payment of all taxes due thereon.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 4. SETTING OF RECORD DATE. The Board of Directors may
fix in advance a date, not exceeding sixty (60) days nor fewer than ten (10)
days preceding the date of any
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meeting of stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion of
or exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to receive payment of any such
dividends, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion, or exchange of capital stock, and in
such cases such stockholders only as shall be stockholders of record on the
date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividends, or to receive such allotment
of rights, or to exercise such rights, as the case may be, not withstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 5. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation, if any, and the laws of the State of Delaware,
the directors may declare dividends upon the capital stock of the Corporation
as and when they deem expedient. Before declaring any dividend there may be
set apart out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time in their discretion think proper for
working capital or as a reserve fund to meeting contingencies or for equalizing
dividends or for such other purposes as the directors shall think conducive to
the interest of the Corporation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. CORPORATE SEAL. The corporate seal shall be circular
in form and shall contain such words as shall be determined by the Board of
Directors. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 2. FISCAL YEAR. The fiscal year of the Corporation
shall commence on March 1, and shall end the last day of February of each
succeeding year.
Section 3. PRINCIPAL OFFICE. The principal office of the
Corporation shall be established and maintained at 3501 Jamboree Road, Suite
200, Newport Beach, California. The Corporation may have branch offices at
such place or places within or without the State of Delaware as the directors
shall from time to time determine.
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Section 4. CHECKS, DRAFTS, NOTES. All checks, drafts or other
orders for the payment of money, notes, or other evidences or indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents, of the Corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
Section 5. NOTICE. Whenever any notice is required by these
Bylaws to be given, personal notice is not meant unless expressly so stated;
and, unless otherwise provided in these Bylaws, any notice so required shall be
deemed to be sufficient if given by depositing the same in a post office box in
a sealed post-paid wrapper addressed to the person entitled thereto at his last
known post office address, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meeting except as otherwise provided by
statute.
Section 6. WAIVER OF NOTICE. Whenever any notice whatever is
required to be given under the provisions of these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders need be specified in any written waiver of
notice. In addition, attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
Section 7. RELATED PARTY TRANSACTIONS. All transactions between
the Corporation and its affiliates must be on terms no less favorable to the
Corporation than terms with unaffiliated parties for similar transactions. All
such transactions that are not in the ordinary course of the Corporation's
business must be approved by a majority of the Corporation's directors not
affiliated with any parent corporation of the Corporation, or any of such
parent corporation's subsidiaries, or employed by the Corporation, and who do
not have a financial interest in the transaction.
- 14 -
<PAGE> 15
ARTICLE VIII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS. The Corporation shall
indemnify and hold harmless any person (an "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
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director of the Corporation, or is or
was serving at the request of the Corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding 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
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Any person (an "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 Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director of the Corporation, or is or
was serving at the request of the Corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit 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 Corporation and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent 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 pursuant to the applicable
provisions of the Delaware General Corporation Law.
Section 2. INDEMNIFICATION OF OFFICERS AND OTHERS. The Board of
Directors shall have the power to cause the Corporation to provide to officers,
employees and agents of the Corporation all or any part of the right to
indemnification and other rights of the type provided under Sections 1, 5 and
11 of this Article VIII (subject to the
- 15 -
<PAGE> 16
conditions, limitations and obligations specified therein), upon a resolution
to that effect identifying such officers, employees or agents (by position or
name) and specifying the particular rights provided, which may be different for
each of the officers, employees and agents identified. Each officer, employee
or agent of the Corporation so identified shall be an "Indemnified Person" for
purposes of the provisions of this Article VIII.
Section 3. SUBSIDIARIES. The Board of Directors shall have the
power to cause the Corporation to provide to any director, officer, employee or
agent of this Corporation who also is a director, officer, trustee, general
partner, employee or agent of a Subsidiary (as defined below), all or any part
of the right to indemnification and other rights of the type provided under
Sections 1, 5 and 11 of this Article VIII (subject to the conditions,
limitations and obligations specified therein, but not subject, however, to the
limitation imposed under clause (b) of Section 1 of this Article VIII), with
regard to amounts actually and reasonably incurred by such person by reason of
the fact that he is or was a director, officer, trustee, general partner,
employee or agent of the Subsidiary. The Board of Directors shall exercise
such power, if at all, through a resolution identifying the person or persons
to be indemnified (by position or name) and the Subsidiary (by name or other
classification), and specifying the particular rights provided, which may be
different for each of the directors, officers, employees and agents identified.
Each person so identified shall be an "Indemnified Person" for purposes of the
provisions of this Article VIII. As used in this Article VIII, "Subsidiary"
shall mean (i) another corporation, joint venture, trust, partnership or
unincorporated business association more than twenty percent (20%) of the
voting capital stock or other voting equity interest of which was, at or after
the time the circumstances giving rise to such action, suit or proceeding
arose, owned, directly or indirectly, by the Corporation, or (ii) a nonprofit
corporation which receives its principal financial support from the Corporation
or its subsidiaries.
Section 4. DETERMINATION. Notwithstanding any judgment, order,
settlement, conviction or plea in any action, suit or proceeding of the kind
referred to in Section 1 of this Article VIII, an Indemnified Person shall be
entitled to indemnification as provided in such Section 1 unless a
determination that such Indemnified Person is not entitled to such
indemnification (because of the applicability of clause (a) or (b) of such
Section 1) shall be made (i) by the Board of Directors by a majority vote or
consent of a quorum consisting of directors who are not
- 16 -
<PAGE> 17
seeking the benefits of such indemnification; or (ii) if such quorum is not
obtainable, or even if obtainable if a quorum of such disinterested directors
so directs, in a written opinion by independent legal counsel (which counsel
may be the outside legal counsel regularly employed or retained by the
Corporation); or (iii) if a quorum cannot be obtained under (i) above and in
the absence of a written opinion by independent legal counsel, by majority vote
or consent of a committee duly designated by the Board of Directors (in which
designation interested directors may participate), consisting solely of one or
more directors who are not seeking the benefit of such indemnification.
Provided, however, that notwithstanding any determination pursuant to the
preceding sentence, if such determination shall have been made at a time that
the members of the Board of Directors, so serving when the events upon which
such Indemnified Person's liability has been based occurred, no longer
constitute a majority of the members of the Board of Directors, then such
Indemnified Person shall nonetheless be entitled to indemnification as set
forth in such Section 1 unless the Company shall carry the burden of proving,
in an action before any court of competent jurisdiction, that such Indemnified
Person is not entitled to indemnification because of the applicability of
clause (a) or (b) of such Section 1.
Section 5. ADVANCES. Expenses (including, but not limited to,
attorneys' fees and disbursements, court costs, and expert witness fees)
incurred by the Indemnified Person in defending any action, suit or proceeding
of the kind described in Section 1 hereof shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as set
forth herein. The Corporation shall promptly pay the amount of such expenses
to the Indemnified Person, but in no event later than ten (10) days following
the Indemnified Persons's delivery to the Corporation of a written request for
an advance pursuant to this Section 5, together with a reasonable accounting of
such expenses; provided, that the Indemnified Person shall undertake and agree
to repay to the Corporation any advances made pursuant to this Section 5 if it
shall be determined pursuant to Section 4 that the Indemnified Person is not
entitled to be indemnified by the Corporation for such amounts. The
Corporation shall make the advances contemplated by this Section 5 regardless
of the Indemnified Person's financial ability to make repayment. Any advances
and undertakings to repay pursuant to this Section 5 shall be unsecured and
interest-free.
Section 6. NON-EXCLUSIVITY; CONTINUING BENEFITS. The
indemnification provided by this Article VIII shall not be deemed exclusive of
any other rights to which a person
- 17 -
<PAGE> 18
seeking indemnification may be entitled under any provision of the Certificate
of Incorporation, or any Bylaw, agreement, vote of the Corporation's
stockholders or disinterested directors or otherwise, both as to actions in his
official capacity and as to actions in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent of the Corporation, as the case may be, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, trustee, general
partner, employee or agent of another corporation, nonprofit corporation, joint
venture, trust, partnership, unincorporated business association or other
enterprise, 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
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VIII.
Section 8. SECURITY. The Corporation may designate certain of
its assets as collateral, provide self-insurance or otherwise secure its
obligations under this Article VIII, or under any indemnification agreement or
plan of indemnification adopted and entered into in accordance with the
provisions of this Article VIII, as the Board of Directors deem appropriate.
Section 9. AMENDMENT. Any amendment to this Article VIII which
limits or otherwise adversely affects the right of indemnification or other
rights of any Indemnified Person hereunder shall, as to such Indemnified
Person, apply only to claims, actions, suits or proceedings based on actions,
events or omissions (collectively, "Post Amendment Events") occurring after
such amendment and after delivery of notice of such amendment to the
Indemnified Person so affected. Any Indemnified Person shall, as to any claim,
action, suit or proceeding based on actions, events or omissions occurring
prior to the date of receipt of such notice, be entitled to the right of
indemnification and other rights under this Article VIII to the same extent as
had such provisions continued as part of the Bylaws of the Corporation without
such amendment. This Section 9 cannot be altered, amended or repealed in a
manner effective as to any Indemnified Person (except as to Post Amendment
Events) without the prior written consent of such Indemnified Person.
- 18 -
<PAGE> 19
Section 10. AGREEMENTS. The provisions of this Article VIII
shall be deemed to constitute an agreement between the Corporation and each
person entitled to indemnification hereunder. In addition to the rights
provided in this Article VIII, the Corporation shall have the power, upon
authorization by the Board of Directors, to enter into an agreement or
agreements providing to any person who is or was a director, officer, employee
or agent of the Corporation indemnification rights substantially similar to
those provided in this Article VIII.
Section 11. SUCCESSORS. For purposes of this Article VIII, the
terms "the Corporation" or "this Corporation" shall include any corporation,
joint venture, trust, partnership or unincorporated business association which
is the successor to all or substantially all of the business or assets of this
Corporation, as a result of merger, consolidation, sale, liquidation or
otherwise, and any such successor shall be liable the persons indemnified under
this Article VIII on the same terms and conditions and tot he same extent as
this Corporation.
Section 12. ADDITIONAL INDEMNIFICATION. In addition to the
specific indemnification rights set forth herein, the Corporation shall
indemnify each of its directors and officers to the full extent permitted by
action of the Board of Directors without stockholder approval under the
Delaware General Corporation Law or other laws of the State of Delaware as in
effect from time to time.
ARTICLE IX
AMENDMENTS
Section 1. POWER TO AMEND BYLAWS. These Bylaws may be altered,
amended or repealed from time to time, and new Bylaws may be made and adopted
by action of the stockholders or by action of the Board of Directors, at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors (if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in
the notice of such special meeting).
- 19 -
<PAGE> 1
Exhibit 10.15
EXECUTION COPY
========================================================
J.M. PETERS COMPANY, INC.,
as Issuer
DURABLE HOMES, INC.,
J.M. PETERS NEVADA, INC.,
and
PETERS RANCHLAND, INC.,
as Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
______________________________
Indenture
Dated as of May 13, 1994
______________________________
12-3/4% Senior Notes due 2002
========================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- - ------------ ------------------
<S> <C>
310(a)(1).................................... 7.10
(a)(2).................................... 7.10
(a)(3).................................... 11.01
(a)(4).................................... 11.01
(a)(5).................................... 11.01
(b)....................................... 7.03; 7.08
(c)....................................... 11.01
311.......................................... 7.03
312.......................................... 2.04; 11.01
313(a)....................................... 7.06
(b)....................................... 11.01
(c)....................................... 7.05; 7.06; 11.02
314(a)....................................... 4.17; 11.02
(b)....................................... 11.01
(c)(1).................................... 11.03
(c)(2).................................... 11.03
(c)(3).................................... 11.01
(d)....................................... 11.01
(e)....................................... 11.04
(f)....................................... 11.01
315(a)....................................... 7.02
(b)....................................... 7.05; 11.02
(c)....................................... 7.02
(d)....................................... 7.02
(e)....................................... 6.11
316(a)(1)(A)................................. 6.05
(a)(1)(B)................................. 6.04
(a)(2).................................... 11.01
(b)....................................... 6.07
(c)....................................... 11.01
317(a)(1).................................... 6.08
(a)(2).................................... 6.09
(b)....................................... 2.05
318(a)....................................... 11.01
(b)....................................... 11.01
(c)....................................... 11.01
</TABLE>
- - ----------
Note: The Cross-Reference Table shall not for any purpose be deemed
to be a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS 1
</TABLE>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
SECTION 1.01. Definitions 2
SECTION 1.02. Incorporation by Reference of
Trust Indenture Act 25
SECTION 1.03. Rules of Construction 25
</TABLE>
ARTICLE TWO
THE SECURITIES
<TABLE>
<S> <C> <C>
SECTION 2.01. Form and Dating 26
SECTION 2.02. Restrictive Legends 27
SECTION 2.03. Execution, Authentication and
Denominations 29
SECTION 2.04. Registrar and Paying Agent 30
SECTION 2.05. Paying Agent to Hold Money in Trust 31
SECTION 2.06. Transfer and Exchange 32
SECTION 2.07. Book-Entry Provisions for
U.S. Global Security 33
SECTION 2.08. Special Transfer Provisions 35
SECTION 2.09. Replacement Securities 40
SECTION 2.10. Outstanding Securities 40
SECTION 2.11. Temporary Securities 41
SECTION 2.12. Cancellation 42
SECTION 2.13. CUSIP Numbers 42
SECTION 2.14. Defaulted Interest 42
</TABLE>
- - ------------
Note: The Table of Contents shall not for any purpose be deemed to
be a part of the Indenture.
-i-
<PAGE> 4
ARTICLE THREE
REDEMPTION
<TABLE>
<S> <C> <C>
SECTION 3.01. Right of Redemption 43
SECTION 3.02. Notices to Trustee 43
SECTION 3.03. Selection of Securities to Be Redeemed 43
SECTION 3.04. Notice of Redemption 44
SECTION 3.05. Effect of Notice of Redemption 45
SECTION 3.06. Deposit of Redemption Price 45
SECTION 3.07. Payment of Securities Called
for Redemption 46
SECTION 3.08. Securities Redeemed in Part 46
</TABLE>
ARTICLE FOUR
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 4.01. Payment of Securities 46
SECTION 4.02. Maintenance of Office or Agency 47
SECTION 4.03. Limitation on Indebtedness 47
SECTION 4.04. Restrictions on Restricted Subsidiary
Indebtedness 48
SECTION 4.05. Limitation on Restricted Payments 48
SECTION 4.06. Maintenance of Consolidated Tangible
Net Worth 52
SECTION 4.07. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries 54
SECTION 4.08. Limitation on Transactions with
Shareholders and Affiliates 55
SECTION 4.09. Limitation on Liens 57
SECTION 4.10. Limitation on Asset Sales 57
SECTION 4.11. Repurchase of Securities upon a
Change of Control 59
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 4.12. Existence 61
SECTION 4.13. Payment of Taxes and Other Claims 62
SECTION 4.14. Maintenance of Properties and
Insurance 62
SECTION 4.15. Notice of Defaults 63
SECTION 4.16. Compliance Certificates 63
SECTION 4.17. Commission Reports and Reports to
Holders 64
SECTION 4.18. Waiver of Stay, Extension or
Usury Laws 64
SECTION 4.19. Issuance of Subsidiary Guarantees
by Restricted Subsdiaries 64
</TABLE>
ARTICLE FIVE
SUCCESSOR CORPORATION
<TABLE>
<S> <C> <C>
SECTION 5.01. When Company May Merge, Etc. 65
SECTION 5.02. Successor Substituted 66
</TABLE>
ARTICLE SIX
DEFAULT AND REMEDIES
<TABLE>
<S> <C> <C>
SECTION 6.01. Events of Default 66
SECTION 6.02. Acceleration 68
SECTION 6.03. Other Remedies 69
SECTION 6.04. Waiver of Past Defaults 69
SECTION 6.05. Control by Majority 70
SECTION 6.06. Limitation on Suits 70
SECTION 6.07. Rights of Holders to Receive Payment 71
SECTION 6.08. Collection Suit by Trustee 71
SECTION 6.09. Trustee May File Proofs of Claim 71
SECTION 6.10. Priorities 72
SECTION 6.11. Undertaking for Costs 72
SECTION 6.12. Restoration of Rights and Remedies 72
SECTION 6.13. Rights and Remedies Cumulative 73
SECTION 6.14. Delay or Omission Not Waiver 73
</TABLE>
-iii-
<PAGE> 6
ARTICLE SEVEN
TRUSTEE
<TABLE>
<S> <C> <C>
SECTION 7.01. General 73
SECTION 7.02. Certain Rights of Trustee 74
SECTION 7.03. Individual Rights of Trustee 74
SECTION 7.04. Trustee's Disclaimer 75
SECTION 7.05. Notice of Default 75
SECTION 7.06. Reports by Trustee to Holders 75
SECTION 7.07. Compensation and Indemnity 75
SECTION 7.08. Replacement of Trustee 76
SECTION 7.09. Successor Trustee by Merger, Etc. 77
SECTION 7.10. Eligibility 77
SECTION 7.11. Money Held in Trust 77
SECTION 7.12. Withholding Taxes 77
</TABLE>
ARTICLE EIGHT
DISCHARGE OF INDENTURE
<TABLE>
<S> <C> <C>
SECTION 8.01. Termination of Company's Obligations 78
SECTION 8.02. Defeasance and Discharge of Indenture 79
SECTION 8.03. Defeasance of Certain Obligations 82
SECTION 8.04. Application of Trust Money 83
SECTION 8.05. Repayment to Company 84
SECTION 8.06. Reinstatement 84
</TABLE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<TABLE>
<S> <C> <C>
SECTION 9.01. Without Consent of Holders 84
SECTION 9.02. With Consent of Holders 85
SECTION 9.03. Revocation and Effect of Consent 86
SECTION 9.04. Notation on or Exchange of Securities 87
SECTION 9.05. Trustee to Sign Amendments, Etc. 87
SECTION 9.06. Conformity with Trust Indenture Act 87
</TABLE>
-iv-
<PAGE> 7
ARTICLE TEN
GUARANTEE OF SECURITIES
<TABLE>
<S> <C> <C>
SECTION 10.01. Note Guarantee 88
SECTION 10.02. Obligations Unconditional 90
SECTION 10.03. Release of Subsidiary Guarantees 90
SECTION 10.04. Notice to Trustee 90
SECTION 10.05 Supplemental Indenture 91
SECTION 10.06. This Article Not to Prevent Events
of Default 91
</TABLE>
ARTICLE ELEVEN
MISCELLANEOUS
<TABLE>
<S> <C> <C>
SECTION 11.01. Trust Indenture Act of 1939 91
SECTION 11.02. Notices 92
SECTION 11.03. Certificate and Opinion as
to Conditions Precedent 93
SECTION 11.04. Statements Required in Certificate
or Opinion 93
SECTION 11.05. Rules by Trustee, Paying Agent
or Registrar 93
SECTION 11.06. Payment Date Other Than a
Business Day 94
SECTION 11.07. Governing Law 94
SECTION 11.08. No Adverse Interpretation of Other
Agreements 94
SECTION 11.09. No Recourse Against Others 94
SECTION 11.10. Successors 95
SECTION 11.11. Duplicate Originals 95
SECTION 11.12. Separability 95
SECTION 11.13. Table of Contents, Headings, Etc. 95
SIGNATURES S-1
S-2
</TABLE>
-v-
<PAGE> 8
<TABLE>
<S> <C> <C>
EXHIBIT A Form of Security A-1
EXHIBIT B Form of Certificate B-1
EXHIBIT C Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited
Investors C-1
EXHIBIT D Form of Certificate to Be
Delivered in Connection with
Transfers Pursuant to
Regulation S D-1
</TABLE>
-vi-
<PAGE> 9
INDENTURE, dated as of May 13, 1994, among J.M. PETERS
COMPANY, INC., a Delaware corporation, as Issuer (the "Company"), DURABLE
HOMES, INC., a Nevada corporation ("Durable"), J.M. PETERS NEVADA, INC., a
Delaware corporation ("JMPN"), and PETERS RANCHLAND, INC., a Delaware
corporation ("Ranchland"), as Guarantors (each a "Guarantor" and, collectively,
the "Guarantors") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
banking corporation, as Trustee (the "Trustee").
RECITALS
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance of up to $100,000,000 aggregate
principal amount of the Company's 12-3/4% Senior Notes due 2002 (the
"Securities") issuable as provided in this Indenture. Pursuant to the terms of
a Placement Agreement dated as of May 6, 1994 between the Company and Morgan
Stanley & Co. Incorporated, as Purchaser, the Company has agreed to issue and
sell 10,000 units (the "Units"), each Unit consisting of $10,000.00 principal
amount of Securities and 79 warrants (each, a "Warrant") of the Company, each
Warrant entitling the registered owner thereof, subject to the terms and
conditions set forth therein, to purchase one share of common stock, $.10 par
value per share, of the Company (the "Common Stock"). The Securities and the
Warrants included in each Unit will become separately transferable at the close
of business upon the earlier to occur of (i) November 14, 1994, or (ii) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement relating to the Securities as provided in the Registration Rights
Agreement (as hereinafter defined). All things necessary to make this
Indenture a valid agreement of the Company and each Guarantor, in accordance
with its terms, have been done, and the Company and each Guarantor have done
all things necessary to make the Securities, when executed by the Company and
authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act
of 1939, as amended.
<PAGE> 10
2
AND THIS INDENTURE FURTHER 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, as follows.
ARTICLE ONE
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acceleration Notice" has the meaning specified in Section
6.02.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined on a consolidated basis in conformity with GAAP;
provided that the following items shall be excluded in computing Adjusted
Consolidated Net Income (to the extent otherwise included therein) without
duplication: (i) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (ii) solely for the purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (D) of the first
paragraph of Section 4.05 (and in such case, except to the extent includable
pursuant to the second proviso set forth at the end of this definition), the
net income (or loss) of any Person accrued prior to the date such Person
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries; and (iii) any gains (but not losses) realized
during such period resulting from (A) the acquisition of securities issued by
the Company or the extinguishment of Indebtedness of the Company or any of its
Restricted Subsidiaries, (B) Asset Sales, and (C) other extraordinary items;
provided that the Company
<PAGE> 11
3
will be entitled to take into consideration the tax benefits associated with
any loss described in clause (iii) above, but only to the extent such tax
benefits are actually recognized by the Company or by any of its Restricted
Subsidiaries during such period; and provided further that, "Adjusted
Consolidated Net Income" shall include the amount of net income of any
Unrestricted Subsidiary and of any Person that is not a Subsidiary or that is
accounted for under the equity method of accounting only to the extent such net
income is actually received by the Company or any Restricted Subsidiary that is
a Wholly Owned Subsidiary of the Company in the form of cash dividends or
similar cash distributions during such period.
"Adjusted Consolidated Net Tangible Assets" means, as of any
date, the total amount of assets of the Company and its Restricted Subsidiaries
(less applicable depreciation, amortization and other valuation reserves) on a
consolidated basis, except to the extent resulting from write-ups of capital
assets (excluding write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities of
the Company and its Restricted Subsidiaries (excluding intercompany items),
(ii) Intangible Assets, and (iii) minority interests of other Persons holding
equity investments in Restricted Subsidiaries, all as set forth on the most
recently available quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries immediately preceding such date,
prepared in conformity with GAAP.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Affiliate Transaction" has the meaning provided in Section
4.08.
"Agent" means any Registrar, Paying Agent or co-Registrar.
<PAGE> 12
4
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of all or
substantially all of the assets that constitute a division or line of business
of any Person other than the Company or any of its Restricted Subsidiaries.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
"Asset Sale" means any sale, lease, conveyance, transfer or
other disposition (including by way of merger, consolidation or sale and
lease-back transaction, but excluding a disposition of property arising as a
result of a foreclosure on, or other settlement with respect to, such property
that results in the cancellation of the entire amount of Indebtedness secured
by Liens on such property) in one transaction or a series of related
transactions by the Company or any of its Restricted Subsidiaries to any
Person, in which the Company or any of its Restricted Subsidiaries receive cash
and/or other consideration (including, without limitation, the unconditional
assumption of Indebtedness of the Company or any of its Restricted
Subsidiaries) having an aggregate fair market value of $500,000 or more as to
each such transaction or series of related transactions, of (i) all or any of
the Capital Stock of any Restricted Subsidiary, or (ii) all or any of the
property or other assets of the Company or any of its Restricted Subsidiaries,
in each case, that is not governed by the provisions of this Indenture
applicable to mergers, consolidations and sales of assets; provided that (A)
sales of homes in the ordinary course of business will not constitute Asset
Sales, (B) sales, leases, sale-leasebacks, conveyances or other dispositions,
including, without limitation, exchanges or swaps, of real estate and other
assets in the ordinary course of business consistent with past practice will
not constitute Asset Sales, and (C) transactions between the Company and any of
its Restricted Subsidiaries which are Wholly Owned Subsidiaries of the Company,
or among such Restricted Subsidiaries which are Wholly Owned Subsidiaries of
the Company, will not constitute Asset Sales.
<PAGE> 13
5
"Average Life" means, at any date of determination with
respect to any Indebtedness or portion thereof, as the case may be, the
quotient obtained by dividing (i) the sum of the products of (a) the number of
years from such date of determination to the dates of each successive scheduled
principal payment of such Indebtedness and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the
Company or any committee of such Board of Directors duly authorized to act
under this Indenture.
"Board Resolution" means a copy of a resolution, certified by
the Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights or other equivalents (however
designated, whether voting or non-voting) in the equity (which includes, but is
not limited to, common stock, preferred stock and partnership and joint venture
interests) of such Person.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations,
as aforesaid, under such lease.
"Change of Control" means such time as (i) (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than any of the Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the total voting power of the Common Equity of the Company; (ii)
individuals who at the beginning of any period of two consecutive calendar
years commencing after August 13, 1992 constituted the Board of Directors
(together with any new directors whose election by the Board of Directors or
<PAGE> 14
6
whose nomination for election by the Company's stockholders was approved by a
vote of at least a majority of the members of the Board of Directors then still
in office who either were members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office; or (iii) all or substantially all of the
Company's assets shall be sold, leased, conveyed or otherwise disposed of as an
entirety or substantially as an entirety to any "person" or "group" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the
Permitted Holders, in one or a series of transactions.
"Change of Control Offer" has the meaning provided in Section
4.11.
"Change of Control Payment" has the meaning provided in
Section 4.11.
"Change of Control Payment Date" has the meaning provided in
Section 4.11.
"Closing Date" means the date on which the Securities are
originally issued under this Indenture.
"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 TIA, then the body
performing such duties at such time.
"Common Equity" means, with respect to any Person, all Capital
Stock of such Person that is generally entitled to (i) vote in the election of
directors of such Person, or (ii) if such Person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners,
managers or others that will control the management and policies of such
Person.
"Common Stock" has the meaning provided in the first paragraph
of the recitals to this Indenture.
<PAGE> 15
7
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, its President, an Executive Vice
President or a Vice President and (ii) by its Chief Financial Officer,
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and
delivered to the Trustee; provided, however, that such written request or order
may be signed by any two of the officers or directors listed in clause (i)
above in lieu of being signed by one of such officers or directors listed in
such clause (i) and one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period (without duplication) of (i) Adjusted Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) income taxes, to the extent
such amount was deducted in calculating Adjusted Consolidated Net Income (other
than income taxes (either positive or negative) attributable to extraordinary
and non-recurring gains or losses or sales of assets), (iv) depreciation
expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent such amount
was deducted in calculating Adjusted Consolidated Net Income, and (vi) all
other non-cash items reducing Adjusted Consolidated Net Income, less all
non-cash items increasing Adjusted Consolidated Net Income, all as determined
on a consolidated basis for the Company and its Restricted Subsidiaries in
conformity with GAAP.
"Consolidated Interest Coverage Ratio" means, on any
Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA
for the four fiscal quarters for which financial information in respect thereof
is available immediately prior to such Transaction Date (the "Reference
Period") to (ii) the aggregate Consolidated Interest Incurred during such
Reference Period. In making the foregoing calculation, (A) pro forma effect
shall be given to (1) any Indebtedness Incurred subsequent to the end of the
Reference Period and prior to the Transaction Date (other than Indebtedness
Incurred under a revolving credit or similar arrangement in effect on the last
day of such Reference Period), (2) any Indebtedness Incurred during such period
to the extent such Indebtedness is outstanding at the Transaction Date and (3)
any Indebtedness to be Incurred on the Transaction Date, in each case as if
such Indebtedness had been Incurred on the first day of
<PAGE> 16
8
such Reference Period and after giving pro forma effect to the application of
the proceeds thereof as if such application had occurred on such first day; (B)
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being Incurred) computed on a pro forma basis and bearing
a floating interest rate shall be computed as if the rate in effect on the
Transaction Date (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months) had been the applicable rate for the entire period; (C)
there shall be excluded from Consolidated Interest Expense any Consolidated
Interest Expense related to any amount of Indebtedness that was outstanding
during such Reference Period or thereafter but that is not outstanding or is to
be repaid on the Transaction Date, except for Consolidated Interest Expense
accrued (as adjusted pursuant to clause (B)) during such Reference Period under
a revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any successor revolving credit or similar arrangement) in
effect on the Transaction Date; (D) pro forma effect shall be given to Asset
Dispositions and Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur during such
Reference Period or thereafter and on or prior to the Transaction Date as if
they had occurred and such proceeds had been applied on the first day of such
Reference Period; (E) with respect to any such Reference Period commencing
prior to the Closing Date, the issuance of the Securities shall be deemed to
have taken place on the first day of such period; and (F) pro forma effect
shall be given to asset dispositions and asset acquisitions (including giving
pro forma effect to the application of proceeds of any asset disposition) that
have been made by any Person that has become a Restricted Subsidiary or has
been merged with or into the Company or any Restricted Subsidiary during such
Reference Period or subsequent to such period and prior to the Transaction Date
and that would have constituted Asset Dispositions or Asset Acquisitions had
such transactions occurred when such Person was a Restricted Subsidiary as if
such asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (D) or (F) of this sentence requires that pro
forma effect be given to an asset acquisition or asset disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person that is acquired or disposed for which financial information is
available.
<PAGE> 17
9
"Consolidated Interest Expense" means, for any period, without
duplication, the aggregate amount of interest which, in conformity with GAAP,
would be set opposite the caption "interest expense" or any like caption on a
consolidated income statement of the Company and its Restricted Subsidiaries
(including, without limitation, imputed interest on Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit securing financial obligations and bankers'
acceptance financing, the net costs associated with Interest Rate Agreements,
amortization of other financing fees and expenses, the interest portion of any
deferred payment obligation, amortization of discount or premium, if any, and
all other noncash interest expense other than interest and other charges
amortized to cost of sales) and including, with respect to the Company and its
Restricted Subsidiaries without duplication (including duplication of the
foregoing items), all interest included as a component of cost of sales for
such period.
"Consolidated Interest Incurred" means, for any period,
without duplication, the aggregate amount of interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on a consolidated income statement of the Company and its Restricted
Subsidiaries (including, without limitation, imputed interest included on
Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit securing financial obligations
and bankers' acceptance financing, the net costs associated with Interest Rate
Agreements, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other noncash interest expense other than interest and
other charges amortized to cost of sales) and includes, with respect to the
Company and its Restricted Subsidiaries, without duplication, all interest
capitalized for such period, all interest attributable to discontinued
operations for such period to the extent not set forth under the caption
"interest expense" or any like caption, all interest actually paid by the
Company or any Restricted Subsidiary under any guarantee of Indebtedness
(including, without limitation, a guarantee of principal, interest or any
combination thereof) of any Person during such period and all Preferred
Returns accrued by any Consolidated Joint Venture that is a Restricted
Subsidiary.
"Consolidated Joint Venture" means, as of any date of
determination, any Joint Venture whose financial results are accounted for on a
consolidated basis with the Company or any Restricted Subsidiary in conformity
with GAAP and, as of the Closing Date, includes each Existing Joint Venture.
<PAGE> 18
10
"Consolidated Tangible Net Worth" means, at any date of
determination, stockholder's equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries (which shall be as of a date not more than 90 days
prior to the date of such computation), less any amounts attributable to
Redeemable Stock, less Intangible Assets reflected on such consolidated balance
sheet of the Company and its Restricted Subsidiaries, each item to be
determined in conformity with GAAP.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular
time, be principally administered, which office is, at the date of this
Indenture, located at 114 West 47th Street, New York, New York 10036,
Attention: Corporate Trust Administration.
"CPH" means Capital Pacific Homes, Inc., a Delaware
corporation.
"CPH Consolidated Group" has the meaning provided in Section
4.05.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Deficiency Date" has the meaning provided in Section 4.06.
"Depositary" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"Durable" has the meaning provided in the first paragraph of
this Indenture.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Excess Proceeds Offer" has the meaning provided in Section
4.10.
"Excess Proceeds Payment" has the meaning provided in Section
4.10.
<PAGE> 19
11
"Excess Proceeds Payment Date" has the meaning provided in
Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means any securities of the Company
containing terms identical to the Securities (except that such Exchange
Securities (i) shall be registered under the Securities Act and (ii) shall have
an interest rate equal to 12-3/4% per annum if issued on or prior to November
14, 1994, and an interest rate equal to 13-1/4% per annum if issued after
November 14, 1994, without provision for adjustment as provided in the fourth
paragraph of Section 1 of the Securities) that are issued and exchanged for the
Securities pursuant to the Registration Rights Agreement and this Indenture.
"Existing Joint Venture" means each of Ranchland Alicante
Development L.P., Ranchland Portola Development L.P., Ranchland Fairway
Development L.P., Ranchland Montilla Development L.P., Taos Estates, L.P.,
Plateau Venture Limited Partnership, Las Hadas Limited Partnership, Tiara
Ventura, a Nevada Limited Partnership and Portraits Venture Limited
Partnership.
"Fair Market Value" with respect to any asset or property
means the sale value that would be obtained in an arm's- length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accounts and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds
<PAGE> 20
12
or pledge assets for the purchase or payment of or payment of interest on) such
Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantors" means each of (i) Durable, (ii) JMPN, (iii)
Ranchland, and (iv) each of the Company's other Subsidiaries that becomes a
guarantor of the Securities pursuant to the provisions of this Indenture.
"Holder" or "Securityholder" means the registered holder of
any Security.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness; provided that neither the accrual of interest (whether such
interest is payable in cash or in kind) nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes, letters of credit (excluding standby letters of credit) or
other similar instruments, (iii) all obligations of such Person in respect of
standby letters of credit, surety, payment and performance bonds, title
insurance, indemnity agreements, reimbursement agreements with homeowners'
associations and similar instruments (including reimbursement obligations with
respect thereto) to the extent that such obligations are drawn upon and remain
unpaid or constitute indebtedness of such Person in conformity with GAAP, (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after
the later of the date such obligation arises or the date of placing such
property in service or taking delivery and title thereto or the completion of
such service, except Trade Payables, (v) all obligations of such Person as
lessee under
<PAGE> 21
13
Capitalized Leases, (vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that, if such Indebtedness is not assumed by such Person, the
amount of such Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person, (viii) to the
extent not otherwise included in this definition, obligations under Interest
Rate Agreements, and (ix) all Redeemable Stock issued by such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligations, provided (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm that is, in the reasonable judgment of the Company's
Board of Directors, (i) qualified to perform the task for which it has been
engaged, and (ii) disinterested and independent, in a direct and indirect
manner, of the parties to the transaction with respect to which such firm has
been engaged.
"Institutional Accredited Investor" shall mean an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act.
"Intangible Assets" means, with respect to the Company and the
Restricted Subsidiaries, all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights and all other items that would be treated as intangibles on the
consolidated balance sheet of the Company and
<PAGE> 22
14
its Restricted Subsidiaries prepared in accordance with GAAP.
"Interest Payment Date" means each semiannual interest payment
date on May 1, and November 1, of each year, commencing November 1, 1994.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Company or any of its Restricted
Subsidiaries against fluctuations in interest rates to or under which the
Company or any of its Restricted Subsidiaries is a party or a beneficiary on
the Closing Date or becomes a party or a beneficiary thereafter.
"Investment" means, with respect to the Company and its
Restricted Subsidiaries, any direct or indirect advance, loan or other
extension of credit (other than advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts receivable on
the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of Indebtedness, Capital Stock, bonds, notes,
debentures or other similar instruments issued by any other Person, or
guarantee of Indebtedness or other obligations of any other Person, or any
other items that would be classified as investments on the balance sheet of the
Company or a Restricted Subsidiary, as the case may be, in accordance with
GAAP.
"Joint Venture" means (i) a corporation of which 50% or less
of the aggregate voting power of all classes of Common Equity is owned by the
Company or the Restricted Subsidiaries and (ii) any entity other than a
corporation in which the Company and the Restricted Subsidiaries own 50% or
less of the aggregate voting power of all classes of Common Equity of such
entity, provided that such corporation or other entity is engaged in the
businesses existing on the Closing Date of the Company and the Restricted
Subsidiaries or in businesses reasonably related thereto.
"JMPN" has the meaning provided in the first paragraph of this
Indenture.
<PAGE> 23
15
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Minimum Consolidated Tangible Net Worth" has the meaning
provided in Section 4.06.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company
and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Net Worth Offer" has the meaning provided in Section 4.06.
"Net Worth Payment" has the meaning provided in Section 4.06.
"Net Worth Payment Date" has the meaning provided in Section
4.06.
<PAGE> 24
16
"Non-Recourse Indebtedness" means, with respect to any Person,
Indebtedness of such Person for which (i) the sole legal recourse for
collection of principal and interest on such Indebtedness is against the
specific property identified in the instruments evidencing or securing such
Indebtedness, (ii) such property was acquired with the proceeds of such
Indebtedness or such Indebtedness was Incurred either within (A) 365 days after
the acquisition of such property if such property constitutes real property on
which multi-family housing is being constructed or (B) 90 days after the
acquisition of such property in all other cases and (iii) no other assets of
such Person or of any other Person may be realized upon or in collection of
principal or interest on such Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Officer" means, with respect to the Company, the Chairman of
the Board, the President, any Executive Vice President, any Vice President, the
Chief Financial Officer, the Treasurer or any Assistant Treasurer, or the
Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two
Officers. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).
"Offshore Securities Exchange Date" has the meaning provided
in Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal
counsel, who may be an employee of or counsel to the Company satisfactory to
the Trustee. Each such Opinion of Counsel shall include the statements
provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04,
except that, for purposes of Article Eight, the Paying Agent shall not be the
Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
<PAGE> 25
17
"Permanent Offshore Physical Security" has the meaning
provided in Section 2.01.
"Permitted Holder" means any of Hadi Makarechian, Dale Dowers,
their respective spouses and immediate family members and/or any corporation,
limited liability company or partnership of which such persons directly or
indirectly control not less than a majority of the aggregate voting power of
all classes of Common Equity of such entity and/or any trust controlled by or
for the benefit of either Hadi Makarechian, Dale Dowers, their respective
spouses and members of their immediate family.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings instituted and diligently conducted and for which
a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens imposed by law and arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; (iii) Liens
(other than any Lien imposed by the Employee Retirement Income Security Act of
1974, as amended) incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security; (iv) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory or regulatory obligations,
surety and appeal bonds, progress payments, development obligations, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature, in each case incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money or otherwise
constituting a liability in accordance with GAAP); (v) with respect to property
of the Company, Liens granted on such property in favor of the Person from whom
the Company acquired such property which Liens secure the payment of a
contingent portion of the purchase price of such property so long as such Liens
are granted and such arrangement is entered into in the ordinary course of
business of the Company consistent with past practice; (vi) attachment or
judgment Liens not giving rise to a Default or Event of Default and which are
being contested in good faith by appropriate proceedings, (vii) easements,
rights-of-way, restrictions, homeowners association assessments and similar
<PAGE> 26
18
charges or encumbrances that do not materially interfere with the ordinary
course of business of the Company or any of its Subsidiaries; (viii) zoning
restrictions, licenses, restrictions on the use of real property or minor
irregularities in title thereto, which do not materially impair the use of such
property in the ordinary course of business of the Company or any Subsidiary or
the value of such real property for the purpose of such business; (ix) Liens in
favor of the Company or any Restricted Subsidiary that is a Wholly Owned
Subsidiary of the Company; (x) Liens existing on the Closing Date; (xi) Liens
securing Non-Recourse Indebtedness of the Company or a Restricted Subsidiary
thereof; (xii) Liens with respect to the property or assets of the Company
securing Indebtedness permitted to be Incurred under Section 4.03; provided
that the aggregate amount of Indebtedness secured by such Liens (other than
Non-Recourse Indebtedness secured by Liens) will not exceed 40% of the Adjusted
Consolidated Net Tangible Assets of the Company; (xiii) Liens granted after the
Closing Date on any assets or Capital Stock of the Company or its Restricted
Subsidiaries created in favor of the Holders; (xiv) Liens with respect to the
property or assets of a Restricted Subsidiary granted by such Restricted
Subsidiary to the Company to secure Indebtedness owing to the Company; (xv)
Liens securing Refinancing Indebtedness which is Incurred to refinance secured
Indebtedness and which is permitted to be Incurred under clause (iv) of the
second paragraph of Section 4.03; provided that such Liens constitute Permitted
Liens under this clause (xv) only to the extent that they do not extend to or
cover any property or assets of the Company or any Restricted Subsidiary other
than the property or assets securing the Indebtedness being refinanced; and
(xvi) leases or subleases granted to others not materially interfering with the
ordinary course of business of the Company or any of its Subsidiaries.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Securities" has the meaning provided in Section 2.01.
"Preferred Returns" has the meaning specified in each of the
partnership agreements to which Ranchland and IHP Investment Fund I, L.P. are
parties, in each case as in effect on the Closing Date, together with all
amounts of a similar character, howsoever designated, accrued or paid by any
Consolidated Joint Venture.
<PAGE> 27
19
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or nonvoting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of the Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth in Section 2.02.
"Public Equity Offering" means a primary underwritten public
offering of Common Equity of the Company pursuant to a registration statement
under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Ranchland" has the meaning provided in the first paragraph of
this Indenture.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms or otherwise is, in whole or in part, (i)
required to be redeemed, repaid or otherwise retired prior to the Stated
Maturity of the Securities, (ii) redeemable, or required to be repaid or
otherwise retired at the option of the holder of such class of series of
Capital Stock at any time prior to the Stated Maturity of the Securities or
(iii) convertible into or exchangeable for Capital Stock referred to in clause
(i) or (ii) above or is convertible into or exchangeable for Indebtedness
having a scheduled maturity prior to the Stated Maturity of the Securities;
provided that any Capital Stock that would not constitute Redeemable Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the Stated Maturity of the
Securities shall not constitute Redeemable Stock if the "asset sale" or "change
of control" provisions applicable to such Capital Stock are no more favorable
to the holders of such Capital Stock than the provisions contained in the
Sections 4.10 and 4.11 and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such Capital Stock pursuant to such
provision prior to the Company's repurchase of such Securities as are required
to be repurchased pursuant to the provisions of Sections 4.10 and 4.11.
<PAGE> 28
20
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which such Security is to be redeemed pursuant
to this Indenture.
"Refinancing Indebtedness" means Indebtedness issued in
exchange for, or the net proceeds of which are used to refinance or refund,
then outstanding Indebtedness and any refinancings thereof to the extent that
such amount does not exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that (i) Indebtedness
the proceeds of which are used to refinance or refund the Securities or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Securities or the Subsidiary Guarantees, as the case may be, shall only be
permitted if (A) in case the Securities are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Securities or the
Subsidiary Guarantees, as the case may be, such new Indebtedness, by its terms
or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Securities or the Subsidiary Guarantees,
as the case may be, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Securities or the Subsidiary
Guarantees, as the case may be, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made subordinate in right of payment to the
Securities or the Subsidiary Guarantees, as the case may be, at least to the
extent that the Indebtedness to be refinanced is subordinated to the Securities
or the Subsidiary Guarantees, as the case may be, and (C) such new
Indebtedness, determined as of the date of Incurrence of such new Indebtedness,
does not mature prior to the Stated Maturity of the Indebtedness to be
refinanced or refunded, and the Average Life of such new Indebtedness is at
least equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded, (ii) such Refinancing Indebtedness is Incurred by the same Person
that initially Incurred the Indebtedness being refunded or refinanced, except
that the Company may Incur Refinancing Indebtedness to refund or refinance
Indebtedness of any Restricted Subsidiary that is a Wholly Owned Subsidiary of
the Company, and (iii) such Refinancing Indebtedness is Incurred within 90 days
after the Indebtedness being refunded or refinanced is so refunded or
refinanced.
<PAGE> 29
21
"Registrar" has the meaning provided in Section 2.04.
"Registration" means the date of commencement of a registered
exchange offer for the Securities by the Company or other registration of the
Securities pursuant to and in accordance with the terms of the Registration
Rights Agreement.
"Registration Rights Agreement" means the Notes Registration
Rights Agreement, dated as of May 13, 1994, between the Company and Morgan
Stanley & Co. Incorporated, and certain permitted assigns specified therein.
"Registration Statement" means a Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 15 or October 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section 4.05.
<PAGE> 30
22
"Restricted Joint Venture" means, as of any date of
determination, any Restricted Subsidiary that is a Joint Venture and that is
prohibited, under the terms of such Restricted Subsidiary's partnership or
joint venture agreement, from providing a Subsidiary Guarantee.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the securities, as defined in the
first paragraph of the recitals hereof, that are authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term
"Securities" shall include any Exchange Securities to be issued and exchanged
for any Securities pursuant to the Registration Rights Agreement and this
Indenture and, for purposes of this Indenture, all Securities and Exchange
Securities shall vote together as one series of Securities under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04.
"Significant Subsidiary" means, at any date of determination,
any Subsidiary of the Company that, together with its Subsidiaries, (i) for the
most recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Subsidiaries or (ii) as of the end
of such fiscal year, was the owner of more than 10% of the consolidated assets
of the Company and its Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Company for such fiscal
year.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date
on which such installment is due and payable.
<PAGE> 31
23
"Subsidiary" means, with respect to any Person, (i) any
corporation of which more than 50% of the outstanding Common Equity is owned,
directly or indirectly, by such Person and one or more other Subsidiaries of
such Person, and (ii) any entity other than a corporation of which more than
50% of the Common Equity is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person or with respect to which such
Person and one or more Subsidiaries of such Person have the power to elect a
majority of the Board of Directors or other governing body or is the managing
general partner of such entity; provided, however that each Consolidated Joint
Venture shall be deemed to be a Subsidiary of the Company.
"Subsidiary Guarantee" means the Guarantee of the Securities
pursuant to Article Ten (a) by the Guarantors party to this Indenture at the
Closing Date, and (b) by any Restricted Subsidiary that becomes a Guarantor
pursuant to Sections 4.04 or 4.19.
"Temporary Offshore Physical Securities" has the meaning
provided in Section 2.01.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S. Code Section Section 77aaa-77bbb), as in effect
on the date this Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
<PAGE> 32
24
"Unit" has the meaning provided in the first paragraph of the
recitals to this Indenture.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy
law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that (i) either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, that such designation would be
permitted under the provisions of Section 4.05, and (ii) after giving effect to
the designation of such Restricted Subsidiary as an Unrestricted Subsidiary, on
a pro forma basis, the Company's Consolidated Tangible Net Worth would not be
less than the Minimum Consolidated Tangible Net Worth. Notwithstanding the
foregoing, for so long as Durable (or any successor thereto) is a Significant
Subsidiary, it shall not be an Unrestricted Subsidiary. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the
Company; provided that immediately after giving effect to such designation (x)
the Company could incur $1.00 of additional Indebtedness under the first
paragraph of Section 4.03, (y) no Default or Event of Default shall have
occurred and be continuing, and (z) after giving effect to the designation of
such Unrestricted Subsidiary as a Restricted Subsidiary, on a pro forma basis,
the Company's Consolidated Tangible Net Worth would not have been less than the
Minimum Consolidated Tangible Net Worth. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions. At the Closing Date, the Company will not have any
Unrestricted Subsidiaries.
<PAGE> 33
25
"U.S. Global Security" has the meaning provided in Section
2.01.
"U.S. Government Obligations" means securities that 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 payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof at any time
prior to the Stated Maturity of the Securities, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of 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 from any amount
received 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.
"U.S. Physical Securities" has the meaning provided in Section
2.01.
"Warrant Agreement" means the Warrant Agreement dated as of
May 13, 1994 between the Company and United States Trust Company of New York,
as warrant agent.
"Warrants" means the warrants issued under the Warrant
Agreement, each of which entitles the registered owner thereof to purchase one
share of Common Stock of the Company at a price of $3.30 per share, subject to
adjustment.
"Wholly Owned Subsidiary" means, (i) with respect to any
Subsidiary of any Person which is a corporation, such Subsidiary if all of the
outstanding Common Equity or other similar equity ownership interests (but not
including Preferred Stock) in such Subsidiary (other than any director's
qualifying shares or certain minority interests owned by foreign nationals
mandated by applicable law but which interest is not in excess of what is
required for such purpose) is owned directly by such Person or through one or
more Wholly Owned Subsidiaries of such Person, or (ii) with respect to any
Subsidiary of any Person, other than a corporation, such Subsidiary if all of
the outstanding Common Equity
<PAGE> 34
26
in such Subsidiary is owned directly or indirectly by such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule of
the Commission and not otherwise defined herein have the meanings assigned to
them therein.
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and
words in the plural include the singular;
(v) provisions apply to successive events and
transactions;
<PAGE> 35
27
(vi) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(vii) all ratios and computations based on GAAP
contained in this Indenture shall be computed in accordance with the
definition of GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
The Securities
SECTION 2.01. Form and Dating. The Securities and the
Trustee's certificate of authentication shall be substantially in the form
annexed hereto as Exhibit A. The Securities may have notations, legends or
endorsements required by law, stock exchange agreements to which the Company or
the Guarantors is subject or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on the Securities. Each
Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the
Securities annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Indenture. To the extent applicable, the
Company, each of the Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agrees to such terms and provisions and
to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of a single permanent global Security in
registered form, substantially in the form set forth in Exhibit A (the "U.S.
Global Security"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Security may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
<PAGE> 36
28
Securities offered and sold in reliance on Regulation S shall
be issued initially in the form of temporary certificated Securities in
registered form substantially in the form set forth in Exhibit A (the
"Temporary Offshore Physical Securities"). At any time following the later of
completion of the distribution of the Securities and the termination of the
"restricted period" (as defined in Regulation S) with respect to the offer and
sale of the Securities (the "Offshore Securities Exchange Date"), upon receipt
by the Trustee and the Company of a certificate substantially in the form of
Exhibit B hereto, the Company shall execute, and the Trustee shall authenticate
and deliver, one or more permanent certificated Securities in registered form
substantially in the form set forth in Exhibit A (the "Permanent Offshore
Physical Securities"), in exchange for the surrender of Temporary Offshore
Physical Securities of like tenor and amount.
Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Physical Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
The definitive Securities shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02. Restrictive Legends. Unless and until a
Security is exchanged for an Exchange Security in connection with an effective
Registration pursuant to the Registration Rights Agreement, the U.S. Global
Security, Temporary Offshore Physical Securities and each U.S. Physical
Security shall bear the following legend on the face thereof:
<PAGE> 37
29
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF REGULATION
D UNDER THE SECURITIES ACT) (AN INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE
ON WHICH THIS SECURITY WAS HELD BY AN AFFILIATE OF THE COMPANY, RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE REGISTRAR OR
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE REGISTRAR OR THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE LATER OF THE
ORIGINAL
<PAGE> 38
30
ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS
HELD BY AN AFFILIATE OF THE COMPANY, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE REGISTRAR OR THE
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
REGISTRAR OR THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
REGISTRAR OR THE TRUSTEE MAY REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each U.S. Global Security, whether or not an Exchange
Security, shall also bear the following legend on the face thereof:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE.
Prior to the close of business upon the earlier to occur of
(i) November 14, 1994 and (ii) the Registration, each Security shall bear the
following legend on the face thereof:
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF
WHICH CONSISTS OF $10,000.00 PRINCIPAL AMOUNT OF 12- 3/4% SENIOR NOTES
DUE 2002 OF J.M. PETERS COMPANY, INC.
<PAGE> 39
31
AND 79 WARRANTS, EACH TO PURCHASE ONE SHARE OF COMMON STOCK OF J.M.
PETERS COMPANY, INC. PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIER
TO OCCUR OF (i) NOVEMBER 14, 1994 AND (ii) THE COMMENCEMENT OF AN
EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT
RELATING TO THE NOTES, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE WARRANTS ISSUED BY J.M. PETERS
COMPANY, INC. IN CONNECTION HEREWITH.
SECTION 2.03. Execution, Authentication and Denominations.
Two Officers shall execute the Securities for the Company by facsimile or
manual signature in the name and on behalf of the Company. The seal of the
Company, if any, shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
<PAGE> 40
32
A Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on the
Security. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
The Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Securities in the aggregate
principal amount of $100,000,000 plus any Exchange Securities that may be
issued pursuant to the Registration Rights Agreement; provided that the Trustee
shall be entitled to receive an Officers' Certificate and an Opinion of Counsel
of the Company that it may reasonably request in connection with such
authentication of Securities. Such Company Order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed the amount set forth above
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
2.06, 2.09, 2.10 or 2.11.
The Trustee may appoint an authenticating agent to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such authenticating
agent. An authenticating agent has the same rights as an Agent to deal with
the Company or the Guarantors or an Affiliate of the Company or the Guarantors.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 in principal amount and any
integral multiple of $1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar"), an office or agency where
Securities may be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served, which shall be in the Borough of
Manhattan, the City of New York. The Company shall cause the Registrar to keep
a register of the Securities and of their transfer and exchange (the "Security
Register"). The Company may have one or more co-Registrars and one or more
additional Paying Agents.
<PAGE> 41
33
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
give prompt written notice to the Trustee of the name and address of any such
Agent and any change in the address of such Agent. If the Company fails to
maintain a Registrar, Paying Agent and/or agent for service of notices and
demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for
service of notices and demands for so long as such failure shall continue. The
Company may remove any Agent upon written notice to such Agent and the Trustee;
provided that no such removal shall become effective until (i) the acceptance
of an appointment by a successor Agent to such Agent as evidenced by an
appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands; provided,
however, that neither the Company, a Subsidiary of the Company nor an Affiliate
of any of them shall act as Paying Agent in connection with the defeasance of
the Securities or the discharge of this Indenture under Article Eight.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Registrar shall make
available to the Trustee on or before each Interest Payment Date and at such
other times as the Trustee may reasonably request, the names and addresses of
the Holders as they appear in the Security Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than each due date of the principal, premium, if any, and interest on any
Securities, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such principal, premium, if any,
and interest so becoming due. The Company shall require each Paying Agent
other than the Trustee to agree in writing that such Paying Agent shall hold in
trust for the benefit of the Holders or the Trustee all money held by the
Paying Agent for the payment of principal of, premium, if any, and interest on
the Securities (whether such money has been paid to it by the Company or any
other obligor on the Securities), and that such Paying Agent shall promptly
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. The
<PAGE> 42
34
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and account for any funds disbursed, and the Trustee may at any
time during the continuance of any payment default, upon written request to a
Paying Agent, require such Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed. Upon doing so, the Paying
Agent shall have no further liability for the money so paid over to the
Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it will, on or before each due date of any
principal of, premium, if any, or interest on the Securities, segregate and
hold in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming due
until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and will promptly notify the Trustee of its
action or failure to act as required by this Section 2.05. Unless otherwise
provided in the Securities, the Company may pay on any due date of interest on
the Securities such amount that is due and payable by its check payable in
lawful money of the United States and mailed to each Holder's address as
reflected in the Security Register.
SECTION 2.06. Transfer and Exchange. The Securities are
issuable only in registered form. The Securities shall initially be issued as
part of an issuance of Units, each of which consists of $10,000.00 principal
amount of Securities and 79 Warrants. Prior to the close of business upon the
earlier to occur of (i) November 14, 1994 and (ii) a Registration, the
Securities may not be transferred or exchanged separately from, but may be
transferred or exchanged only together with, the Warrants issued in connection
with such Securities. A Holder may transfer a Security by written application
to the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the
Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Security is registered as the owner thereof
for all purposes whether or not the Security shall be overdue, and neither the
Company, the Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, any Holder of the U.S. Global Security shall, by
acceptance of such U.S. Global Security, agree that transfers of beneficial
interests in such Global Security, may be effected only through a book-entry
system maintained by the Depositary (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry. When Securities
<PAGE> 43
35
are presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Securities of
other authorized denominations (including on exchange of Securities for
Exchange Securities), the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met;
provided that no exchanges of Securities for Exchange Securities shall occur
until a Registration Statement shall have been declared effective by the
Commission and that any Securities that are exchanged for Exchange Securities
shall be cancelled by the Trustee. To permit registrations of transfers and
exchanges in accordance with the terms, conditions and restrictions hereof, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request upon receipt of the Securities to be exchanged or
transferred. No service charge shall be made for any registration of transfer
or exchange or redemption of the Securities, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
other similar governmental charge payable upon exchanges pursuant to Section
2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 3.03 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 2.07. Book-Entry Provisions for U.S. Global Security.
(a) The U.S. Global Security initially shall (i) be registered in the name of
the Depositary for such U.S. Global Security or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii)
bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any U.S.
Global Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Security, and the Depositary may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such U.S. Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee, from giving effect to any
written
<PAGE> 44
36
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Security.
(b) Transfers of the U.S. Global Security shall be
limited to transfers of such U.S. Global Security in whole, but not in part, to
the Depositary, its successors or their respective nominees. Beneficial
interests in the U.S. Global Security may be transferred in accordance with the
applicable rules and procedures of the Depositary and the provisions of Section
2.08. Beneficial owners may obtain U.S. Physical Securities in exchange for
their beneficial interests in the U.S. Global Security upon request in
accordance with the Depositary's and the Registrar's procedures. In addition,
U.S. Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Security if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Security and a successor depositary is not
appointed by the Company within 90 days following such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has received a
request from the Depositary.
(c) In connection with any transfer of a beneficial
interest in the U.S. Global Security to a transferee receiving U.S. Physical
Securities pursuant to paragraph (b) of this Section, the Registrar shall
reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the principal amount
of the beneficial interest in the U.S. Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S.
Global Security to beneficial owners pursuant to paragraph (b) of this Section,
the U.S. Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security, an equal aggregate
principal amount of U.S. Physical Securities of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for
an interest in the U.S. Global Security pursuant to paragraph (b) or (d) of
this Section shall, except as
<PAGE> 45
37
otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding
transfer restrictions applicable to the U.S. Physical Security set forth in
Section 2.02.
(f) The registered holder of the U.S. Global Security may
grant proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Securities.
SECTION 2.08. Special Transfer Provisions. Unless and until
a Security is exchanged for an Exchange Security in connection with an
effective Registration pursuant to the Registration Rights Agreement, the
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security to any
Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):
(i) The Registrar shall register the transfer of
any Security, whether or not such Security bears the Private
Placement Legend, if (x) the requested transfer is at least
three years after the later of the original issue date of the
Securities and the last date on which such Security was held
by an affiliate of the Company or (y) the proposed transferee
has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Security,
upon receipt by the Registrar of (x) the documents, if any,
required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the
U.S. Global Security in an amount equal to the principal
amount of the beneficial interest in the U.S. Global Security
to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S.
Physical Securities of like tenor and amount.
<PAGE> 46
38
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a
Security to a QIB (excluding transfers to or by Non-U.S. Persons):
(i) If the Security to be transferred consists of
U.S. Physical Securities or Temporary Offshore Physical
Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has
checked the box provided for on the form of Security stating,
or has otherwise advised the Company and the Registrar in
writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or
has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent
Member, and the Security to be transferred consists of U.S.
Physical Securities, Temporary Offshore Physical Securities or
Permanent Offshore Physical Securities, upon receipt by the
Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Security
in an amount equal to the principal amount of the U.S.
Physical Securities, Temporary Offshore Physical Securities or
Permanent Offshore Physical Securities, as the case may be, to
be transferred, and the Trustee shall cancel the Physical
Security so transferred.
(c) Transfers by Non-U.S. Persons prior to June 22, 1994.
The following provisions shall apply with respect to registration of
any proposed transfer of a Security by a Non-U.S. Person prior to June
22, 1994:
<PAGE> 47
39
(i) The Registrar shall register the transfer of
any Security (x) if the proposed transferee is a Non- U.S.
Person and the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit D
hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the
form of Security stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of
Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Security for
its own account or an account with respect to which it
exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A. Unless clause (ii) below
is applicable, the Company shall execute, and the Trustee
shall authenticate and deliver one or more Temporary Offshore
Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent
Member, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal
amount of the Temporary Offshore Physical Security to be
transferred, and the Trustee shall cancel the Physical
Security so transferred.
(d) Transfers by Non-U.S. Persons on or After June 22
1994. The following provisions shall apply with respect to any
transfer of a Security by a Non-U.S. Person on or after June 22, 1994:
(i) (x) If the Security to be transferred is
a Permanent Offshore Physical Security, the Registrar shall
register such transfer, (y) if the Security
<PAGE> 48
40
to be transferred is a Temporary Offshore Physical Security,
upon receipt of a certificate substantially in the form of
Exhibit D from the proposed transferor, the Registrar shall
register such transfer and (z) in the case of either clause
(x) or (y), unless clause (ii) below is applicable, the
Company shall execute, and the Trustee shall authenticate and
deliver, one or more Permanent Offshore Physical Securities of
like tenor and amount.
(ii) If the proposed transferee is an Agent
Member, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal
amount of the Temporary Offshore Physical Security or
Permanent Offshore Physical Security to be transferred, and
the Trustee shall cancel the Physical Security so transferred.
(e) Transfers to Non-U.S. Persons at any Time. The
following provisions shall apply with respect to any transfer of a
Security to a Non-U.S. Person:
(i) Prior to June 22, 1994, the Registrar
shall register any proposed transfer of a Security to a
Non-U.S. Person upon receipt of a certificate substantially in
the form of Exhibit D hereto from the proposed transferor, and
the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
(ii) On and after June 22, 1994, the
Registrar shall register any proposed transfer to any Non-
U.S. Person (w) if the Security to be transferred is a
Permanent Offshore Physical Security, (x) if the Security to
be transferred is a Temporary Offshore Physical Security, upon
receipt of a certificate substantially in the form of Exhibit
D from the proposed transferor, (y) if the Security to be
transferred is a U.S. Physical Security or an interest in the
U.S. Global Security, upon receipt of a certificate
substantially in the form of Exhibit D from the proposed
transferor and (z) in the case of either clause (w), (x) or
(y), the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore
Physical Securities
<PAGE> 49
41
of like tenor and amount.
(iii) (a) If the proposed transferor is an
Agent Member holding a beneficial interest in the U.S. Global
Security, upon receipt by the Registrar of (x) the documents,
if any, required by paragraphs (i) or (ii) and (y)
instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its
books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the
principal amount of the beneficial interest in the U.S. Global
Security to be transferred, and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
Temporary Offshore Physical Securities or Permanent Offshore
Physical Securities, as applicable, of like tenor and amount.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do not
bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Securities bearing the Private Placement Legend, the
Registrar shall deliver only Securities that bear the Private
Placement Legend unless either (i) the circumstances contemplated by
the fourth paragraph of Section 2.01 or paragraphs (a)(i)(x) or
(e)(ii) of this Section 2.08 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company
and the Registrar to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Security bearing
the Private Placement Legend, each Holder of such a Security
acknowledges the restrictions on transfer of such Security set forth
in this Indenture and in the Private Placement Legend and agrees that
it will transfer such Security only as provided in this Indenture.
The Registrar shall not register a transfer of any Security unless
such transfer complies with the restrictions on transfer of such
Security set forth in this Indenture. In connection with any transfer
of Securities, each Holder agrees by its acceptance of the Securities
to furnish the Registrar or the Company such certifications, legal
opinions or other information as either of them may reasonably require
to confirm that such transfer is being made pursuant to an exemption
from, or a transaction not subject to, the registration requirements
of the Securities Act;
<PAGE> 50
42
provided that the Registrar shall not be required to determine (but
may rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Securities. If a mutilated
Security is surrendered to the Trustee or if the Holder claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the Company or the Trustee has not received proof satisfactory to
them that the Security being replaced is held by a bona fide purchaser. If
required by the Trustee or the Company, an indemnity bond must be furnished
that is sufficient in the judgment of both the Trustee and the Company to
protect the Company, the Trustee or any Agent from any loss that any of them
may suffer if a Security is replaced. The Company may charge such Holder for
its expenses and the expenses of the Trustee in replacing a Security. In case
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding
at any time are all Securities that have been authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation and
those described in this Section 2.10 as not outstanding.
<PAGE> 51
43
If a Security is replaced pursuant to Section 2.09, it ceases
to be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on the maturity date money sufficient to pay Securities
payable on that date, then on and after that date such Securities cease to be
outstanding and interest on them shall cease to accrue.
A Security does not cease to be outstanding because the
Company or one of its Affiliates holds such Security, provided, however, that,
in determining whether the Holders of the requisite principal amount of the
outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
SECTION 2.11. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officers executing the temporary Securities, as evidenced by their
execution of such temporary Securities. If temporary Securities are issued,
the Company will cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a
<PAGE> 52
44
like principal amount of definitive Securities of authorized denominations.
Until so exchanged, the temporary Securities shall be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.12. Cancellation. The Company at any time may
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for transfer, exchange or payment. The Trustee shall
cancel all Securities surrendered for transfer, exchange, payment or
cancellation and shall dispose of them in accordance with its normal procedure.
The Company may not issue new Securities to replace Securities it has paid in
full or delivered to the Trustee for cancellation.
SECTION 2.13. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and the Trustee
shall use CUSIP numbers, in notices of redemption or exchange as a convenience
to Holders; provided that any such notice shall state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or exchange and that reliance may
be placed only on the other identification numbers printed on the Securities.
SECTION 2.14. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, it shall pay, or shall deposit with
the Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect
to the payment of any defaulted interest, shall mean the 15th day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to
the Trustee a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest to be paid.
<PAGE> 53
45
ARTICLE THREE
Redemption
SECTION 3.01. Right of Redemption. (a) The
Securities may be redeemed at the election of the Company, in whole or in part,
at any time and from time to time on or after May 1, 1999 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior
to the Redemption Date), if redeemed during the 12-month period commencing
May 1 of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1999 106.375%
2000 103.188%
2001 and thereafter 100.000%
</TABLE>
(b) In addition, at any time prior to May
1, 1997, the Company may redeem up to an aggregate of 35% of the original
aggregate principal amount of the Securities with the proceeds of one or more
Public Equity Offerings at any time as a whole, or from time to time in part,
at a Redemption Price of 112.75% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date).
SECTION 3.02. Notices to Trustee. If the
Company elects to redeem Securities pursuant to Section 3.01, it shall notify
the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed.
<PAGE> 54
46
The Company shall give each notice provided for
in this Section 3.02 in an Officers' Certificate at least 45 days before the
Redemption Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to Be
Redeemed. If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed in compliance with the
requirements, as certified to it by the Company, of the principal national
securities exchange, if any, on which the Securities are listed or, if the
Securities are not listed on a national securities exchange, on a pro rata
basis, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate; provided that no Securities of $1,000 in
principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the
Securities outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
or any integral multiple thereof) of Securities that have denominations larger
than $1,000 in principal amount. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption. The Trustee shall notify the Company and the Registrar
promptly in writing of the Securities or portions of Securities to be called
for redemption.
SECTION 3.04. Notice of Redemption. At least
30 days but not more than 60 days before a Redemption Date, the Company shall
mail a notice of redemption by first class mail to each Holder whose Securities
are to be redeemed.
The notice shall identify the Securities to be
redeemed including, with respect to Securities with denominations larger than
$1,000 in principal amount that are to be redeemed in part the portion of the
principal amount thereof to be redeemed, and shall state:
(i) the Redemption Date;
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(ii) the Redemption Price;
(iii) the name and address of the
Paying Agent;
(iv) that Securities called for
redemption must be surrendered to the Paying Agent in
order to collect the Redemption Price;
(v) that, unless the Company defaults
in making the redemption payment, interest on
Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining
right of the Holders is to receive payment of the
Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Securities to the
Paying Agent;
(vi) if any Security is being redeemed
in part, the portion of the principal amount (equal to
$1,000 in principal amount or any integral multiple
thereof) of such Security to be redeemed and that, on
and after the Redemption Date, upon surrender of such
Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be
reissued; and
(vii) that, if any Security contains a
CUSIP number as provided in Section 2.13, no
representation is being made as to the correctness of
the CUSIP number either as printed on the Securities or
as contained in the notice of redemption and that
reliance may be placed only on the other identification
numbers printed on the Securities.
At the Company's request (which request may be
revoked by the Company at any time prior to the time at which the Trustee shall
have given such notice to the Holders), made in writing to the Trustee at least
60 days (or such shorter period as shall be satisfactory to the Trustee) before
a Redemption Date, the Trustee shall give the notice of redemption in the name
and at the expense of the Company. If, however, the Company gives such notice
to the Holders, the Company shall concurrently deliver to the Trustee an
Officers' Certificate stating that such notice has been given.
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SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon
surrender of any Securities to the Paying Agent, such Securities shall be paid
at the Redemption Price, plus accrued interest to the Redemption Date.
Notice of redemption shall be deemed to be
given when mailed, whether or not the Holder receives the notice. In any
event, failure to give such notice, or any defect therein, shall not affect the
validity of the proceedings for the redemption of Securities held by Holders to
whom such notice was properly given.
SECTION 3.06. Deposit of Redemption Price. On
or prior to any Redemption Date, the Company shall deposit with the Paying
Agent (or, if the Company is acting as its own Paying Agent, shall segregate
and hold in trust as provided in Section 2.05) money sufficient to pay the
Redemption Price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.07. Payment of Securities Called for
Redemption. If notice of redemption has been given in the manner provided
above, the Securities or portion of Securities specified in such notice to be
redeemed shall become due and payable on the Redemption Date at the Redemption
Price stated therein, together with accrued interest to such Redemption Date,
and on and after such date (unless the Company shall default in the payment of
such Securities at the Redemption Price and accrued interest to the Redemption
Date, in which case the principal, until paid, shall bear interest from the
Redemption Date at the rate prescribed in the Securities), such Securities
shall cease to accrue interest. Upon surrender of any Security for redemption
in accordance with a notice of redemption, such Security shall be paid and
redeemed by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
registered as such at the close of business on the relevant Regular Record
Date.
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SECTION 3.08. Securities Redeemed in Part.
Upon surrender of any Security that is redeemed in part, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder a new
Security equal in principal amount to the unredeemed portion of such
surrendered Security.
ARTICLE FOUR
Covenants
SECTION 4.01. Payment of Securities. The
Company shall pay the principal of, premium, if any, and interest on the
Securities on the dates and in the manner provided in the Securities and this
Indenture. An installment of principal, premium, if any, or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on
that date money designated for and sufficient to pay the installment. If the
Company or any Subsidiary of the Company or any Affiliate of any of them acts
as Paying Agent, an installment of principal, premium, if any, or interest
shall be considered paid on the due date if the entity acting as Paying Agent
complies with the last sentence of Section 2.05. As provided in Section 6.09,
upon any bankruptcy or reorganization procedure relative to the Company, the
Trustee shall serve as the Paying Agent and conversion agent, if any, for the
Securities.
The Company shall pay interest on overdue
principal, premium, if any, and interest on overdue installments of interest,
to the extent lawful, at the rate per annum specified in the Securities.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, the City of New York an
office or agency where Securities 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 and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall
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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 set forth in Section 11.02.
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; provided 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 Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the
Corporate Trust Office of the Trustee, located in the Borough of Manhattan, the
City of New York, as such office of the Company in accordance with Section
2.04.
SECTION 4.03. Limitation on Indebtedness. (a)
The Company will not Incur any Indebtedness (other than the Securities) unless,
after giving effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, (i) the Consolidated Interest Coverage
Ratio of the Company would be at least 2.0 to 1, and (ii) the ratio of
Indebtedness of the Company and its Restricted Subsidiaries to Consolidated
Tangible Net Worth of the Company would be less than 2.5 to 1.
Notwithstanding the foregoing, the Company may
Incur each and all of the following:
(i) Indebtedness outstanding at any
time in an aggregate principal amount not to exceed the
greater of (A) $15 million or (B)(1) 10% of Adjusted
Consolidated Net Tangible Assets if Adjusted
Consolidated Net Tangible Assets are less than $200
million, or (2) 15% of Adjusted Consolidated Net
Tangible Assets if Adjusted Consolidated Net Tangible
Assets are equal to or greater than $200 million, in
the case of each of clauses (A) and (B), less any
amount of Indebtedness permanently repaid as provided
under the provisions of Section 4.10;
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(ii) Indebtedness to any Restricted
Subsidiary that is a Wholly Owned Subsidiary of the
Company;
(iii) Non-Recourse Indebtedness;
(iv) Refinancing Indebtedness, other
than with respect to Indebtedness Incurred under clause
(i) of this Section 4.03; and
(v) Indebtedness under Interest Rate
Agreements.
SECTION 4.04. Restrictions on Restricted
Subsidiary Indebtedness. The Company will not permit any Restricted Subsidiary
to, directly or indirectly, Incur any Indebtedness other than:
(i) Non-Recourse Indebtedness;
(ii) Refinancing Indebtedness;
(iii) any Guarantee of Indebtedness of
the Company under the Securities; and
(iv) any Guarantee by a Restricted
Subsidiary of Indebtedness of the Company that is pari
passu in right of payment with the Securities, provided
that (A) such Restricted Subsidiary is, or prior to or
simultaneously with the issuance of such Guarantee,
becomes a Guarantor hereunder, (B) such Indebtedness is
permitted under the Indenture and (C) such Guarantee is
pari passu or subordinated in right of payment with
the Guarantee of the Securities by such Restricted
Subsidiary.
Each Restricted Subsidiary which is required to become a Guarantor pursuant to
clause (iv) of this Section 4.04 will execute and deliver a supplemental
indenture to this Indenture providing for a Guaranty of payment of the
Securities by such Restricted Subsidiary pursuant to Article Ten.
SECTION 4.05. Limitation on Restricted
Payments. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, (i) declare or pay
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any dividend or make any distribution on its Capital Stock (other than
dividends or distributions payable solely in shares of its or such Restricted
Subsidiary's Capital Stock (other than Redeemable Stock) of the same class held
by such holders or in options, warrants or other rights to acquire such shares
of Capital Stock) held by Persons other than the Company or any Restricted
Subsidiary that is a Wholly Owned Subsidiary of the Company, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of
the Company or any Restricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by Persons other than the
Company or any Restricted Subsidiary that is a Wholly Owned Subsidiary of the
Company, (iii) make any voluntary or optional principal payment, or voluntary
or optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the Securities, or (iv) make any Investment in any
Affiliate of the Company (other than a Restricted Subsidiary) (such payments or
any other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (A) a Default or Event of Default shall have
occurred and be continuing, (B) the Company could not Incur at least $1.00 of
additional Indebtedness under the first paragraph of Section 4.03(a), (C) the
Consolidated Tangible Net Worth of the Company would be less than the Minimum
Consolidated Tangible Net Worth or (D) the aggregate amount expended for all
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a Board Resolution) on and after March 1, 1994
shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of such amount) (determined by excluding income created by transfers
of assets received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on March 1, 1994 and ending on the last day
of the last fiscal quarter preceding the Transaction Date, plus (2) the
aggregate net proceeds (including the fair market value of non-cash proceeds as
determined in good faith by the Board of Directors) received by the Company
from the issuance and sale permitted by the Indenture of its Capital Stock
(other than Redeemable Stock) to a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by the Indenture for cash or
other property upon the conversion of any Indebtedness of the Company
subsequent to the Closing Date, or from the issuance of any options, warrants
or other rights to acquire Capital Stock of the Company (in each case,
exclusive of any Redeemable Stock or any
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53
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Securities), plus (3) the amount of any Investment returned to the Company or
any Restricted Subsidiary by any Affiliate (other than a Restricted Subsidiary)
thereof plus (4) $1 million plus (5) solely for the purpose of making
Investments in any Unrestricted Subsidiary or Joint Venture that is not a
Restricted Subsidiary, $14 million; provided that any Restricted Payment made
pursuant to this clause (5) shall not be subject to the provisions of clause
(B) of this paragraph and any such Restricted Payment shall be evidenced to the
Trustee by an Officers' Certificate certifying that such Restricted Payment is
being made pursuant to this clause (5).
The foregoing provision shall not take into
account, and shall not be violated by reason of:
(i) the payment of any dividend within
60 days after the date of declaration thereof if, at
said date of declaration, such payment would comply
with the foregoing paragraph;
(ii) the redemption, repurchase,
defeasance or other acquisition or retirement for value
of Indebtedness that is subordinated in right of
payment to the Securities including premium, if any,
and accrued and unpaid interest, with the proceeds of,
or in exchange for, Indebtedness Incurred under clause
(iv) of the second paragraph of Section 4.03(a);
(iii) the repurchase, redemption or
other acquisition of Capital Stock of the Company in
exchange for, or out of the proceeds of a substantially
concurrent offering (other than to a Subsidiary) of
shares of Capital Stock (other than Redeemable Stock)
of the Company;
(iv) the acquisition of Indebtedness of
the Company that is subordinated in right of payment to
the Securities in exchange for, or out of the proceeds
of, a substantially concurrent offering of, shares of
Capital Stock of the Company (other than Redeemable
Stock);
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(v) payments or distributions pursuant
to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of
the Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property
and assets of the Company;
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(vi) distributions required by the partnership
agreements of each of the Existing Joint Ventures, as in effect on the
Closing Date,
(vii) the return of capital on the Closing Date to
IHP Investment Fund I, L.P. by certain of the Existing Joint Ventures;
(viii) prior to the merger of CPH with and into the
Company and with respect to each period for which CPH pays its federal
income taxes, California franchise taxes and other state corporate
income taxes on a consolidated or combined basis with the Company and
its subsidiaries (the CPH Consolidated Group"), the payment by the
Company to CPH of an amount with respect to such taxes, to be paid by
CPH on behalf of the CPH Consolidated Group, for such period provided
that such amount will not exceed the lesser of (a) the aggregate
amount of federal income taxes, California franchise taxes and other
state corporate income taxes payable by the CPH Consolidated Group for
such period, and (b) the aggregate amount of federal income taxes,
California franchise taxes and other state corporate income taxes that
would be payable by the Company and its subsidiaries for such period
on a consolidated basis if the Company and its subsidiaries were not
part of the CPH Consolidated Group, taking into account tax refunds or
credits attributable to carrybacks or carryforwards of tax benefits of
the Company and its subsidiaries; and
(ix) the repurchase of Warrants pursuant to a
Repurchase Offer (as defined in and required by the Warrant
Agreement);
provided that, except in the case of clauses (i), (iv), (vi) and (viii), no
Default or Event of Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Notwithstanding the foregoing, in the event of an issuance of
Capital Stock of the Company and (1) the repurchase, redemption or other
acquisition of Capital Stock out of the proceeds of such issuance or (2) the
acquisition of Indebtedness that is subordinated in right of payment to the
Securities out of the proceeds of such issuance, then, in calculating whether
the conditions of clause (D) of the first paragraph of this Section 4.05 have
been met with respect to any subsequent Restricted Payments, the proceeds of
any such issuance shall be included under such clause (D) only to the extent
such proceeds are not applied as described in clause (1) or (2) of this
paragraph.
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SECTION 4.06. Maintenance of Consolidated Tangible Net Worth.
If the Company's Consolidated Tangible Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Deficiency Date") is less than $37 million (the "Minimum
Consolidated Tangible Net Worth"), then the Company shall make an offer to all
Holders (a "Net Worth Offer") to acquire Securities, for cash, in an aggregate
principal amount equal to 10% of the initial aggregate outstanding principal
amount of the Securities (or if less than 10% of the aggregate principal amount
of the Securities originally issued are then outstanding, all of the Securities
outstanding at the time) (a "Net Worth Payment") at a purchase price of 100% of
principal amount, plus accrued and unpaid interest to the date of purchase (the
"Net Worth Payment Date"). Securities acquired or redeemed by the Company or
purchased by it in the open market subsequent to the Deficiency Date other than
by reason of a mandatory repurchase obligation may be credited against any Net
Worth Payment. The Company, however, may not credit a specific Security
against more than one Deficiency Payment and mandatory repurchase payment. In
no event shall the Company's failure to meet the Minimum Consolidated Tangible
Net Worth threshold at the end of any fiscal quarter be counted toward the
making of more than one Net Worth Offer. Prior to the mailing of the notice to
Holders provided for in the succeeding paragraph, but in any event within 30
days following a Deficiency Date, the Company covenants to (i) repay in full
all indebtedness of the Company that would prohibit the repurchase of the
Securities as provided for in this Section 4.06 or (ii) obtain any requisite
consents under instruments governing any such indebtedness of the Company to
permit the repurchase of the Securities as provided for in this Section 4.06.
The Company shall first comply with the covenant in the preceding sentence
before it shall be required to repurchase Securities pursuant to this Section
4.06. The Company shall notify the Trustee promptly after the occurrence of
any of the events specified in this Section 4.06 and, in addition, the Company
shall notify the Trustee in writing if the Company's Consolidated Tangible Net
Worth is equal to or less than the Minimum Consolidated Tangible Net Worth for
any fiscal quarter.
Within 30 days following a Deficiency Date, the Company shall
mail a notice to the Trustee and each Holder stating
(i) that a Deficiency Date has occurred, that the Net
Worth Offer is being made pursuant to this Section 4.06 and that all
Securities validly tendered will be accepted for payment (on a pro
rata basis if required pursuant to the terms of this Section 4.06);
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(ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than
60 days from the date such notice is mailed) (the Net Worth Payment
Date");
(iii) that any Security not tendered will continue to
accrue interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment
of the Net Worth Payment, any Security accepted for payment pursuant
to the Net Worth Offer shall cease to accrue interest on and after the
Net Worth Payment Date;
(v) that the Holders electing to have any Security or
portion thereof purchased pursuant to the Net Worth Offer will be
required to surrender such Securities, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of such
Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day
immediately preceding the Net Worth Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Net Worth
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of
Securities delivered for purchase and a statement that such Holder is
withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered;provided that each Security purchased and each Security
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Net Worth Payment Date, the Company shall: (1) accept
for payment Securities or portions thereof tendered pursuant to the Net Worth
Offer; (2) deposit with the Paying Agent money sufficient to pay the purchase
price of all Securities or portions thereof so accepted; and (3) deliver, or
cause to be delivered, to the Trustee, all Securities or portions thereof so
accepted together with an Officers' Certificate specifying the Securities or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail, to the Holders of the Securities so accepted, payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders new Securities equal in principal amount to any
unpurchased
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portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of $1,000
or an integral multiple thereof. In the event that the aggregate principal
amount of Securities surrendered by Holders exceeds the Net Worth Amount, the
Company will select the Securities to be purchased on a pro rata basis from all
Securities so surrendered, with such adjustments as may be deemed appropriate
by the Company so that only Securities in denominations of $1,000, or integral
multiples thereof, will be purchased. The Company will publicly announce the
results of the Net Worth Offer on or as soon as practicable after the Net Worth
Payment Date. For purposes of this Section 4.06, the Trustee shall act as
Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Deficiency Date occurs
and the Company is required to repurchase Securities under this Section 4.06.
Section 4.07. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any interest on or principal of any Indebtedness owed to the Company
or any other Restricted Subsidiary, (iii) make loans or advances to the Company
or any other Restricted Subsidiary or (iv) transfer any of its property or
assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict or prohibit any
encumbrances or restrictions:
(i) existing on the Closing Date in this Indenture or
any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of any of the
foregoing;provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
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(iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any
Restricted Subsidiary and existing at the time of such acquisition,
which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the
property or assets of such Person so acquired, and any extensions,
refinancings, renewals or replacements of any of the
foregoing;provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced; or
(iv) in the case of clause (iv) of the first
paragraph of this Section 4.07, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property
or asset, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and
that do not, individually or in the aggregate, detract from the value
of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary.
Nothing contained in this Section 4.07 shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted by Section 4.09 or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company
or any of its Restricted Subsidiaries.
SECTION 4.08. Limitation on Transactions with Shareholders
and Affiliates. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the investment, loan, advance,
guaranty or capital contribution in or to, or the purchase, sale, lease,
transfer, exchange or other disposition of property or assets, or the rendering
of any service) with or for the benefit of any holder (or any Affiliate of such
holder) of 10% or more of any class of Capital Stock of the Company or with or
for the benefit of any Affiliate of the Company or any Restricted Subsidiary
(each an "Affiliate Transaction"), except upon fair and reasonable terms no
less favorable to the Company or
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such Restricted Subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that
is not such a holder or an Affiliate.
In addition, the Company will not, and will not permit any of
its Restricted Subsidiaries to, (a) enter into any Affiliate Transaction
involving or having an amount of more than $1.0 million, unless in each case
such Affiliate Transaction has been approved by a majority of the disinterested
members of the Company's Board of Directors, or (b) enter into an Affiliate
Transaction involving or having a value of more than $5.0 million unless the
Company has delivered to the Trustee an opinion of an Independent Financial
Advisor to the effect that the transaction is fair to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial point of
view; provided, however, for purposes of this paragraph, "Affiliate
Transaction" shall not include any transaction between the Company or any
Restricted Subsidiary and any Person that is an Affiliate of the Company or
such Restricted Subsidiary solely by reason of such Person having an interest
in a Joint Venture that is a Restricted Subsidiary.
This Section 4.08 does not limit, and shall not apply to
(i) any transaction between the Company and any
Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company
or between Restricted Subsidiaries which are Wholly Owned Subsidiaries
of the Company;
(ii) the payment of reasonable and customary regular
fees to directors who are not employees, and the provision of
reasonable indemnification benefits, to directors and officers of the
Company; or
(iii) any Restricted Payments not prohibited by
Section 4.05.
SECTION 4.09. Limitation on Liens. The Company will not, and
will not permit any Restricted Subsidiary to, create, incur, assume or suffer
to exist any Lien (other than Permitted Liens) on any of its assets or
properties, income or profits thereon or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all of the Securities and all other amounts due under the Indenture to be
directly secured equally and ratably with (or prior to) the obligation or
liability secured by such Lien.
SECTION 4.10. Limitation on Asset Sales. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
make any Asset Sale unless (i) the Company
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or the Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value for the
shares or assets sold or otherwise disposed of; provided that the aggregate
Fair Market Value of the consideration received from any Asset Sale that is
not in the form of cash or cash equivalents (in U.S. dollars or freely
convertible into U.S. dollars) will not, when aggregated with the Fair Market
Value of all other noncash consideration received by the Company and its
Restricted Subsidiaries from all previous Asset Sales since the Closing Date
that has not been converted into cash or cash equivalents (in U.S. dollars or
freely convertible into U.S. dollars), exceed 5% of the Adjusted Consolidated
Net Tangible Assets of the Company at the time of the Asset Sale under
consideration, and (ii) the Company will apply, or cause such Restricted
Subsidiary to apply, the aggregate Net Cash Proceeds received by the Company or
any Restricted Subsidiary from all Asset Sales occurring subsequent to the
Closing Date to (A) permanently repay unsubordinated Indebtedness of the
Company owing to a Person other than the Company or any of its Restricted
Subsidiaries or any Indebtedness of any Restricted Subsidiary, in each case
within one year after such Asset Sale or (B) invest an equal amount, or the
amount not so applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or the property and
assets of, or the business of, the Company and its Restricted Subsidiaries
existing on the date of such investment (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution, within one year after such Asset Sale). The amount of such
Net Cash Proceeds required to be applied (or to be committed to be applied)
during such 12-month period as set forth in the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
totals at least $5 million, the Company must, not later than the fifteenth
Business Day of such month, make an offer (an "Excess Proceeds Offer") to
purchase from the Holders on a pro rata basis an aggregate principal amount of
Securities equal to the Excess Proceeds on such date, at a purchase price equal
to 100% of the principal amount of the Securities, plus, in each case, accrued
and unpaid interest (if any) to the date of purchase (the "Excess Proceeds
Payment").
The Company shall commence an Excess Proceeds Offer by mailing
a notice to the Trustee and each Holder stating:
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(i) that the Excess Proceeds Offer is being made
pursuant to this Section 4.10 and that all Securities validly tendered
will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than
60 days from the date such notice is mailed) (the Excess Proceeds
Payment Date");
(iii) that any Security not tendered will continue to
accrue interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment
of the Excess Proceeds Payment, any Security accepted for payment
pursuant to the Excess Proceeds Offer shall cease to accrue interest
on and after the Excess Proceeds Payment Date;
(v) that Holders electing to have a Security
purchased pursuant to the Excess Proceeds Offer will be required to
surrender the Security, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Security
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately
preceding the Excess Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Excess
Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of
Securities delivered for purchase and a statement that such Holder is
withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered;provided that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i)
accept for payment on a pro rata basis Securities or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
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Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered; provided that each Security purchased and each new Security issued
shall be in a principal amount of $1,000 or integral multiples thereof. The
Company will publicly announce the results of the Excess Proceeds Offer on or
as soon as practicable after the Excess Proceeds Payment Date. For purposes
of this Section 4.10, the Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that such Excess Proceeds are
received by the Company under this Section 4.10 and the Company is required to
repurchase Securities as described above.
SECTION 4.11. Repurchase of Securities upon a Change of
Control. Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of its Securities by the Company in cash
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest (if any) to the date of purchase (the "Change of Control
Payment"). Prior to the mailing of the notice to Holders provided for in the
succeeding paragraph, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness of the
Company that would prohibit the repurchase of the Securities as provided for in
the succeeding paragraph or (ii) obtain any requisite consents under
instruments governing any such indebtedness of the Company to permit the
repurchase of the Securities as provided for in the succeeding paragraph. The
Company shall first comply with the covenant in the preceding sentence before
it shall be required to repurchase Securities pursuant to this Section 4.11.
Within 30 days following the Change of Control, the Company
shall mail a notice to the Trustee and each Holder stating:
(i) that a Change of Control has occurred, that the
Change of Control Offer is being made pursuant to this Section 4.11
and that all Securities validly tendered will be accepted for payment;
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(ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than
60 days from the date such notice is mailed) (the Change of Control
Payment Date");
(iii) that any Security not tendered will continue to
accrue interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment
of the Change of Control Payment, any Security accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
on and after the Change of Control Payment Date;
(v) that Holders electing to have any Security or
portion thereof purchased pursuant to the Change of Control Offer
will be required to surrender such Security, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side
of such Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business
Day immediately preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Securities delivered for purchase and a statement that such Holder is
withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered;provided that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Change of Control Payment Date, the Company shall: (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Securities or
portions thereof so accepted together with an Officers' Certificate specifying
the Securities or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail, to the Holders of Securities so accepted,
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and
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mail to such Holders a new Security equal in principal amount to any
unpurchased portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of $1,000
or integral multiples thereof. The Company will publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 4.11, the Trustee shall act
as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control
occurs and the Company is required to repurchase the Securities under this
Section 4.11.
SECTION 4.12. Existence. Subject to Articles Four and Five
of this Indenture, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and the existence
of each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided that the Company shall not be required to preserve any
such right, license or franchise, or the existence of any Restricted
Subsidiary, if the maintenance or preservation thereof is no longer desirable
in the conduct of the business of the Company and Restricted its Subsidiaries
taken as a whole.
SECTION 4.13. Payment of Taxes and Other Claims. The Company
will pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent all material taxes, assessments and governmental charges levied or
imposed upon (a) the Company or any such Subsidiary, (b) the income or profits
of any such Subsidiary which is a corporation or (c) the property of the
Company or any such Subsidiary; provided 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 the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made.
SECTION 4.14. Maintenance of Properties and Insurance. The
Company will cause all properties used or useful in the conduct of its business
or the business of any of its Restricted Subsidiaries, to be maintained and
kept in good condition, repair and working order (ordinary wear and tear
excepted) and supplied
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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 that nothing in this Section 4.14 shall prevent the Company or any
such Subsidiary from discontinuing the use, 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 Company, desirable in the conduct of the business of
the Company or such Subsidiary.
The Company will provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, products liability insurance and public liability insurance,
with reputable insurers or with the government of the United States of America,
or an agency or instrumentality thereof, in such amounts, with such deductibles
and by such methods as shall be customary for corporations similarly situated
in the industry in which the Company or such Restricted Subsidiary, as the
case may be, is then conducting business.
SECTION 4.15. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default the Company, promptly
after it becomes aware thereof, will give written notice thereof to the
Trustee.
SECTION 4.16. Compliance Certificates. (a) The Company
shall deliver to the Trustee, within 45 days after the end of each fiscal
quarter (120 days after the end of the last fiscal quarter of each fiscal
year), an Officers' Certificate stating whether or not the signers know of any
Default or Event of Default that occurred during such fiscal quarter. In the
case of the Officers' Certificate delivered within 120 days of the end of the
Company's fiscal year, such certificate shall contain a certification from the
principal executive officer, principal financial officer or principal
accounting officer that a review has been conducted of the activities of the
Company and its Restricted Subsidiaries and the Company's and its Restricted
Subsidiaries' performance under this Indenture and that the Company has
fulfilled all obligations thereunder. For purposes of this Section 4.16, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. If they do know of such a
Default or Event of Default, the certificate shall describe any such Default or
Event of Default and its status. The first certificate to be delivered
pursuant to this Section 4.16(a) shall be for the first fiscal quarter
beginning after the execution
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of this Indenture.
(b) The Company shall deliver to the Trustee, within 120
days after the end of the Company's fiscal year, a certificate signed by the
Company's independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent Officers' Certificate delivered to the Trustee pursuant to
paragraph (a) of this Section 4.16 and (iii) whether, in connection with their
audit examination, anything came to their attention that caused them to believe
that the Company was not in compliance with any of the terms, covenants,
provisions or conditions of Article Four and Section 5.01 of this Indenture as
they pertain to accounting matters and, if any Default or Event of Default has
come to their attention, specifying the nature and period of existence thereof;
provided that such independent certified public accountants shall not be liable
in respect of such statement by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of an audit examination conducted in accordance with generally accepted
auditing standards in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's fiscal
years, the Company shall deliver to the Trustee a list of all Significant
Subsidiaries. The Trustee shall have no duty with respect to any such list
except to keep it on file and available for inspection by the Holders.
(d) The Company shall deliver to the Trustee a notice, within
a reasonable time, that three years have passed since the later of the original
issue date of the Securities and the last date on which any Security was held
by an Affiliate of the Company.
SECTION 4.17. Commission Reports and Reports to Holders. The
Company shall file with the Commission the annual, quarterly and other reports
required by Section 13(a), 13(c) or 15(d) of the Exchange Act, regardless of
whether such Sections of the Exchange Act are applicable to the Company, and
shall provide copies of such reports to each Holder, without cost to such
Holder, and the Trustee within seven days after the date it would have been
required to file such reports or other information with the Commission had it
been subject to such sections. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 4.18. 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 or take
the benefit or advantage of, any stay or
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extension law or any usury law or other law that would prohibit or forgive the
Company from paying all or any portion of the principal of, premium, if any, or
interest on the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force, or that 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 4.19. Issuance of Subsidiary Guarantees by Restricted
Subsidiaries. Each Subsidiary of the Company which becomes a Restricted
Subsidiary subsequent to the Closing Date will execute and deliver a
supplemental indenture to this Indenture providing for a Guarantee of payment
of the Securities by such Restricted Subsidiary pursuant to Article Ten;
provided, however, that the Company may elect that any Restricted Joint Venture
and any Restricted Subsidiary the assets of which have a book value (and so
long as the assets of which have a book value) of not more than $2 million will
not be required to become a Guarantor pursuant to this Section 4.19.
ARTICLE FIVE
Successor Corporation
SECTION 5.01. When Company May Merge, Etc. The Company shall
not, and shall not permit any Guarantor to, consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to, any
Person unless:
(i) the Company or such Guarantor, as the case may
be, shall be the continuing Person, or the Person (if other than the
Company or such Guarantor, as the case may be) formed by such
consolidation or into which the Company or such Guarantor, as the case
may be, is merged or that acquired or leased such property and assets
of the Company or such Guarantor, as the case may be, shall be a
corporation organized and validly existing under the laws of the
United States of America, any state thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture in
form reasonably suitable to the
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Trustee, executed and delivered to the Trustee, all of the obligations
of the Company or such Guarantor, as the case may be, on all of the
Securities or such Guarantor's Subsidiary Guarantee, as the case may
be, and under this Indenture;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such
transaction on a pro forma basis, the Company or any Person becoming
the successor obligor of the Securities (in the case of a transaction
involving the Company), as the case may be, shall have a Consolidated
Tangible Net Worth equal to or greater than the Consolidated Tangible
Net Worth of the Company immediately prior to such transaction;
(iv) immediately after giving effect to such
transaction on a pro forma basis, the Company or such other Person
becoming the successor obligor of the Securities (in the case of a
transaction involving the Company), as the case may be, would be able
to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of Section 4.03; and
(v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion of Counsel, in
each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this Section 5.01 and that all
conditions precedent provided for herein relating to such transaction
have been complied with.
This Section 5.01 shall not apply to a transaction involving
the consolidation or merger of a Guarantor with or into another person, or the
sale, lease, conveyance or other disposition of substantially all of the assets
of such Guarantor, that results in such Guarantor being released from its
Subsidiary Guaranty as provided under Section 10.03.
The Company will use its best efforts to merge with or into
CPH within 180 days after consummation of the Exchange Offer or effectiveness
of the Registration Statement, as the case may be, and, in any event, will
complete such merger on or before the earlier of (i) one year thereafter or
(ii) 18 months after the initial issuance of the Securities. Immediately after
and giving effect to such merger, either (a) (i) the Consolidated Interest
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Coverage Ratio of the Company will not be less than such Consolidated Interest
Coverage Ratio immediately prior to the merger, (ii) the ratio of Indebtedness
of the Company and its Restricted Subsidiaries to Consolidated Tangible Net
Worth of the Company will not be less than such ratio immediately prior to such
merger, and (iii) the Consolidated Tangible Net Worth of the Company will not
be less than such Consolidated Tangible Net Worth immediately prior to such
merger or (b) such merger will comply with the covenants set forth in the first
paragraph of this Section 5.01.
SECTION 5.02. Successor Substituted. Upon any consolidation
or merger, or any sale, conveyance, transfer, lease or other disposition of all
or substantially all of the property and assets of the Company in accordance
with Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.
ARTICLE SIX
Default and Remedies
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Securities if:
(a) the Company defaults in the payment of the principal
of (or premium, if any, on) any Security when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on
any Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(c) the Company or any Guarantor defaults in the
performance of or breaches any other covenant or agreement of the
Company or such Guarantor in this Indenture or under the Securities
and such default or breach continues for a period of 60 consecutive
days after written notice to the Company by the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Securities;
(d) there occurs with respect to any
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issue or issues of Indebtedness (other than Non-Recourse Indebtedness) of the
Company or any of its Significant Subsidiaries having an outstanding principal
amount of $5 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be created,
(A) an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and/or (B) the
failure to make any payment in respect of such Indebtedness when due or during
any applicable grace period and the continuation of such failure for five
Business Days; provided, however, that the default which exists as of the
Closing Date, as a result of the failure to pay principal and interest, under
the note dated March 14, 1989, payable to West Coast Land Fund L.P. shall not
constitute an Event of Default under this clause (d);
(e) one or more final judgments or orders for the payment
of money in excess of $3 million in the aggregate shall be rendered
against the Company or any of its Significant Subsidiaries and such
final judgments or orders, shall not have been satisfied, stayed,
annulled or rescinded within 60 days after being entered;
(f) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any of its Significant Subsidiaries or for all or substantially all of
the property and assets of the Company or any of its Significant
Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case,
such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days;
(g) the Company or any Significant Subsidiary of the
Company (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment
of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any of its Significant Subsidiaries or for all or substantially all of
the property and assets of the Company or any Significant Subsidiary
of the Company or (C) effects any general assignment for the benefit
of creditors; or
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(h) any Restricted Joint Venture that is not a Guarantor
provides a Guarantee of Indebtedness of any other Person; or
(i) any Subsidiary Guarantee ceases to be in full force
and effect (other than in accordance with the terms of this Indenture)
or is declared null and void and unenforceable or found to be invalid
or any Guarantor denies its liability under its Subsidiary Guarantee
(other than by reason of release of a Guarantor from its Subsidiary
Guarantee in accordance with the terms of the Indenture).
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in clause (f) or (g) of Section 6.01) occurs
and is continuing under this Indenture, the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by
the Holders (the "Acceleration Notice")), may, and the Trustee at the request
of such Holders shall, declare the principal of, premium, if any, and accrued
interest on the Securities to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall be immediately due and payable. If an Event of Default
specified in clause (f) or (g) of Section 6.01 occurs, the principal of,
premium, if any, and accrued interest on the Securities then outstanding 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.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of not less than a majority in principal amount of
the outstanding Securities by written notice to the Company and to the Trustee,
may waive all past Defaults and rescind and annul such declaration of
acceleration and its consequences if (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the
Trustee hereunder and the resonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Securities, (iii) the principal of and premium, if any, on any Securities
that have become due otherwise than by such declaration or occurrence of
acceleration and interest thereon at the rate prescribed therefor by such
Securities, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate prescribed therefor by such
Securities, (b) all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and accrued interest on the Securities that
have become due solely by such
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declaration of acceleration, have been cured or waived and (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue, in its own name or as trustee of an
express trust, any available remedy by proceeding at law or in equity to
collect the payment of principal of, premium, if any, or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of not less than a majority in principal
amount of the outstanding Securities, by notice to the Company and the Trustee,
may waive an existing Default or Event of Default and its consequences, except
a Default in the payment of principal of, premium, if any, or interest on any
Security as specified in clause (a) or (b) of Section 6.01 or in respect of a
covenant or provision of this Indenture which cannot be modified or amended
without the consent of the holder of each outstanding Security affected. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of not less
than a majority in aggregate principal amount of the outstanding Securities may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided, that the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders not joining in the giving of such
direction; and provided further, that the Trustee may take any other action it
deems proper that is not inconsistent with any directions received from Holders
pursuant to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not
institute any proceeding, judicial or otherwise, with respect to this Indenture
or the Securities, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
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(i) such Holder has previously given to the Trustee
written notice of a continuing Event of Default;
(ii) the Holders of not less than 25% in aggregate
principal amount of outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the
Trustee indemnity satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such
request;
(iv) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
any such proceeding or pursue the remedy; and
(v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding Securities
have not given the Trustee a direction that is inconsistent with such
written request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of principal of, premium, if any, or interest
on such Holder's Security on or after the respective due dates expressed on
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a),
(b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor of the Securities for the whole amount of principal,
premium, if any, and accrued interest remaining unpaid, together with interest
on overdue principal, premium, if any, and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate specified in the Securities, and such further amount as shall be
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sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor of the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies, securities or
other property payable or deliverable upon conversion or exchange of the
Securities or upon 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 to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower 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 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal, premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the
Securities, as their interests may appear, or as a court of competent
jurisdiction may direct.
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The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by a Holder pursuant to Section
6.07, or a suit by Holders of more than 10% in principal amount of the
outstanding Securities.
SECTION 6.12. 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 Company, Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.09, 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 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder 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 Six 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.
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ARTICLE SEVEN
Trustee
SECTION 7.01. General. The duties and responsibilities of
the Trustee shall be as provided by the TIA and as set forth herein.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) 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 person. The Trustee need not
investigate any fact or matter stated in the document;
(ii) before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Section 11.04. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on
such certificate or opinion;
(iii) the Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or negligence
of any agent appointed with due care;
(iv) 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, unless such Holders
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction;
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(v) the Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized
or within its rights or powers; provided that the Trustee's conduct
does not constitute negligence or bad faith; and
(vi) The Trustee shall not be charged with knowledge
of any Default or Event of Default unless either (i) a Responsible
Officer of the Trustee shall have actual knowledge of such Default or
Event of Default or (ii) written notice of such Default or Event of
Default shall have been given to the Trustee by the Company, any other
obligor of the Securities or by any Holder.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to TIA Sections 310(b)
and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Company's use or application
of the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to the Trustee, the Trustee shall mail to each Holder in the manner and
to the extent provided in TIA Section 313(c) notice of the Default or Event of
Default within 45 days after it occurs, unless such Default or Event of Default
has been cured; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Security, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 1995, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report dated as of such May
15, if required by TIA Section 313(a).
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SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee reasonable compensation as shall be agreed upon in writing
for its services as Trustee or otherwise in connection with this Indenture.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by the Trustee. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Securities as Trustee or otherwise, including the costs and expenses of
defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise
or performance of any of its powers or duties under this Indenture and the
Securities.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, and
interest on particular Securities.
If the Trustee incurs expenses or renders services as Trustee
or otherwise after the occurrence of an Event of Default specified in clause
(f) or (g) of Section 6.01, the expenses and the compensation for the services
will be intended to constitute expenses of administration under Title 11 of the
United States Bankruptcy Code or any applicable federal or state law for the
relief of debtors.
SECTION 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and
may appoint a successor Trustee with the consent of the Company; provided that
the consent of the Company shall not be required if a Default or an Event of
Default exists. The Company may remove the Trustee if:
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(i) the Trustee fails to comply with Section 7.10 of
this Indenture;
(ii) the Trustee is adjudged a bankrupt or an
insolvent;
(iii) a receiver or other public officer takes charge
of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not take office within 30 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of a majority in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee shall become effective and (iii) the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If the Trustee fails to comply with Section 7.10, any Holder
who satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligation under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national
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banking association without any further act shall be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee herein.
SECTION 7.10. Eligibility. This Indenture shall always have
a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law and except for money held
in trust under Article Eight of this Indenture.
SECTION 7.12 Withholding Taxes. To the extent required by
law, the Trustee, as agent for the Company, shall exclude and withhold from
each payment by the Trustee of principal and interest and other amounts due
hereunder or under the Securities any and all withholding taxes applicable
thereto. The Trustee agrees to act as such withholding agent and, in
connection therewith, whenever it has notice that any present or future taxes
or similar charges are required to be withheld by the Trustee with respect to
any amounts payable in respect of the Securities, to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf
of the Holders, that it will file any necessary withholding tax returns or
statements required by law when due, and that, as promptly as possible after
the payment thereof, it will deliver to each Holder appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such Holders may reasonably request from time to time.
ARTICLE EIGHT
Discharge of Indenture
SECTION 8.01. Termination of Company's Obligations. Except
as otherwise provided in this Section 8.01, the Company and the Guarantors may
terminate their respective obligations under the Securities and this Indenture
if:
(i) all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities that have
been replaced or Securities that are paid pursuant to Section 4.01 or
Securities for whose payment money or securities have theretofore been
held in
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trust and thereafter repaid to the Company, as provided in
Section 8.05) have been delivered to the Trustee for cancellation and
the Company has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all
of them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of
redemption, (B) the Company irrevocably deposits in trust with the
Trustee during such one-year period, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Trustee, as
trust funds solely for the benefit of the Holders for that purpose,
money or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Securities to
maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with
respect to the Securities shall have occurred and be continuing on the
date of such deposit, (D) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Company is a party or by
which it is bound and (E) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Securities are no longer outstanding. Thereafter, only
the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After
any such irrevocable deposit, the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the Securities and
this Indenture except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company and the Guarantors will be deemed to have paid and will be discharged
from any and all obligations in respect of the Securities on the 123rd day
after the date of the deposit referred to in clause (A) of this Section 8.02,
and the provisions of this Indenture will no longer be in effect with
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respect to the Securities, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same, except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of Holders to receive payments of principal thereof and interest
thereon, (iv) the Company's obligations under Section 4.02, (v) the rights,
obligations and immunities of the Trustee hereunder and (vi) the rights of the
Holders as beneficiaries of this Indenture with respect to the property so
deposited with the Trustee payable to all or any of them; provided that the
following conditions shall have been satisfied:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10 of this Indenture) and conveyed all right, title and interest for
the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Securities, and dedicated solely to,
the benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (A), money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the
Trustee, the principal of, premium, if any, and accrued interest on
the outstanding Securities at the Stated Maturity of such principal,
premium, if any, or interest;provided that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Securities;
(B) such deposit shall not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Company is a party or by
which it is bound;
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(C) immediately after giving effect to such deposit on a
pro forma basis, no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or during the period
ending on the 123rd day after such date of deposit;
(D) the Company shall have delivered to the Trustee (1)
either (x) an Opinion of Counsel to the effect that the Holders will
not recognize income, gain or loss for federal income tax purposes as
a result of the Company's exercise of its option under this Section
8.02 and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred, which
Opinion of Counsel must be based upon (and accompanied by a copy of) a
ruling published by the Internal Revenue Service to the same effect
unless there has been a change in the applicable federal income tax
law since the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service to
the same effect as the aforementioned Opinion of Counsel and (2) an
Opinion of Counsel to the effect that (x) the creation of the
defeasance trust does not violate the Investment Company Act of 1940
and (y) after the passage of 123 days following the deposit (except,
with respect to any trust funds for the account of any Holder who may
be deemed to be an "insider" for purposes of the United States
Bankruptcy Code, after one year following the deposit), the trust
funds will not be subject to the effect of Section 547 of the United
States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law;
(E) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit, defeasance and
discharge will not cause the Securities to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
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Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none
of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to this
Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and
when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (D)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of
the Company's obligations under Section 4.01, then the Company's obligations
under such Section 4.01 shall cease upon delivery to the Trustee of such ruling
or Opinion of Counsel and compliance with the other conditions precedent
provided for herein relating to the defeasance contemplated by this Section
8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) of Section 5.01 and Sections 4.03 through 4.18, and clause (c)
of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and
Sections 4.03 through 4.18, and clauses (d) and (e) of Section 6.01 shall be
deemed not to be Events of Default, in each case with respect to the
outstanding Securities if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee
(or another trustee satisfying the requirements of Section 7.10) and conveyed
all right, title and interest to the Trustee for the benefit of the Holders,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(A) money in an amount, (B) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due
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date of any payment referred to in this clause (i), money in an amount
or (C) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, without consideration of the reinvestment of
such interest and after payment of all federal, state and local taxes
or other charges and assessments in respect thereof payable by the
Trustee, the principal of, premium, if any, and interest on the
outstanding Securities on the Stated Maturity of such principal or
interest; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal, premium, if any, and
interest with respect to the Securities;
(ii) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Company is a party or by
which it is bound;
(iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit, and
immediately after giving effect to such deposit on apro forma basis,
no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd
day after such date of deposit;
(iv) the Company has delivered to the Trustee an
Opinion of Counsel to the effect that (A) the creation of the
defeasance trust does not violate the Investment Company Act of 1940,
(B) the Holders have a valid first-priority security interest in the
trust funds, (C) the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and Events of Default and will be
subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (D) after the passage of
123 days following the deposit (except, with respect to any trust
funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law;
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(v) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit, defeasance and
discharge will not cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all conditions precedent provided for herein relating to the
defeasance contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Securities and this Indenture to
the payment of principal of, premium, if any, and interest on the Securities;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.05. Repayment to Company. Subject to Sections
7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay
to the Company upon request set forth in an Officers' Certificate any excess
money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for two years;
provided that the Trustee or such Paying Agent before being required to make
any payment may cause to be published at the expense of the Company once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money at such Holder's address (as set forth in the Security
Register) notice that such money remains unclaimed and that after a date
specified therein (which shall be at least 30 days from the date of such
publication or mailing) any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to
such money must look to the Company for payment as general creditors unless an
applicable law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining,
<PAGE> 96
88
restraining or otherwise prohibiting such application, the Company's and
each Guarantor's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be;
provided that, if the Company has made any payment of principal of, premium, if
any, or interest on any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
Amendments, Supplements and Waivers
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, each Guarantor, when
authorized by a resolution of its board of directors or any committee of such
board of directors duly authorized to act under this Indenture, and the Trustee
may amend or supplement this Indenture or the Securities without notice to or
the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in the
Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to reflect a Guarantor ceasing to be liable on its
Subsidiary Guarantee because it is no longer a Subsidiary of the
Company;
(5) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee;
(6) to add any Subsidiary Guarantee;
(7) provide for uncertificated Securities; or
<PAGE> 97
89
(8) to make any change that does not materially adversely
affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution), each
Guarantor, when authorized by a resolution of its board of directors or any
committee of such board of directors duly authorized to act under this
Indenture, and the Trustee may modify or amend this Indenture and the
Securities with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Securities then outstanding, and the
Holders of not less than a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the
Securities.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of,
or any installment of interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any
premium payable upon the repurchase or redemption thereof, or
adversely affect any right of repayment at the option of any Holder of
any Security, or change any place of payment where, or the 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);
(ii) reduce the percentage or aggregate principal
amount of outstanding Securities the consent of whose Holders is
required for any such amendment, for any waiver of compliance with
certain provisions of this Indenture or certain Defaults and their
consequences provided for in this Indenture;
(iii) waive a Default in the payment of principal of,
premium, if any, or interest on, any Security; or
(iv) modify any of the provisions of this Section
9.02, except to increase any such percentage
<PAGE> 98
90
or to provide that certain other provisions of this Indenture cannot
be modified or waived without the consent of the Holder of each
outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only
if the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver
shall become effective on receipt by the Trustee of written consents from the
Holders of the requisite percentage in principal amount of the outstanding
Securities.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses
(i) through (iv) of Section 9.02. In case of an amendment or waiver of the
type described in clauses (i) through (iv) of Section 9.02, the amendment or
waiver shall
<PAGE> 99
91
bind each Holder who has consented to it and every subsequent Holder of a
Security that evidences the same indebtedness as the Security of the
consenting Holder.
SECTION 9.04. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee
may require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security about the changed terms and return it to
the Holder and the Trustee may place an appropriate notation on any Security
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver authorized pursuant to this Article Nine if the
same does not adversely affect the rights, duties and immunities of the
Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
Guarantee of Securities
SECTION 10.01. Subsidiary Guarantee. Subject to the
provisions of this Article Ten, each of the Guarantors hereby, jointly and
severally, fully, unconditionally and irrevocably Guarantees, to the extent set
forth in the proviso at the end of this sentence, to each Holder and to the
Trustee on behalf of the Holders: (i) the due and punctual payment of the
principal of, premium, if any, on and interest on each Security, when and as
the same shall become due and payable, whether at Stated Maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of, premium, if any, on and interest, if any, on the
Securities, to the extent lawful,
<PAGE> 100
92
and the due and punctual performance of all other obligations of the Company
to the Holders or the Trustee, all in accordance with the terms of such
Security and this Indenture and (ii) in the case of any extension of time of
payment or renewal of any Securities or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at Stated Maturity, by acceleration
or otherwise; provided that the liability of each Guarantor under this
Subsidiary Guarantee shall not exceed the greater of (a) the amount of proceeds
from the issuance and sale of the Securities by the Company received by such
Guarantor from the Company, (b) 90% of the Adjusted Net Assets of such
Guarantor on the date on which such Guarantor became a Guarantor hereunder, and
(c) 90% of the Adjusted Net Assets of such Guarantor on the date of any payment
by such Guarantor hereunder. For purposes of this Article Ten, "Adjusted Net
Assets" of any Guarantor at any date means the lesser of (x) the amount by
which the fair value of the property of such Guarantor exceeds the total amount
of liabilities, including, without limitation, contingent liabilities, but
excluding liabilities under this Subsidiary Guarantee, of such Guarantor at
such date and (y) the amount by which the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts, excluding debt in
respect of this Subsidiary Guarantee, as they become absolute and matured.
Each of the Guarantors hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger,
insolvency or bankruptcy of the Company, any requirement that the Trustee or
any of the Holders protect, secure, perfect or insure any security interest in
or other Lien upon any property subject thereto or exhaust any right or take
any action against the Company or any other Person, any right to require a
proceeding first against the Company, the benefit of discussion, protest or
notice with respect to any such Security or the debt evidenced thereby and all
demands whatsoever, and covenants that this Subsidiary Guarantee will not be
discharged as to any such Security except by payment in full of the principal
thereof, premium, if any, and interest thereon and as provided in Section 8.01
and Section 8.02.
The obligations of each Guarantor under this Subsidiary
Guarantee are independent of the obligations Guaranteed by such Guarantor
hereunder, and a separate action or actions may be brought and prosecuted by
the Trustee on behalf of, or by, the Holders, subject to the terms and
conditions set forth in this Indenture, against the Guarantor to enforce this
Guaranty, irrespective of whether any action is brought against the Company or
whether the Company is joined in any such action or actions.
<PAGE> 101
93
If the Trustee or any Holder is required by any court or
otherwise to return to the Company or any Guarantor, or any custodian,
receiver, liquidator, trustee, sequestrator or other similar official acting in
relation to the Company or such Guarantor, any amount paid to the Trustee or
such Holder in respect of a Security, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each of
the Guarantors further agrees, to the fullest extent that it may lawfully do
so, that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, the maturity of the obligations Guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition
extant under any applicable bankruptcy law preventing such acceleration in
respect of the obligations Guaranteed hereby.
Each of the Guarantors hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the Company or any
other Guarantor that arise from the existence, payment, performance or
enforcement of its obligations under this Subsidiary Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Holders against the Company or any
Guarantor or any collateral which any such Holder or the Trustee on behalf of
such Holder hereafter acquires, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company or a Guarantor,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to a Guarantor in violation of the preceding sentence and
the principal of, premium, if any, and accrued interest on the Securities shall
not have been paid in full, such amount shall be deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Holders, and shall forthwith be paid to the Trustee for the benefit of the
Holders to be credited and applied upon the principal of, premium, if any, and
accrued interest on the Securities. Each of the Guarantors acknowledges that
it will receive direct and indirect benefits from the issuance of the
Securities pursuant to this Indenture and that the waivers set forth in this
Section 10.01 are knowingly made in contemplation of such benefits.
<PAGE> 102
94
The Subsidiary Guarantee set forth in this Section 10.01 shall
not be valid or become obligatory for any purpose with respect to a Security
until the certificate of authentication on such Security shall have been signed
by or on behalf of the Trustee.
SECTION 10.02. Obligations Unconditional. Nothing contained
in this Article Ten or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as among any Guarantor and the Holders, the
obligation of such Guarantor, which is absolute and unconditional, to pay to
the Holders the principal of, premium, if any, and interest on the Securities
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders and
creditors of such Guarantor, nor shall anything herein or therein prevent any
Holder or the Trustee on their behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture.
Without limiting the foregoing, nothing contained in this
Article Ten will restrict the right of the Trustee or the Holders to take any
action to declare this Subsidiary Guarantee to be due and payable prior to the
Stated Maturity of the Securities pursuant to Section 6.02 or to pursue any
rights or remedies hereunder.
SECTION 10.03. Release of Subsidiary Guarantees. (a) Upon
the sale by the Company or any of its Subsidiaries of all or substantially all
of the assets of any Guarantor or all of the Capital Stock of any Guarantor in
a transaction constituting an Asset Sale under, and in compliance with all of
the provisions of, Section 4.10, such Guarantor (in the event of a sale or
other disposition of all of the Capital Stock of such Guarantor) or the
corporation acquiring such assets (in the event of a sale or other disposition
of all or substantially all of the assets of such Guarantor) shall be
automatically and unconditionally released and discharged of its Subsidiary
Guarantee obligations.
(b) Upon the release or discharge of the Guarantee which
resulted in the creation of any Subsidiary Guarantee pursuant to clause (iv) of
Section 4.04, except a discharge or release by or as a result of payment under
such Guarantee, the Subsidiary Guarantee required pursuant to clause (iv) of
Section 4.04 shall be automatically and unconditionally released.
<PAGE> 103
95
SECTION 10.04. Notice to Trustee. A Guarantor shall give
prompt written notice to the Trustee of any fact known to such Guarantor which
would prohibit the making of any payment to or by the Trustee in respect of
this Guarantee pursuant to the provisions of this Article Ten.
SECTION 10.05. Supplemental Indenture. Subject to the
requirements of Article Nine, any supplemental indenture required to add a
Subsidiary Guarantee pursuant to Sections 4.04 or 4.19 shall be executed by the
Company, the Trustee and the Restricted Subsidiary providing such guaranty.
SECTION 10.06. This Article not to Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if any, or
interest on the Securities by reason of any provision of this Article will not
be construed as preventing the occurrence of an Event of Default.
ARTICLE ELEVEN
Miscellaneous
SECTION 11.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration, this Indenture shall incorporate and be
governed by the provisions of the TIA that are required to be part of and to
govern indentures qualified under the TIA. After the effectiveness of the
Registration, this Indenture shall be subject to the provisions of the TIA that
are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
J.M. Peters Company, Inc.
3501 Jamboree Road, Suite 200
Newport Beach, California 92660
Attention: Chief Financial Officer
if to the Trustee:
United States Trust Company of New York
114 West 47th Street, 15th Floor
New York, New York 10036
Attention: Corporate Trust Administration
<PAGE> 104
96
The Company or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder
shall be mailed to him at his address as it appears on the Security Register by
first class mail and shall be sufficiently given to him if so mailed within the
time prescribed. Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders. Except for a notice to the Trustee, which is deemed given only
when received, and except as otherwise provided in this Indenture, if a notice
or communication is mailed in the manner provided in this Section 11.02, it is
duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with the approval
of the Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 11.03. Certificate and Opinion as to
Conditions Precedent. Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company shall furnish to
the Trustee:
(i) an Officers' Certificate stating
that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture
relating to the proposed action have been complied
with; and
(ii) an Opinion of Counsel stating
that, in the opinion of such Counsel, all such
conditions precedent have been complied with.
<PAGE> 105
97
SECTION 11.04. Statements Required in
Certificate or Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(i) a statement that each person
signing such certificate or opinion has read such
covenant or condition;
(ii) a brief statement as to the nature
and scope of the examination or investigation upon
which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion
of each such person, he has made such examination or
investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not,
in the opinion of each such person, such condition or
covenant has been complied with; provided, however,
that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 11.05. Rules by Trustee, Paying Agent
or Registrar. The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Paying Agent or Registrar may make reasonable rules
for its functions.
SECTION 11.06. Payment Date Other Than a
Business Day. If an Interest Payment Date, Redemption Date, Change of Control
Payment Date, Excess Proceeds Payment Date, Net Worth Payment Date, Stated
Maturity or date of maturity of any Security shall not be a Business Day at any
place of payment, then payment of principal of, premium, if any, or interest on
such Security, as the case may be, need not be made on such date, but may be
made on the next succeeding Business Day at any place of payment with the same
force and effect as if made on the Interest Payment Date, Redemption Date,
Change of Control Payment Date, Excess Proceeds Payment Date, Net Worth Payment
Date, or at the Stated Maturity or date of maturity of such Security; provided
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date, Change of Control Payment Date, Excess Proceeds
Payment Date, Net Worth Payment Date, Stated Maturity or date of maturity, as
the case may be.
SECTION 11.07. Governing Law. The laws of the
State of New York shall govern this Indenture and the Securities. The Trustee,
the Company and the Holders agree to submit to the jurisdiction of the courts
of the State of New York in any action
<PAGE> 106
98
or proceeding arising out of or relating to this Indenture or the Securities.
SECTION 11.08. No Adverse Interpretation of
Other Agreements. This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any Subsidiary of the
Company. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.09. No Recourse Against Others. No
recourse for the payment of the principal of, premium, if any, or interest on
any of the Securities, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company contained in this Indenture, or in any of the Securities, or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee or
controlling person, as such, of the Company or of any successor Person, either
directly or through the Company or any successor Person, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
SECTION 11.10. Successors. All agreements of
the Company in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successor.
SECTION 11.11. Duplicate Originals. The
parties may sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same agreement.
SECTION 11.12. Separability. 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 11.13. Table of Contents, Headings,
Etc. The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms and provisions hereof.
<PAGE> 107
99
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have
caused this Indenture to be duly executed, all as of the date first written
above.
J.M. PETERS COMPANY, INC.,
as Issuer
By _______________________
Name:
Attest:________________ Title:
Name:
Title:
DURABLE HOMES, INC.,
as Guarantor
By _______________________
Name:
Attest:________________ Title:
Name:
Title:
PETERS RANCHLAND, INC.,
as Guarantor
By _______________________
Name:
Attest:________________ Title:
Name:
Title:
J.M. PETERS NEVADA, INC.,
as Guarantor
By _______________________
Name:
Attest:________________ Title:
Name:
Title:
<PAGE> 108
100
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By _______________________
Name:
Attest:________________ Title:
Name:
Title:
<PAGE> 109
EXHIBIT A
[FACE OF NOTE]
J.M. PETERS COMPANY, INC.
12-3/4% Senior Note due 2002
CUSIP No. 716 035 AA 8
No. _________________ $____________________
J.M. PETERS COMPANY, INC., a Delaware
corporation (the "Company", which term includes any successor under the
Indenture hereinafter referred to), for value received, promises to pay to
____________, or its registered assigns, the principal sum of
______________________________________________ ($ ) on May 1, 2002.
[Initial Interest Rate: 12-3/4% per annum.](1)
Interest Payment Dates: May 1, and November 1,
commencing November 1, 1994.
Regular Record Dates: April 15, and October 15.
The payment of principal of, premium, if any,
and interest on the Notes, subject to the provisions set forth in the
Indenture, have been jointly and severally, fully, unconditionally and
irrevocably guaranteed by the Guarantors (as defined in the Indenture referred
to herein).
Reference is hereby made to the further
provisions of this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.
<PAGE> 110
IN WITNESS WHEREOF, the Company has caused this
Note to be signed manually or by facsimile by its duly authorized officers.
Date: ______________ J.M. PETERS COMPANY, INC.
By ______________________
Name:
Title:
By ______________________
Name:
Title:
- - ----------------
(1) Include only for Securities other than Exchange Securities.
A-2
<PAGE> 111
(Form of Trustee's Certificate of Authentication)
This is one of the 12-3/4% Senior Notes due 2002 described in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By _______________________________
Authorized Signatory
A-3
<PAGE> 112
[REVERSE SIDE OF NOTE]
J.M. PETERS COMPANY, INC.
12-3/4% Senior Note due 2002
1. Principal and Interest.
The Company will pay the principal of this Note
on May 1, 2002.
The Company promises to pay interest on the
principal amount of this Note on each Interest Payment Date, as set forth
below, at the rate of [12-3/4% per annum (subject to adjustment as provided
below)](2) [12-3/4% per annum].(3)
Interest will be payable semiannually (to the
holders of record of the Notes at the close of business on the April 15 or
October 15 immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing November 1, 1994.
[If an exchange offer registered under the
Securities Act is not completed, or a registration statement under the
Securities Act with respect to resales of the Notes is not declared effective
by the Commission, on or before November 14, 1994 in accordance with the terms
of a Registration Rights Agreement dated May 13, 1994 between the Company and
Morgan Stanley & Co. Incorporated, interest (in addition to the interest
otherwise due on the Notes after such date) will accrue on the Notes at an
annual rate of 0.5% from November 14, 1994, payable in cash semiannually, in
arrears, on each May 1 and November 1, commencing May 1, 1995. The Holder of
this Note is entitled to the benefits of such Registration Rights
Agreement.](4)
Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 13, 1994.
The Company shall pay interest on overdue
principal and premium, if any, and interest on overdue installments of
interest, to the extent lawful, at a rate per annum that is 2% in excess of the
rate otherwise payable.
---------------
(2) Include only for Securities other than Exchange Securities
issued in an exchange offer completed on or prior to November
14, 1994.
(3) Include only for Exchange Securities issued in an exchange
offer completed on or prior to November 14, 1994.
(4) Include only for Securities other than Exchange Securities
issued in an exchange offer completed on or before November
14, 1994.
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<PAGE> 113
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
The Company will pay interest (except defaulted
interest) on the principal amount of the Notes as provided above on each May 1
and November 1 to the persons who are Holders (as reflected in the Security
Register at the close of business on the April 15 and October 15 immediately
preceding the Interest Payment Date), in each case, even if the Note is
cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after May 1, 2002.
The Company will pay principal, premium, if
any, and as provided above, interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal, premium, if any, and interest by its
check payable in such money. It may mail an interest check to a Holder's
registered address (as reflected in the Security Register). If a payment date
is a date other than a Business Day at a place of payment, payment may be made
at that place on the next succeeding day that is a Business Day and no interest
shall accrue with respect to such payment for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as
authenticating agent, Paying Agent and Registrar. The Company may change any
authenticating agent, Paying Agent or Registrar without notice to the Holders
in accordance with the Indenture. The Company, any Subsidiary of the Company
or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar; provided, however, that neither the Company, a Subsidiary of the
Company nor an Affiliate of any of them shall act as Paying Agent in connection
with the defeasance of the Notes or the discharge of the Indenture under
Article Eight thereof.
4. Indenture; Limitations.
The Company issued the Notes under an
Indenture dated as of May 13, 1994 (the "Indenture"), between the Company,
each of the Guarantors and United States Trust Company of New York, as trustee
(the "Trustee").
A-5
<PAGE> 114
Capitalized terms herein are used as defined in the Indenture unless otherwise
indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the
terms of this Note and the terms of the Indenture, the terms of the Indenture
shall control.
The Notes are general unsecured obligations of
the Company. The Indenture limits the original aggregate principal amount of
the Notes to $100,000,000.
5. Optional Redemption.
The Notes will be redeemable, at the election
of the Company, in whole or in part, at any time and from time to time on or
after May 1, 1999 and prior to maturity at the following Redemption Prices
(expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date), if redeemed
during the 12-month period commencing May 1 of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1999 106.375%
2000 103.188
2001 and thereafter 100.000
</TABLE>
In addition, at any time prior to May 1, 1997,
the Company may redeem up to an aggregate of 35% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at any time as a whole or from time to time in part, at a Redemption
Price (expressed as a percentage of principal amount) of 112.75%, plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date).
Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Security
Register. Notes in original
A-6
<PAGE> 115
denominations larger than $1,000 may be redeemed in part. On and after the
Redemption Date, interest ceases to accrue on Notes or portions of Notes called
for redemption, unless the Company defaults in the payment of the Redemption
Price.
6. Repurchase at Option of the Holder.
Upon the occurrence of any Change of Control,
each Holder shall have the right to require the repurchase of its Notes by the
Company in cash pursuant to the offer described in the Indenture at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest (if any) to the date of purchase (the "Change of Control Payment").
If the Company's Consolidated Tangible Net
Worth at the end of each of any two consecutive fiscal quarters (the last day
of such second fiscal quarter being referred to as the "Deficiency Date") is
less than $37 million, then the Company shall make the offer described in the
Indenture to acquire Notes, for cash, in an aggregate principal amount equal to
10% of the original aggregate principal amount of the Notes at a purchase price
equal to 100% of the principal amount thereof plus accrued and unpaid interest
(if any) to the date of purchase (a "Net Worth Payment"). In the event that
the aggregate principal amount of Notes surrendered by Holders exceeds the Net
Worth Amount, the Company will select the Notes to be purchased on a pro rata
basis from all Notes so surrendered, with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, will be purchased.
When the aggregate amount of Excess Proceeds
from Asset Sales exceeds $5 million the Company shall make the offer described
in the Indenture to acquire, on a pro rata basis from each Holder, the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds at a
purchase price of 100% of the principal amount thereof plus accrued interest,
if any, to the date of purchase (the "Excess Proceeds Payment").
Each Holder of Notes that are subject to an
offer to purchase will receive a notice of such offer prior to the Change of
Control Payment Date, Net Worth Payment Date or Excess Proceeds Payment Date,
as the case may be, mailed to such Holder at its last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may
be sold to the Company in part. On and after a Change of Control Payment Date,
a Net Worth Payment Date or an Excess Proceeds Payment Date, as the case may
be, interest ceases to accrue on Notes or portions of Notes surrendered for
purchase
A-7
<PAGE> 116
by the Company, unless the Company defaults in the payment of the Change of
Control Payment, Net Worth Payment or Excess Proceeds Payment, as the case may
be.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without
coupons in denominations of $1,000 of principal amount and multiples of $1,000
in excess thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any transfer tax or similar governmental charge required by law or permitted by
the Indenture. The Registrar need not register the transfer or exchange of any
Notes selected for redemption. Also, it need not register the transfer or
exchange of any Notes for a period of 15 days before a selection of Notes to be
redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a
Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium,
if any, or interest remains unclaimed for two years, the Trustee and the Paying
Agent will pay the money back to the Company at its request. After that,
Holders entitled to the money must look to the Company for payment, unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money
or U.S. Government Obligations sufficient to pay the then outstanding principal
of, premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company will be discharged from certain covenants set
forth in the Indenture.
A-8
<PAGE> 117
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented with the written consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
then outstanding, and any existing default or compliance with any provision may
be waived with the consent of the Holders of not less than a majority in
principal amount of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially adversely affect the
rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on
the ability of the Company and its Restricted Subsidiaries, among other things,
to Incur additional Indebtedness, make Restricted Payments, create certain
Liens, create restrictions on the ability of Restricted Subsidiaries to pay
dividends or make other payments to the Company, engage in transactions with
Affiliates and merge, consolidate or transfer substantially all of its assets.
Within 45 days after the end of each fiscal quarter (120 days after the end of
the last fiscal quarter of each year), the Company must report to the Trustee
on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes
all the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of
Default" under the Indenture: (a) default in the payment of principal of (or
premium, if any, on) any Note when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise; (b) default in the
payment of interest on any Note when the same becomes due and payable, and such
default continues for a period of 30 days; (c) the Company or any Guarantor
defaults in the performance of or breaches any other covenant or agreement of
the Company or such Guarantor in the Indenture or under the Notes and such
default or breach continues for a period of 60 consecutive days after written
A-9
<PAGE> 118
notice to the Company by the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Notes; (d) there occurs with respect to any
issue or issues of Indebtedness (other than Non-Recourse Indebtedness) of the
Company or any of its Significant Subsidiaries having an outstanding principal
amount of $5 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be created,
(A) an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and/or (B) the
failure to make any payment in respect of such Indebtedness when due or during
any applicable grace period and the continuation of such failure for five
Business Days; provided, however, that the default which exists as of the
Closing Date, as a result of the failure to pay principal and interest, under
the note dated March 14, 1989, payable to West Coast Land Fund L.P. shall not
constitute an Event of Default under clause (d) of Section 6.01 of the
Indenture; (e) one or more final judgments or orders for the payment of money
in excess of $3 million in the aggregate shall be rendered against the Company
or any of its Significant Subsidiaries and such final judgments or orders,
shall not have been satisfied, stayed, annulled or rescinded within 60 days
after being entered; (f) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property and assets of the
Company or any of its Significant Subsidiaries or (C) the winding up or
liquidation of the affairs of the Company or any of its Significant
Subsidiaries and, in each case, such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; (g) the Company or any
Significant Subsidiary of the Company (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property and assets of the Company or any of its
Significant Subsidiaries or (C) effects any general assignment for the benefit
of creditors; (h) any Restricted Joint Venture that is not a Guarantor provides
a Guarantee of Indebtedness of any other Person; or (i) any Subsidiary
Guarantee ceases to be in full force and effect (other than in accordance with
the
A-10
<PAGE> 119
terms of the Indenture) or is declared null and void and unenforceable or found
to be invalid or any Guarantor denies its liability under its Subsidiary
Guarantee (other than by reason of release of a Guarantor from its Subsidiary
Guarantee in accordance with the terms of the Indenture).
If an Event of Default, as defined in the
Indenture (other than an Event of Default specified in clause (f) or (g)
above), occurs and is continuing, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Notes then outstanding, by written
notice to the Company (and to the Trustees if such notice is given by the
Holders), may declare all the Notes to be due and payable. If an Event of
Default under clause (f) or (g) above occurs and is continuing, the Notes
automatically become due and payable. Holders may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Notes.
Subject to certain limitations, Holders of not less than a majority in
principal amount of the outstanding Notes may direct the Trustee in its
exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from and
perform services for the Company or its Affiliates and may otherwise deal with
the Company or its Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator or any past, present or future
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes 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 Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee
or authenticating agent signs the certificate of authentication on the other
side of this Note.
A-11
<PAGE> 120
18. Abbreviations.
Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
The Company will furnish to any Holder upon
written request and without charge a copy of the Indenture. Requests may be
made to J.M. Peters Company, Inc., 3501 Jamboree Road, Suite 200, Newport
Beach, California 92660, Attention: Chief Financial Officer.
A-12
<PAGE> 121
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered
holder hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
______________________________________________________________
______________________________________________________________
Please print or typewrite name and address including zip code of assignee
______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
______________________________________________________________
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Note
occurring prior to the date which is the earlier of (i) the date of an
effective Registration or (ii) three years after the later of the original
issuance of this Note or the last date on which this Note was held by an
Affiliate of the Company, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
A-13
<PAGE> 122
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date: _____________________ _______________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it
is purchasing this Note for its own account or an account with respect to which
it exercises sole investment discretion and that each of it and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act of 1933, as amended, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_____________________ ______________________________________
NOTICE: To be executed by an executive
officer
A-14
<PAGE> 123
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the
Company pursuant to Section 4.06 or Section 4.10 or Section 4.11 of the
Indenture, check the Box: [ ].
If you wish to have a portion of this Note
purchased by the Company pursuant to Section 4.06 or Section 4.10 or Section
4.11 of the Indenture, state the amount (in principal amount):
$____________.
Date: ____________________
Your Signature: ____________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________
<PAGE> 124
EXHIBIT B
Form of Certificate
___________, _______
United States Trust Company of
New York, as Trustee
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company")
12-3/4% Senior Notes due 2002
(the "Securities")
Dear Ladies and Gentlemen:
This letter relates to U.S.
$___________________ principal amount of Securities represented by the attached
note (the "Legended Note") which bears a legend outlining restrictions upon
transfer of the Legended Note. Pursuant to Section 2.01 of the Indenture (the
"Indenture") dated as of May 13, 1994 relating to the Securities, we hereby
certify that (1) we are a person outside the United States to whom the
Securities could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended, and (2) the
distribution of the Securities has been completed and the restricted period (as
defined in Regulation S) with respect to the offer and sale of the Securities
have been terminated. Accordingly, you are hereby requested to exchange the
Legended Note for an unlegended Note representing an identical principal amount
of Securities, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ______________________
Authorized Signature
<PAGE> 125
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
_____________, ______
United States Trust Company of
New York, as Trustee
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company")
12-3/4% Senior Notes due 2002
(the "Securities")
Dear Ladies and Gentlemen:
In connection with our proposed purchase of
$_____________ aggregate principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer
of the Securities is subject to certain restrictions
and conditions set forth in the Indenture dated as of
May 13, 1994 relating to the Securities (the
"Indenture") and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the
Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
2. We understand that the offer and sale of
the Securities have not been registered under the
Securities Act, and that the Securities may not be
offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of
any investor account for which we are purchasing the
Securities to offer, sell or otherwise transfer such
Securities prior to the date which is three years after
the later of the date of original issue and the last
date on which the Company or any affiliate of the
Company was the owner of such Securities, or any
predecessor thereto (the "Resale Restriction
Termination Date") only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A
under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional
"accredited
C-2
<PAGE> 126
investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to you a signed letter
substantially in the form of this letter, (D) outside
the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to
the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F)
pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to
any person purchasing any of the Securities from us a
notice advising such purchaser that resales of the
Securities are restricted as stated herein. The
foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date.
3. We understand that, on any proposed resale
of any Securities, we will be required to furnish to
you and the Company such certifications, legal opinions
and other information as you and the Company may
reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further
understand that the Securities purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Securities purchased
by us for our own account or for one or more accounts
(each of which is an institutional "accredited
investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:___________________________
Authorized Signature
<PAGE> 127
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
___________, ____
United States Trust Company of
New York, as Trustee
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company")
12-3/4% Senior Notes due 2002
(the "Securities")
Dear Sirs:
In connection with our proposed sale of
$_________________ aggregate principal amount of the Securities, we confirm
that such sale has been effected pursuant to and in accordance with Regulation
S under the Securities Act of 1933, as amended, and, accordingly, we represent
that:
(1) the offer of the Securities was not
made to a person in the United States;
(2) either (a) at the time the buy order
was originated, the transferee was outside the United
States or we and any person acting on our behalf
reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in,
on or through the facilities of a designated off- shore
securities market and neither we nor any person acting
on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been
made by us in the United States in contravention of the
requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan
or scheme to evade the registration requirements of the
U.S. Securities Act of 1933.
D-2
<PAGE> 128
In addition, if the sale is made during a
restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of
Regulation S are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1),
as the case may be.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ________________________
Authorized Signature
<PAGE> 1
Exhibit 10.16
EXECUTION COPY
WARRANT AGREEMENT
between
J.M. PETERS COMPANY, INC.
and
UNITED STATES TRUST
COMPANY OF NEW YORK,
Warrant Agent
_______________________________
Dated as of May 13, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Certain Definitions.......................... 1
ARTICLE II Original Issue of Warrants.................. 6
Section 2.1. Form of Warrant Certificates........ 6
Section 2.2. Restrictive Legends................. 7
Section 2.3. Execution and Delivery of
Warrant Certificates................ 9
ARTICLE III Exercise Price; Exercise and
Repurchase of Warrants.............. 10
Section 3.1. Exercise Price...................... 10
Section 3.2. Exercise; Restrictions on
Exercise............................ 10
Section 3.3. Method of Exercise; Payment of
Exercise Price...................... 11
Section 3.4. Repurchase Offers................... 12
ARTICLE IV Adjustments................................. 17
Section 4.1. Adjustments......................... 17
Section 4.2. Notice of Adjustment................ 24
Section 4.3. Statement on Warrants............... 25
Section 4.4. Notice of Consolidation,
Merger, Etc......................... 25
Section 4.5. Fractional Interests................ 26
ARTICLE V Decrease in Exercise Price................... 26
ARTICLE VI Loss or Mutilation.......................... 27
ARTICLE VII Reservation, Authorization and
Registration of Common Stock....... 28
Section 7.1. Reservation and Authorization....... 28
Section 7.2. Registration........................ 28
ARTICLE VIII Warrant Transfer Books; Restrictions
on Transfer......................... 29
Section 8.1. Transfer and Exchange............... 29
Section 8.2. Book-Entry Provisions for
U.S. Global Security................ 30
</TABLE>
<PAGE> 3
-ii-
<TABLE>
<S> <C>
Section 8.3. Special Transfer Provisions......... 31
Section 8.4. Surrender of Warrant Certificates... 37
ARTICLE IX Warrant Holders............................. 37
Section 9.1. Warrant Holder Not Deemed a
Stockholder......................... 37
Section 9.2. Right of Action..................... 37
ARTICLE X Remedies..................................... 38
Section 10.1. Defaults........................... 38
Section 10.2. Payment Obligations................ 38
Section 10.3. Remedies; No Waiver................ 38
ARTICLE XI The Warrant Agent........................... 39
Section 11.1. Duties and Liabilities............. 39
Section 11.2. Right to Consult Counsel........... 40
Section 11.3. Compensation; Indemnification...... 41
Section 11.4. No Restrictions on Actions......... 41
Section 11.5. Discharge or Removal;
Replacement Warrant Agent.......... 41
Section 11.6. Successor Warrant Agent............ 42
ARTICLE XII Miscellaneous.............................. 43
Section 12.1. Money Deposited with the
Warrant Agent...................... 43
Section 12.2. Payment of Taxes................... 43
Section 12.3. No Merger, Consolidation or
Sale of Assets of the Company...... 44
Section 12.4. Reports to Holders................. 44
Section 12.5. Notices............................ 44
Section 12.6. Applicable Law..................... 45
Section 12.7. Binding Effect..................... 45
Section 12.8. Counterparts....................... 45
Section 12.9. Amendments......................... 45
Section 12.10. Headings........................... 46
Section 12.11. Common Stock Legend................ 46
</TABLE>
<PAGE> 4
-iii-
<TABLE>
<S> <C>
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE
EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
APPENDIX A LIST OF FINANCIAL EXPERTS
</TABLE>
<PAGE> 5
WARRANT AGREEMENT
AGREEMENT dated as of May 13, 1994 (this "Agreement") between
J.M. Peters Company, Inc., a Delaware corporation (the "Company"), and United
States Trust Company of New York, a New York banking corporation, as warrant
agent (the "Warrant Agent").
Pursuant to the terms of a Placement Agreement dated as of May
6, 1994 between the Company and Morgan Stanley & Co. Incorporated, as
Purchaser (the "Placement Agreement"), the Company has agreed to issue and sell
10,000 units (the "Units"), each Unit consisting of $10,000 principal amount of
12-3/4% Senior Notes due 2002 (the "Notes") to be issued pursuant to the
provisions of an Indenture dated as of May 13, 1994 between the Company and
United States Trust Company of New York, as trustee, and 79 warrants (each, a
"Warrant") of the Company, each Warrant entitling the registered owner thereof,
subject to the terms and conditions set forth herein, to purchase one share of
Common Stock, par value $.10 per share, of the Company (the "Common Stock") at
an initial purchase price of $3.30 per share. The Notes and the Warrants
included in each Unit will become separately transferable upon the earlier to
occur of (i) November 14, 1994, or (ii) the close of business upon the
commencement of an exchange offer (the "Exchange Offer") or the effectiveness
of a shelf registration statement (the "Shelf Registration Statement") relating
to the Notes.
In consideration of the foregoing and of the agreements
contained in the Placement Agreement and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the holders thereof (the "Holders"), the Company
and the Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" of any Person means any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control", when
used with respect to any 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
<PAGE> 6
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Members" has the meaning specified in Section 8.2.
"Amendment" has the meaning specified in Section 7.1.
"Business Day" means any day which is not a Saturday, a
Sunday, or any other day on which banking institutions are authorized or
required to be closed in the State of New York or the state in which the
principal corporate trust office of the Warrant Agent is located.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company and any
other capital stock of the Company into which such common stock may be
converted or reclassified or that may be issued in respect of, in exchange for,
or in substitution of, such common stock by reason of any stock splits, stock
dividends, distributions, mergers, consolidations or other like events.
"Company" has the meaning specified in the preamble to this
Agreement.
"CPH" means Capital Pacific Homes, Inc., a Delaware
corporation and an Affiliate of the Company.
"Current Market Value" has the meaning specified in Section
4.1(f).
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Default" has the meaning specified in Article X.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" has the meaning specified in the preamble to
this Agreement.
"Exercise Date" has the meaning specified in Section 3.2.
"Exercise Price" has the meaning specified in Section 3.1.
2
<PAGE> 7
"Expiration Date" means May 1, 2002.
"Final Surrender Time" has the meaning specified in Section
3.4(b).
"Financial Expert" means one of the Persons listed in Appendix
A hereto, all of which are nationally recognized investment banking firms.
"Holders" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert which
does not (or whose directors, executive officers or 5% stockholders do not)
have a direct or indirect financial interest in the Company or any of its
subsidiaries, which has not been for at least five years, and, at the time it
is called upon to give independent financial advice to the Company, is not (and
none of its directors, executive officers or 5% stockholders is) a promoter,
director, or officer of the Company or any of its subsidiaries. The
Independent Financial Expert may be compensated and indemnified by the Company
for opinions or services it provides as an Independent Financial Expert.
"Merger" means the merger of CPH with and into the Company
required to be effected pursuant to the Indenture under which the Notes will be
issued.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Regulation S.
"Notes" has the meaning specified in the recitals to this
Agreement.
"Notice Date" has the meaning specified in Section 3.4(b).
"Offshore Securities Exchange Date" has the meaning specified
in Section 2.1.
"Offer Notice" has the meaning specified in Section 3.4(f).
"Permanent Offshore Physical Securities" has the meaning
specified in Section 2.1.
3
<PAGE> 8
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Physical Securities" has the meaning specified in Section 2.1.
"Placement Agreement" has the meaning specified in the
recitals to this Agreement.
"Private Placement Legend" means the legend initially set
forth on the Warrant Certificates in the form set forth in Section 2.1.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Warrant Registration
Rights Agreement dated as of May 13, 1994 between the Company and Morgan
Stanley & Co. Incorporated, and certain permitted assigns specified therein,
with respect to the registration of the Warrants and the shares of Common Stock
issuable upon the exercise of the Warrants.
"Regulation S" means Regulation S under the Securities Act.
"Relevant Value" means the value of the Warrants as set forth
in the Value Report in accordance with Section 3.4(d).
"Repurchase Event" means, and shall be deemed to occur on the
earliest of any date prior to the Expiration Date when the Company consolidates
with, merges (other than in the Merger) into or with (but only where holders of
the Common Stock receive consideration in exchange for all or part of such
shares of Common Stock), or sells all or substantially all of its assets to,
another Person which does not have a class of equity securities registered
under the Exchange Act or a wholly owned subsidiary of such Person, if the
consideration for such transaction does not consist solely of cash or such
merger or consolidation is not effected solely for the purpose of changing the
Company's state of incorporation.
"Repurchase Notice" has the meaning specified in Section
3.4(a).
4
<PAGE> 9
"Repurchase Obligation" has the meaning specified in Section
10.2.
"Repurchase Offer" means the Company's offer to repurchase
Warrants in accordance with Section 3.4.
"Repurchase Price" means the amount of cash payable in respect
of Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d).
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the close of business upon the earlier
to occur of (i) November 14, 1994 or (ii) the date of the commencement of the
Exchange Offer or the effectiveness of the Shelf Registration Statement
relating to the Notes.
"Shelf Registration Statement" has the meaning specified in
the preamble to this Agreement.
"Temporary Offshore Physical Securities" has the meaning
specified in Section 2.1.
"Units" has the meaning specified in the preamble to this
Agreement.
"U.S. Global Security" has the meaning specified in Section
2.1.
"U.S. Physical Securities" has the meaning specified in
Section 2.1.
"Valuation Date" means the date five Business Days prior to
the Notice Date.
"Value Certificate" has the meaning specified in Section
3.4(d)(ii)(I).
"Value Report" has the meaning specified in Section
3.4(d)(ii)(II).
"Warrant" has the meaning specified in the recitals to this
Agreement.
5
<PAGE> 10
"Warrant Agent" has the meaning specified in the preamble to
this Agreement.
"Warrant Certificate" has the meaning specified in Section 2.1.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates
representing the Warrants (the "Warrant Certificates") shall be substantially
in the form attached hereto as Exhibit A, shall be dated the date on which
countersigned by the Warrant Agent and shall have such insertions as are
appropriate or required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be
issued initially in the form of a single permanent global Warrant Certificate
in registered form, substantially in the form set forth in Exhibit A (the "U.S.
Global Security"), deposited with the Warrant Agent, as custodian for the
Depositary, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. The aggregate number of Warrants represented by the
U.S. Global Security may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary or its nominee, as hereinafter provided.
Warrants offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of temporary Warrant
Certificates in registered form, substantially in the form set forth in Exhibit
A (the "Temporary Offshore Physical Securities"). At any time following the
later of completion of the distribution of the Warrants and the termination of
the "restricted period" (as defined in Regulation S) with respect to the offer
and sale of the Warrants (the "Offshore Securities Exchange Date"), upon
receipt by the Trustee and the Company of a certificate substantially in the
6
<PAGE> 11
form of Exhibit B hereto, the Company shall execute, and the Warrant Agent
shall countersign and deliver, one or more permanent certificated Warrants in
registered form substantially in the form set forth in Exhibit A (the
"Permanent Offshore Physical Securities"), in exchange for the surrender of
Temporary Offshore Physical Securities of like tenor and amount.
Warrants offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent Warrant
Certificates in registered form in substantially the form set forth in Exhibit
A (the "U.S. Physical Securities").
The Temporary Offshore Physical Securities, the Permanent
Offshore Physical Securities and the U.S. Physical Securities are sometimes
collectively herein referred to as the "Physical Securities".
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) Each Warrant
Certificate shall bear the following legend on the face thereof:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or
(7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS WARRANT IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER SUCH WARRANT AT ANY TIME,
OR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT WITHIN THREE YEARS OF THE LATER OF THE EXERCISE
OF THE WARRANT OR THE LAST DATE ON WHICH SUCH COMMON
7
<PAGE> 12
STOCK WAS HELD BY AN AFFILIATE OF THE COMPANY, EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) WITH
RESPECT TO THE WARRANT ONLY, INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE WARRANT
AGENT OR REGISTRAR FOR THE COMMON STOCK A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
WARRANT AND THE COMMON STOCK (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE WARRANT AGENT), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS WARRANT IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OR EXERCISE OF THIS
WARRANT, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER OR NATURE OF THE HOLDER IN CONNECTION
WITH AN EXERCISE AND SUBMIT THIS CERTIFICATE TO THE
WARRANT AGENT. IF THE PROPOSED TRANSFEREE OR EXERCISOR
IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER OR EXERCISE, FURNISH TO
THE WARRANT AGENT, THE REGISTRAR AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER OR EXERCISE IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
WARRANT AGENT MAY REFUSE TO REGISTER ANY TRANSFER OF
THIS WARRANT IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) The U.S. Global Security shall also bear
the following legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY TO THE COMPANY OR THE WARRANT AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR REPURCHASE, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
8
<PAGE> 13
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE VIII OF THE WARRANT AGREEMENT.
(c) Prior to the Separation Date, each Warrant
Certificate shall bear the following legend on the face thereof:
THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $10,000.00
PRINCIPAL AMOUNT OF 12-3/4% SENIOR NOTES DUE 2002 OF
THE J.M. PETERS COMPANY, INC. AND 79 WARRANTS. PRIOR
TO THE CLOSE OF BUSINESS UPON THE EARLIER TO OCCUR OF
(i) NOVEMBER 14, 1994 AND (ii) THE COMMENCEMENT OF AN
EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF
REGISTRATION STATEMENT RELATING TO SUCH NOTES, THE
WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES
ISSUED BY THE J.M. PETERS COMPANY, INC. IN CONNECTION
HEREWITH.
Section 2.3. Execution and Delivery of Warrant
Certificates. Warrant Certificates evidencing Warrants to purchase initially
an aggregate of up to 790,000 shares of Common Stock may be executed, on or
after the date of this Agreement, by the Company and delivered to the Warrant
Agent for countersignature, and the Warrant Agent shall thereupon countersign
and deliver such Warrant Certificates upon the order and at the direction of
the Company to the purchasers thereof on the date of issuance. The Warrant
Agent is hereby authorized to countersign and deliver Warrant Certificates as
required by this
9
<PAGE> 14
Section 2.3 or by Section 3.3, Section 3.4, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on
behalf of the Company by its Chairman of the Board, Chief Executive Officer,
President or a Vice President, either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company whose signature shall have
been placed upon any of the Warrant Certificates shall cease to be such officer
of the Company before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates may, nevertheless, be countersigned
by the Warrant Agent and issued and delivered with the same force and effect as
though such person had not ceased to be such officer of the Company.
ARTICLE III
EXERCISE PRICE; EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant
Certificate shall, when countersigned by the Warrant Agent, entitle the Holder
thereof, subject to the provisions of this Agreement, to purchase one share of
Common Stock for each Warrant represented thereby at a purchase price per share
of Common Stock (the "Exercise Price") of $3.30, subject to adjustment as
provided in Section 4.1 and Article V.
Section 3.2. Exercise; Restrictions on
Exercise. At any time after the later of (a) the date on which the Certificate
of Incorporation of the Company is amended as provided in Section 7.1 hereof,
or (b) November 14, 1995 (the later of such dates being referred to herein as
the "Exercise Date"), and prior to 5:00 p.m., New York City time, on the
Expiration Date, all outstanding Warrants may be exercised on any Business Day.
Any Warrants not exercised by 5:00 p.m., New York City time, on the Expiration
Date, shall expire and all rights of the Holders of such Warrants shall
terminate; provided, however, that the Warrants may expire and all rights of
the Holders of such Warrants may terminate pursuant to Section 4.1(i)(ii) in
the event the Company merges (other than in the Merger) or consolidates with or
sells all or substantially all of its property and assets to a Person if the
consideration payable to holders of Common Stock in exchange for
10
<PAGE> 15
their Common Stock in connection with such merger, consolidation or sale
consists solely of cash or in the event of the dissolution, liquidation or
winding up of the Company.
Section 3.3. Method of Exercise; Payment of
Exercise Price. (a) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, the Holder thereof must surrender for
exercise the Warrant Certificate to the Warrant Agent at its corporate trust
office set forth in Section 12.5 herein, with the Subscription Form set forth
in the Warrant Certificate duly executed, together with payment in full of the
Exercise Price then in effect for each share of Common Stock or other
securities or property issuable upon exercise of the Warrants as to which a
Warrant is exercised; such payment may be made in cash or by certified or
official bank or bank cashier's check payable to the order of the Company. All
payments received upon exercise of Warrants shall be delivered to the Company
by the Warrant Agent as instructed in writing by the Company. If less than all
the Warrants represented by a Warrant Certificate are exercised, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not exercised shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same. Upon
exercise of any Warrants following surrender of a Warrant Certificate in
conformity with the foregoing provisions, the Warrant Agent shall cause the
Company to transfer promptly to or upon the written order of the Holder of
such Warrant Certificate appropriate evidence of ownership of any shares of
Common Stock or other securities or property (including money) to which it is
entitled, registered or otherwise placed in such name or names as may be
directed in writing by the Holder, and shall deliver such evidence of ownership
and any other securities or property (including money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 4.5; provided that the Holder of
such Warrant shall be responsible for the payment of any transfer taxes
required as the result of any change in ownership of such Warrants. Upon
exercise of a Warrant or Warrants, the Warrant Agent is hereby authorized and
directed to requisition from any transfer agent of the Common Stock (and all
such transfer agents are hereby irrevocably authorized to comply with all such
requests) certificates (bearing the legend set forth in Section 12.11 hereof
unless the Company and the Holder otherwise agree) for the necessary number of
shares to which the Holder of the Warrant or Warrants may be entitled. A
Warrant
11
<PAGE> 16
shall be deemed to have been exercised immediately prior to the close of
business on the date of the surrender for exercise, as provided above, of the
Warrant Certificate representing such Warrant and, for all purposes of this
Agreement, the Person entitled to receive any shares of Common Stock or other
securities or property deliverable upon such exercise shall, as between such
Person and the Company, be deemed to be the Holder of such shares of Common
Stock or other securities or property of record as of the close of business on
such date and shall be entitled to receive, and the Warrant Agent shall deliver
to such Person, any money, shares of Common Stock or other securities or
property to which he would have been entitled had he been the record holder on
such date. Without limiting the foregoing, if, at the date referred to above,
the transfer books for the shares of Common Stock or other securities
purchasable upon the exercise of the Warrants shall be closed, the certificates
for the shares of Common Stock or securities in respect of which such Warrants
are then exercised shall be issuable as of the date on which such books shall
next be opened, and until such date the Company shall be under no duty to
deliver any certificate for such shares of Common Stock or other securities;
provided further that the transfer books or records, unless required by law,
shall not be closed at any one time for a period longer than 20 days.
(b) In addition to the requirements of
paragraph (a) above, in connection with any exercise of Warrants represented by
Permanent Offshore Physical Securities, the Holder thereof shall be required to
provide written certification to the Warrant Agent that (i) (x) it is not a
U.S. person within the meaning of Regulation S and the Warrant is not being
exercised on behalf of a U.S. person within the meaning of Regulation S or (y)
a written opinion of counsel to the effect that the Warrant and the Common
Stock issuable upon exercise thereof have been registered under the Securities
Act or are exempt from registration thereunder and (ii) if an opinion is not
being furnished, that the Holder exercising the Warrant is located outside the
United States at the time of the exercise thereof.
Section 3.4. Repurchase Offers. (a) Notice
of Repurchase Event. Within five Business Days following the occurrence of a
Repurchase Event, the Company shall give notice (a "Repurchase Notice") to all
Holders of the Warrants that such event has occurred and shall provide a copy
of such notice to the Warrant Agent.
(b) Repurchase Offers Generally.
Following the occurrence of a Repurchase Event, the Company shall offer to
purchase for cash all outstanding Warrants pursuant to the
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<PAGE> 17
provisions of this Section 3.4 (each a "Repurchase Offer"). The Company shall
give notice of a Repurchase Offer in accordance with Section 3.4(f). The date
on which the Company gives any such notice is referred to as a "Notice Date".
Each Repurchase Offer shall commence on the Notice Date for such offer and
shall expire at 5:00 p.m., New York City time, on the date (the "Final
Surrender Time") at least 30 but not more than 60 calendar days after such
Notice Date. Once a Repurchase Event has occurred, there is no limit on the
number of Repurchase Offers the Company may make.
(c) Repurchase Offers. (i) In any
Repurchase Offer, the Company shall offer to purchase for cash at the
Repurchase Price for such Repurchase Offer all Warrants outstanding on the
Notice Date for such offer that are properly tendered to the Warrant Agent on
or prior to the Final Surrender Time for such Repurchase Offer.
(ii) Each Holder may, but shall not
be obligated to, accept such Repurchase Offer, by tendering to the Warrant
Agent, on or prior to the Final Surrender Time for such Repurchase Offer, the
Warrant Certificates evidencing the Warrants such Holder desires to have
repurchased in such offer, together with a completed Certificate for Surrender
in substantially the form attached to the Warrant Certificate for Repurchase
Offer referred to in Section 3.4(f). A Holder may withdraw all or a portion of
the Warrants tendered to the Warrant Agent at any time prior to the Final
Surrender Time for such Repurchase Offer. If less than all the Warrants
represented by a Warrant Certificate shall be tendered, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not tendered shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same; provided
that the Holder of such Warrants shall be responsible for the payment of any
transfer taxes required as the result of any change in ownership of such
Warrants.
(d) Repurchase Price. (i) The purchase
price (the "Repurchase Price") for each Warrant properly tendered to the
Warrant Agent pursuant to a Repurchase Offer shall be equal to the value (the
"Relevant Value") on the Valuation Date of the Common Stock and other
securities or property of the Company which would have been delivered upon
exercise of Warrants had the Warrants been exercised (regardless of whether the
Warrants
13
<PAGE> 18
are then exercisable), less the Exercise Price then in effect.
(ii) The Relevant Value of the
Common Stock and other securities or property issuable upon exercise of all the
Warrants, on any Valuation Date shall be:
(I) (A) If the Common Stock (or
other securities) is registered under the Exchange Act,
deemed to be the average of the daily market prices of
the Common Stock (or other securities) for the 20
consecutive trading days immediately preceding such
Valuation Date or, (B) if the Common Stock (or other
securities) has been registered under the Exchange Act
for less than 20 consecutive trading days before such
date, then the average of the daily market prices for
all of the trading days before such date for which
daily market prices are available, in the case of each
of (A) and (B), as certified to the Warrant Agent by
the President, any Vice President or the Chief
Financial Officer of the Company (the "Value
Certificate"). The market price for each such trading
day shall be: (A) in the case of a security listed or
admitted to trading on any national securities
exchange, the closing sales price, regular way, on such
day, or if no sale takes place on such day, the average
of the closing bid and asked prices on such day, (B) in
the case of a security not then listed or admitted to
trading on any national securities exchange, the last
reported sale price on such day, or if no sale takes
place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable
quotation source designated by the Company, (C) in the
case of a security not then listed or admitted to
trading on any national securities exchange and as to
which no such reported sale price or bid and asked
prices are available, the average of the reported high
bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general
circulation in the Borough of Manhattan, City and State
of New York customarily published on each Business Day,
designated by the Company, or, if there shall be no bid
and asked prices on such day, the average of the high
bid and low asked prices, as so reported, on the most
recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and
(D) if there are no bid and asked prices reported
during the 30 days prior to the date in question, the
Relevant Value of the security shall be determined as
if the security were not registered under the Exchange
Act; or
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(II) If the Common Stock (or
other securities) is not registered under the Exchange
Act or if the value cannot be computed under clause (I)
above, equal to the value set forth in the Value Report
(as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board
of Directors in accordance with Section 3.4(e), and
retained on customary terms and conditions, using one
or more valuation methods that the Independent
Financial Expert, in its best professional judgment,
determines to be most appropriate but without giving
effect to any discount for lack of liquidity, the fact
that the Company has no class of equity securities
registered under the Exchange Act, or the fact that the
shares of Common Stock and other securities or property
issuable upon exercise of the Warrants represent a
minority interest in the Company. The Company shall
cause the Independent Financial Expert to deliver to
the Company, with a copy to the Warrant Agent, within
45 days of the appointment of the Independent Financial
Expert in accordance with Section 3.4(e), a value
report (the "Value Report") stating the Relevant Value
of the Common Stock and other securities or property of
the Company, if any, being valued as of the Valuation
Date and containing a brief statement as to the nature
and scope of the examination or investigation upon
which the determination of Relevant Value was made.
The Independent Financial Expert shall consult with
management of the Company in order to allow management
to comment on the proposed Relevant Value prior to
delivery to the Company of any Value Report of the
Independent Financial Expert.
The Warrant Agent shall have no duty to determine the Relevant Value or with
respect to the Value Certificate or the Value Report of any Independent
Financial Expert, except to keep the Value Certificate or Value Report, as the
case may be, on file and available for inspection by the Holders. The
determination as to Relevant Value in accordance with the provisions of this
Section 3.4(d) shall be conclusive on all Persons.
(e) Selection of Independent Financial
Expert. If clause (d)(ii)(II) of this Section 3.4 is applicable, the Board of
Directors of the Company shall select an Independent Financial Expert not more
than five Business Days following a Repurchase Event. Within two Business Days
after such selection of the Independent Financial Expert, the Company shall
deliver to the Warrant Agent a notice setting forth the name of such
Independent Financial Expert.
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(f) Notice of Repurchase Offer. Each
notice of a Repurchase Offer (an "Offer Notice") given by the Company pursuant
to Section 3.4(b): (i) shall be given by the Company directly to all Holders
of the Warrants, with a copy to the Warrant Agent; (ii) shall be given
simultaneously with the Repurchase Notice, or, in the event that the Relevant
Value of the Common Stock or other securities or property issuable upon
exercise of all the Warrants cannot be determined pursuant to Section
3.4(d)(ii)(I), then such Offer Notice shall be given within five Business Days
after the Company receives the Value Report with respect to such offer; (iii)
shall specify (I) the Final Surrender Time for such Repurchase Offer, (II) the
manner in which Warrants may be surrendered to the Warrant Agent for repurchase
by the Company, (III) the Repurchase Price at which the Warrants will be
repurchased by the Company, (IV) the name of the Independent Financial Expert,
if any, whose valuation of the Common Stock and other securities or property
was utilized in connection with determining such Repurchase Price and (V) that
payment of the Repurchase Price will be made by the Warrant Agent and (iv)
shall state that the Warrant Agent shall not at any time be under any duty or
responsibility whatsoever to any Holders with respect to the determination of
the Repurchase Price or the Value Report, if any, of any Independent Financial
Expert, if any. Each such Offer Notice shall be accompanied by a Certificate
for Surrender for Repurchase Offer in substantially the form attached to the
Warrant Certificate and a copy of the Valuation Report, if any.
(g) Payment for Warrants. Upon surrender
for repurchase of any Warrants in conformity with the provisions of this
Section 3.4, the Warrant Agent shall thereupon promptly notify the Company of
such surrender. On or before the Final Surrender Time for any Repurchase
Offer, the Company shall deposit with the Warrant Agent funds sufficient to
make payment in full for all Warrants tendered to the Warrant Agent and not
withdrawn. Deposits by the Company with the Warrant Agent pursuant to the
preceding sentence shall be made in immediately available funds payable to the
order of the Warrant Agent. After receipt of such deposit from the Company,
the Warrant Agent shall make payment, by delivering a check in such amount as
is appropriate, to such Person or Persons as it may be directed in writing by
the Holder surrendering such Warrants, net of any transfer taxes required to be
paid in the event that the check is to be delivered to a Person other than the
Holder.
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(h) Compliance with Laws. Notwithstanding
anything contained in this Section 3.4, if the Company is required to comply
with laws or regulations in connection with making any Repurchase Offer, such
laws or regulations shall also govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price
and the number of shares of Common Stock issuable upon exercise of each
Warrant shall be subject to adjustment from time to time as follows:
(a) Stock Dividends; Stock Splits; Reverse
Stock Splits; Reclassifications. In case the Company
shall (i) pay a dividend or make any other distribution
with respect to its Common Stock in shares of any class
or series of its capital stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock (other than a
reclassification in connection with a merger,
consolidation or other business combination which will
be governed by Section 4.1(i)), the number of shares of
Common Stock purchasable upon exercise of each Warrant
immediately prior to the record date for such dividend
or distribution or the effective date of such
subdivision, or combination or reclassification shall
be adjusted so that the Holder of each Warrant shall
thereafter be entitled to receive the kind and number
of shares of Common Stock or other securities of the
Company which such Holder would have been entitled to
receive after the happening of any of the events
described above had such Warrant been exercised
immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made
pursuant to this Section 4.1(a) shall become effective
immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Rights; Options; Warrants. In case the
Company shall issue rights, options, warrants or
convertible or exchangeable securities (other than a
convertible or exchangeable security subject to Section
4.1(a)) to all holders of its Common Stock, entitling
them to subscribe for or purchase Common Stock at a
price per share which is lower (at the record date for
such issuance) than the then Current
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Market Value per share of Common Stock, the number of
shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding
immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable
securities plus the number of additional shares of
Common Stock offered for subscription or purchase, and
the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or
convertible or exchangeable securities plus the number
of shares which the aggregate offering price of the
total number of shares of Common Stock so offered would
purchase at the then Current Market Value per share of
Common Stock. Such adjustment shall be made whenever
such rights, options, warrants or convertible or
exchangeable securities are issued, and shall become
effective retroactively immediately after the record
date for the determination of shareholders entitled to
receive such rights, options, warrants or convertible
or exchangeable securities.
(c) Issuance of Common Stock at Lower Values.
In case the Company shall sell and issue shares of
Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the
right to subscribe for or purchase shares of Common
Stock (excluding (i) shares, rights, options, warrants
or convertible or exchangeable securities issued in any
of the transactions described in Section 4.1(a) or (b)
above, (ii) shares of Common Stock, issued pursuant to
qualified or nonqualified employee stock option or
employee stock purchase plans of the Company which
options or rights are granted after the date hereof
which in the aggregate are not in excess of 10% of the
fully diluted number of shares of Common Stock
outstanding on the date hereof (as such number of
shares may be adjusted as a result of stock dividends,
stock splits, reverse stock splits or reclassifications
of such Common Stock) and (iii) shares or warrants,
rights, options, or convertible or exchangeable
securities issued as consideration when (A) any
corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the
Company or (B) the Company acquires substantially all
of the assets that constitute a division or line of
business, in the case of each of (A) and (B) in an
arm's-length transaction between the Company and a
Person other than an Affiliate of the Company) at a
price per share
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<PAGE> 23
of Common Stock (determined in the case of such rights,
options, warrants or convertible or exchangeable
securities, by dividing (x) the total amount receivable
by the Company in consideration of the sale and
issuance of such rights, options, warrants or
convertible or exchangeable securities, plus the total
consideration payable to the Company upon exercise,
conversion or exchange thereof, by (y) the total number
of shares of Common Stock covered by such rights,
options, warrants or convertible or exchangeable
securities) that is lower than the Current Market Value
per share of the Common Stock in effect immediately
prior to such sale or issuance, then the number of
shares of Common Stock thereafter purchasable upon the
exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the
date of such sale or issuance and the denominator of
which shall be the number of shares of Common Stock
outstanding immediately prior to such sale or issuance
plus the number of shares of Common Stock which the
aggregate consideration received (determined as
provided below) for such sale or issuance would
purchase at such Current Market Value per share of
Common Stock. For purposes of this Section 4.1(c), the
shares of Common Stock which the holder of any such
rights, options, warrants or convertible or
exchangeable securities shall be entitled to subscribe
for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance
and the consideration received by the Company therefor
shall be deemed to be the consideration received by the
Company for such rights, options, warrants or
convertible or exchangeable securities (without
deducting from such consideration any fees, commissions
or other expenses incurred by the Company in connection
with such sale and issuance), plus the consideration or
premiums stated in such rights, options, warrants or
convertible or exchangeable securities to be paid for
the shares of Common Stock covered thereby. In case
the Company shall sell and issue shares of Common Stock
or rights, options, warrants or convertible or
exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock, for a
consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and
the "consideration received by the Company" for
purposes of the first sentence of this Section 4.1(c),
the Board of Directors of the Company shall determine,
in good faith, the fair value of said property, which
determination shall be evidenced by a resolution of the
Board of Directors of the
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<PAGE> 24
Company. In case the Company shall sell and issue
rights, options, warrants or convertible or
exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock
together with one or more other securities as part of a
unit at a price per unit, then in determining the
"price per share of Common Stock" and the
"consideration received by the Company" for purposes of
the first sentence of this Section 4.1(c), the Board of
Directors of the Company shall determine, in good
faith, the fair value of the rights, options, warrants
or convertible or exchangeable securities then being
sold as part of such unit.
(d) Distributions of Debt, Assets,
Subscription Rights or Convertible Securities. In case
the Company shall fix a record date for the making of a
distribution to all holders of shares of its Common
Stock of evidences of its indebtedness, assets, cash
dividends or distributions (excluding (1) dividends or
distributions referred to in Section 4.1(a) above, (2)
distributions in connection with the dissolution,
liquidation or winding up of the Company which will be
governed by Section 4.1(i)(ii) below and (3) cash
dividends to all holders of Common Stock in an
aggregate amount that, together with the aggregate
amount of all other such cash dividends to all holders
of Common Stock within the 12 months preceding the
record date for such cash dividend as to which no
adjustment has been made pursuant to this paragraph
(d), does not exceed 10% of the product of the Current
Market Value per share of Common Stock on such date of
determination multiplied by the number of shares of
Common Stock outstanding on such date) or securities
(excluding those referred to in Section 4.1(a), Section
4.1(b) or Section 4.1(c) above), then in each case the
number of shares of Common Stock purchasable after such
record date upon the exercise of each Warrant shall be
determined by multiplying the number of shares of
Common Stock purchasable upon the exercise of such
Warrant immediately prior to such record date by a
fraction, the numerator of which shall be the Current
Market Value per share of Common Stock immediately
prior to the record date for such distribution and the
denominator of which shall be the Current Market Value
per share of Common Stock immediately prior to the
record date for such distribution less the then fair
value (as determined in good faith by the Board of
Directors of the Company) of the portion of the assets,
evidence of indebtedness, cash dividends or
distributions or securities so distributed applicable
to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made, and shall
become effective on the date
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<PAGE> 25
of distribution retroactive to the record date for the
determination of shareholders entitled to receive such
distribution.
(e) Expiration of Rights, Options and
Conversion Privileges. Upon the expiration of any
rights, options, warrants or conversion or exchange
privileges that have previously resulted in an
adjustment hereunder, if any thereof shall not have
been exercised, the Exercise Price and the number of
shares of Common Stock issuable upon the exercise of
each Warrant shall, upon such expiration, be readjusted
and shall thereafter, upon any future exercise, be such
as they would have been had they been originally
adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares
of Common Stock so issued were the shares of Common
Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon
such exercise plus the consideration, if any, actually
received by the Company for issuance, sale or grant of
all such rights, options, warrants or conversion or
exchange rights whether or not exercised; provided
further that no such readjustment shall have the effect
of increasing the Exercise Price by an amount, or
decreasing the number of shares issuable upon exercise
of each Warrant by a number, in excess of the amount or
number of the adjustment initially made in respect to
the issuance, sale or grant of such rights, options,
warrants or conversion or exchange rights.
(f) Current Market Value. For the purposes of
any computation under this Article IV, the Current
Market Value per share of Common Stock or of any other
security (herein collectively referred to as a
"security") at any date herein specified shall be:
(i) if the security is not registered under
the Exchange Act, the value of the security (1) most
recently determined as of a date within the six months
preceding such date by an Independent Financial Expert
selected by the Company in accordance with the criteria
for such valuation set out in Section 3.4(d)(ii)(II),
or (2) if no such determination shall have been made
within such six- month period or if the Company so
chooses, determined as of such date by an Independent
Financial Expert selected by the Company in
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accordance with the criteria for such valuation
set out in Section 3.4(d)(ii)(II); provided,
however, that in determining the value of the
Common Stock under Section 4.5, if the
foregoing clause (1) shall not be applicable,
the Current Market Value per share of Common
Stock shall be determined in good faith by the
Board of Directors of the Company, or
(ii) if the security is registered under the
Exchange Act, deemed to be the average of the daily
market prices of the security for the 20 consecutive
trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for
less than 20 consecutive trading days before such date,
then the average of the daily market prices for all of
the trading days before such date for which daily
market prices are available. The market price for each
such trading day shall be: (A) in the case of a
security listed or admitted to trading on any national
securities exchange, the closing sales price, regular
way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed
or admitted to trading on any national securities
exchange, the last reported sale price on such day, or
if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported
by a reputable quotation source designated by the
Company, (C) in the case of a security not then listed
or admitted to trading on any national securities
exchange and as to which no such reported sale price or
bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as
reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of
Manhattan, City and State of New York customarily
published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices
on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not
more than 30 days prior to the date in question) for
which prices have been so reported and (D) if there are
no bid and asked prices reported during the 30 days
prior to the date in question, the Current Market Value
of the security shall be determined as if the security
were not registered under the Exchange Act; provided,
however, that notwithstanding the foregoing, the
Current Market Value of the Common Stock in connection
with any primary
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underwritten public offering of Common Stock of
the Company pursuant to an effective
registration statement under the Securities Act
shall be the issue price.
(g) De Minimis Adjustments. No adjustment
in the number of shares of Common Stock purchasable
hereunder shall be required unless such adjustment
would require an increase or decrease of at least one
percent (1%) in the number of shares of Common Stock
purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason
of this Section 4.1(g) are not required to be made
shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made
to the nearest one-thousandth of a share.
(h) Adjustment of Exercise Price. Whenever
the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per share of Common Stock
payable upon exercise of such Warrant shall be adjusted
(calculated to the nearest $.001) so that it shall
equal the price determined by multiplying such Exercise
Price immediately prior to such adjustment by a
fraction the numerator of which shall be the number of
shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the
denominator of which shall be the number of shares so
purchasable immediately thereafter.
(i) Consolidation, Merger, Etc. (i) Subject
to the provisions of Subsection (ii) below of this
Section 4.1(i), in case of the consolidation of the
Company with, or merger of the Company with or into,
or of the sale of all or substantially all of the
properties and assets of the Company to, any Person,
and in connection therewith consideration is payable to
holders of Common Stock (or other securities or
property purchasable upon exercise of Warrants) in
exchange therefor, the Warrants shall remain subject to
the terms and conditions set forth in this Agreement
and each Warrant shall, after such consolidation,
merger or sale, entitle the Holder to receive upon
exercise the number of shares of capital stock or other
securities or property (including cash) of the Company,
or of such Person resulting from such consolidation or
surviving such merger or to which such sale shall be
made or of the parent of such Person, as the case may
be, that would have been distributable or payable on
account of the Common Stock (or other securities or
property purchasable upon exercise of Warrants) if such
Holder's Warrants had been exercised immediately prior
to
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such merger, consolidation or sale (or, if applicable,
the record date therefor); and in any such case the
provisions of this Agreement with respect to the rights
and interests thereafter of the Holders of Warrants
shall be appropriately adjusted by the Board of
Directors in good faith so as to be applicable, as
nearly as may reasonably be, to any shares of stock or
other securities or any property thereafter deliverable
on the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if
the Company merges (other than in the Merger) or
consolidates with, or sells all or substantially all of
its property and assets to, another Person and
consideration is payable to holders of Common Stock in
exchange for their Common Stock in connection with such
merger, consolidation or sale which consists solely of
cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the
Holders of Warrants shall be entitled to receive
distributions on the date of such event on an equal
basis with holders of Common Stock (or other securities
issuable upon exercise of the Warrants) as if the
Warrants had been exercised immediately prior to such
event, less the Exercise Price (whether or not the
Warrants are then exercisable). Upon receipt of such
payment, if any, the rights of a Holder shall terminate
and cease and his or her Warrants shall expire.
Notwithstanding the foregoing, if the Company has made
a Repurchase Offer, which has not expired at the time
of such transaction, the Holders of the Warrants shall
be entitled to receive on the date of such transaction
the higher of (1) the amount payable to Holders of
Warrants pursuant to this paragraph or (2) the
Repurchase Price payable to Holders of Warrants
pursuant to such Repurchase Offer. In case of any such
merger, consolidation or sale of assets, the surviving
or acquiring Person and, in the event of any
dissolution, liquidation or winding up of the Company,
the Company shall deposit promptly with the Warrant
Agent the funds, if any, necessary to pay the Holders
of the Warrants. After receipt of such deposit from
such Person or the Company and after receipt of
surrendered Warrant Certificates, the Warrant Agent
shall make payment by delivering a check in such amount
as is appropriate (or, in the case of consideration
other than cash, such other consideration as is
appropriate) to such Person or Persons as it may be
directed in writing by the Holder surrendering such
Warrants.
Section 4.2. Notice of Adjustment. Whenever
the number of shares of Common Stock or other stock or property purchasable
upon the exercise of each Warrant or the Exercise
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Price is adjusted, as herein provided, the Company shall cause the Warrant
Agent promptly to mail, at the expense of the Company, to each Holder notice of
such adjustment or adjustments and shall deliver to the Warrant Agent a
certificate of a firm of independent public accountants selected by the Board
of Directors of the Company (who may be the regular accountants employed by the
Company) setting forth the number of shares of Common Stock or other stock or
property purchasable upon the exercise of each Warrant and the Exercise Price
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment. The Warrant Agent shall be entitled to rely on such certificate
and shall be under no duty or responsibility with respect to any such
certificate, except to exhibit the same, from time to time, to any Holder
desiring an inspection thereof during reasonable business hours. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holders
to determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of shares of Common Stock or other stock or
property purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment, or the validity or value (or the kind or
amount) of any shares of Common Stock or other stock or property which may be
purchasable on exercise of the Warrants. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of Common Stock or stock certificates or
other common stock or properties upon the exercise of any Warrant.
Section 4.3. Statement on Warrants.
Irrespective of any adjustment in the Exercise Price or the number or kind of
shares purchasable upon the exercise of the Warrants, Warrant Certificates
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrant Certificates initially
issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger,
Etc. In case at any time after the date hereof and prior to 5:00 p.m., New
York City time, on the Expiration Date, there shall be any (i) consolidation or
merger (other than the Merger) involving the Company or sale, transfer or other
disposition of all or substantially all of the Company's property, assets or
business (except a merger or other reorganization in which the Company shall be
the surviving corporation and holders of Common Stock (or other securities or
property purchasable upon exercise of
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<PAGE> 30
the Warrants) receive no consideration in respect of their shares) or (ii) any
other transaction contemplated by Section 4.1(i)(ii) above; then in any one or
more of said cases, the Company shall cause to be mailed to the Warrant Agent
and each Holder of a Warrant, at the earliest practicable time (and, in any
event, not less than 20 calendar days before any date set for definitive
action), notice of the date on which such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also set forth such facts as shall indicate the
effect of such action (to the extent such effect may be known at the date of
such notice) on the Exercise Price and the kind and amount of the shares of
Common Stock and other securities, money and other property deliverable upon
exercise of the Warrants. Such notice shall also specify the date as of which
the holders of record of the shares of Common Stock or other securities or
property issuable upon exercise of the Warrants shall be entitled to exchange
their shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up, as the case may be.
Section 4.5. Fractional Interests. If more
than one Warrant shall be presented for exercise in full at the same time by
the same Holder, the number of full shares of Common Stock which shall be
issuable upon such exercise thereof shall be computed on the basis of the
aggregate number of shares of Common Stock purchasable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would,
except for the provisions of this Section 4.5, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay an amount in
cash calculated by it to be equal to the then Current Market Value per share of
Common Stock multiplied by such fraction computed to the nearest whole cent.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board of Directors of the Company, in its
sole discretion, shall have the right at any time, or from time to time, to
decrease the Exercise Price of the Warrants, such reduction of the Exercise
Price to be effective for a period or periods to be determined by it, but in no
event for a period of less than 30 calendar days. Any exercise by the Board of
Directors of any rights granted in this Article V must be preceded by a written
notice from the Company to each Holder of the Warrants setting forth the
reduction in the Exercise Price
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and to the Warrant Agent, which notice shall be mailed at least 30 calendar
days prior to the effective date of such decrease in the Exercise Price of the
Warrants. Any reduction of the Exercise Price pursuant to provisions of this
Article V shall not alter or adjust the number of shares of Common Stock or
other securities issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership and the loss, theft,
destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of proof satisfactory to the Company
or the Warrant Agent that the Warrants represented thereby have been acquired
by a bona fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver to the registered Holder of the lost, stolen, destroyed
or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Article
VI, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses (including the fees and expenses of the Warrant Agent) in connection
therewith. Every new Warrant Certificate executed and delivered pursuant to
this Article VI in lieu of any lost, stolen or destroyed Warrant Certificate
shall constitute a contractual obligation of the Company, whether or not the
allegedly lost, stolen or destroyed Warrant Certificates shall be at any time
enforceable by anyone, and shall be entitled to the benefits of this Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder. The provisions of this Article VI are
exclusive and shall preclude (to the extent lawful) all other rights or
remedies with respect to the replacement of mutilated, lost, stolen, or
destroyed Warrant Certificates.
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ARTICLE VII
RESERVATION, AUTHORIZATION AND
REGISTRATION OF COMMON STOCK
Section 7.1. Reservation and Authorization.
As of the date hereof, the Certificate of Incorporation of the Company does not
authorize a sufficient number of shares of Common Stock or other securities of
the Company for issue and delivery upon the exercise in full of all outstanding
Warrants. The Company shall use its best efforts to amend the Certificate of
Incorporation of the Company in order to increase the authorized number of
shares of Common Stock to a number sufficient to permit the Company to issue
and deliver Common Stock or other securities of the Company upon the exercise
in full of all of the Warrants on or before the date that is six months after
the initial issuance of the Warrants (the "Amendment"). On May 5, 1994, the
Board of Directors of the Company approved the Amendment. The Company shall
submit the Amendment to the stockholders of the Company for approval at the
first annual meeting of stockholders held after the date of this Agreement and
shall file the Amendment with the Secretary of State of the State of Delaware
promptly after such approval by the stockholders. The Company shall at all
times after effectiveness of the Amendment reserve and keep available for issue
upon the exercise of Warrants such number of its authorized but unissued shares
of Common Stock or other securities of the Company deliverable upon exercise of
Warrants as will be sufficient to permit the exercise in full of all
outstanding Warrants and will cause appropriate evidence of ownership of such
Common Stock or other securities of the Company to be delivered to the Warrant
Agent upon its request for delivery upon the exercise of Warrants, and all such
shares of Common Stock will, at all times, be duly approved for listing subject
to official notice of issuance on each securities exchange, if any, on which
such Common Stock is then listed. The Company covenants that all shares of
Common Stock or other securities of the Company that may be issued upon the
exercise of the Warrants will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free from preemptive rights and all
taxes, liens, charges and security interests with respect to the issue thereof.
Section 7.2. Registration. The Company will
comply in full with the provisions of the Registration Rights Agreement.
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ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The
Warrant Certificates shall be issued in registered form only. The Company
shall cause to be kept at the office of the Warrant Agent a register in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided. All Warrant Certificates issued
upon any registration of transfer or exchange of Warrant Certificates shall be
the valid obligations of the Company, evidencing the same obligations, and
entitled to the same benefit under this Agreement, as the Warrant Certificates
surrendered for such registration of transfer or exchange.
The Warrants shall initially be issued as part
of an issuance of Units, each of which consists of $10,000.00 principal amount
of Notes and 79 Warrants. Prior to the close of business on the Separation
Date, the Warrants may not be transferred or exchanged separately from, but may
be transferred or exchanged only together with, the Notes issued in connection
with such Warrants. A Holder may transfer its Warrants only by written
application to the Warrant Agent stating the name of the proposed transferee
and otherwise complying with the terms of this Agreement. No such transfer
shall be effected until, and such transferee shall succeed to the rights of a
Holder only upon, final acceptance and registration of the transfer by the
Warrant Agent in the register. Prior to the registration of any transfer of
Warrants by a Holder as provided herein, the Company, the Warrant Agent, and
any agent of the Company shall treat the person in whose name the Warrants are
registered as the owner thereof for all purposes and as the person entitled to
exercise the rights represented thereby, and neither the Company, the Warrant
Agent, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of the U.S. Global Security shall, by acceptance of
such U.S. Global Security, agree that transfers of beneficial interests in such
U.S. Global Security, may be effected only through a book entry system
maintained by the Holder of such U.S. Global Security (or its agent), and that
ownership of a beneficial interest in the Warrants represented thereby shall be
required to be reflected in a book entry. When Warrant Certificates are
presented to the Warrant Agent with a request to register the transfer or to
exchange them for an equal amount of Warrants of other authorized
denominations, the Warrant Agent shall register the
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transfer or make the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges in
accordance with the terms, conditions and restrictions hereof, the Company
shall execute Warrant Certificates at the Warrant Agent's request. No service
charge shall be made for any registration of transfer or exchange of Warrants,
but the Company may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith.
Section 8.2. Book-Entry Provisions for U.S.
Global Security. (a) The U.S. Global Security initially shall (i) be
registered in the name of the Depositary for such Global Security or the
nominee of such Depositary, (ii) be delivered to the Warrant Agent as custodian
for such Depositary and (iii) bear legends as set forth in Section 2.2.
Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Agreement with respect to any
U.S. Global Security held on their behalf by the Depositary, or the Warrant
Agent as its custodian, or under the U.S. Global Security, and the Depositary
may be treated by the Company, the Warrant Agent and any agent of the Company
or the Warrant Agent as the absolute owner of such U.S. Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Warrants.
(b) Transfers of the U.S. Global Security
shall be limited to transfers of such U.S. Global Security in whole, but not in
part, to the Depositary, its successors or their respective nominees.
Interests of beneficial owners in the U.S. Global Security may be transferred
in accordance with the rules and procedures of the Depositary and the
provisions of Section 8.3. Beneficial owners may obtain U.S. Physical
Securities in exchange for their beneficial interests in the U.S. Global
Security upon request in accordance with the Depositary's and the Warrant
Agent's procedures. In addition, U.S. Physical Securities shall be transferred
to all beneficial owners in exchange for their beneficial interests in the U.S.
Global Security if the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the U.S. Global Security and a successor
depositary is not appointed by the Company within 90 days of such notice.
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(c) In connection with any transfer of a
beneficial interest in the U.S. Global Security to a transferee receiving U.S.
Physical Securities pursuant to paragraph (b) of this Section, the Warrant
Agent shall reflect on its books and records the date and a decrease in the
amount of Warrants represented by the U.S. Global Security in an amount equal
to the amount of the beneficial interest in the U.S. Global Security to be
transferred, and the Company shall execute, and the Warrant Agent shall
countersign and deliver, one or more U.S. Physical Securities of like tenor and
amount.
(d) In connection with the transfer of the
entire U.S. Global Security to beneficial owners pursuant to paragraph (b) of
this Section, the U.S. Global Security shall be deemed to be surrendered to the
Warrant Agent for cancellation, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the U.S. Global Security,
an equal aggregate principal amount of U.S. Physical Securities of authorized
denominations.
(e) Any U.S. Physical Security delivered
in exchange for an interest in the U.S. Global Security pursuant to paragraph
(b) or (c) of this Section shall, except as otherwise provided by paragraph (f)
of Section 8.3, bear the legend regarding transfer restrictions applicable to
the U.S. Physical Security set forth in Section 2.2.
(f) The registered holder of the U.S.
Global Security may grant proxies and otherwise authorize any person, including
Agent Members and persons that may hold interests through Agent Members, to
take any action which a Holder is entitled to take under this Agreement or the
Warrants.
Section 8.3. Special Transfer Provisions.
Unless and until the Warrants and the Common Stock are registered under the
Securities Act, or unless otherwise agreed by the Company and the holder
thereof, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional
Accredited Investors. The following provisions shall apply with respect to
the registration of any proposed transfer of Warrants to any Institutional
Accredited Investor that is not a QIB (excluding transfers to or by Non-U.S.
Persons):
(i) The Warrant Agent shall register
the transfer of any Warrants, whether not the Warrant Certificate
representing such Warrants bears the Private Placement Legend, if (x)
the requested transfer is at least three
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years after the later of the original issue date of the Warrants and
the last date on which such Warrants were held by an Affiliate of the
Company (and the Company has notified the Warrant Agent as to such
last date) or (y) the proposed transferee has delivered to the Warrant
Agent a certificate substantially in the form of Exhibit C hereto and
any legal opinions or other information as the Company or the Warrant
Agent may reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.
(ii) If the proposed transferor is an
Agent Member holding a beneficial interest in the U.S. Global
Security, upon receipt by the Warrant Agent of (x) the documents, if
any, required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Warrant Agent's procedures,
the Warrant Agent shall reflect on its books and records the date and
a decrease in the amount of Warrants represented by the U.S. Global
Security in an amount equal to the amount of the beneficial interest
in the U.S. Global Security to be transferred, and the Company shall
execute, and the Warrant Agent shall countersign and deliver, one or
more U.S. Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following
provisions shall apply with respect to the registration of any proposed
transfer of Warrants to a QIB (excluding transfers to or by Non-U.S. Persons):
(i) If the Warrants to be
transferred are represented by U.S. Physical Securities, Temporary
Offshore Physical Securities or Permanent Offshore Physical
Securities, the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Warrant Certificate stating, or has
otherwise advised the Company and the Warrant Agent in writing, that
the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the
form of Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is purchasing the
Warrants for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
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is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an
Agent Member, and the Warrants to be transferred are represented by
U.S. Physical Securities, Temporary Offshore Physical Securities or
Permanent Offshore PhysicalSecurities, upon receipt by the Warrant
Agent of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the amount of Warrants represented
by the U.S. Global Security in an amount equal to the amount of
Warrants represented by the U.S. Physical Securities, Temporary
Offshore Physical Securities or Permanent Offshore Physical
Securities, as the case may be, to be transferred, and the Warrant
Agent shall cancel the Physical Security so transferred.
(c) Transfers of Temporary Offshore
Physical Securities Prior to June 22, 1994. The following provisions shall
apply with respect to registration of any proposed transfer of interests in
the Temporary Offshore Physical Securities by a Non-U.S. Person prior to
June 22, 1994:
(i) The Warrant Agent shall register
the transfer of any Warrants (x) if the proposed transferee is a
Non-U.S. Person and the proposed transferor has delivered to the
Warrant Agent a certificate substantially in the form of Exhibit D
hereto or (y) if the proposed transferee is a QIB and the proposed
transferor has checked the box provided for on the form of Warrant
Certificate stating, or has otherwise advised the Company and the
Warrant Agent in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant Certificate stating,
or has otherwise advised the Company and the Warrant Agent in writing,
that it is purchasing the Warrants for its own account or an
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account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A. Unless
clause (ii) below is applicable, the Company shall execute, and the
Warrant Agent shall countersign and deliver one or more Temporary
Offshore Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an
Agent Member, upon receipt by the Warrant Agent of the documents
referred to in clause (i)(y) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures,
the Warrant Agent shall reflect on its books and records the date and
an increase in the amount of Warrants represented by the U.S. Global
Security in an amount equal to the amount of Warrants represented by
the Temporary Offshore Physical Security to be transferred, and the
Warrant Agent shall cancel the Physical Security so transferred.
(d) Transfers by Non-U.S. Persons On or
After June 22, 1994. The following provisions shall apply with respect to any
transfer of Warrants by a Non-U.S. Person on or after June 22, 1994:
(i) (x) If the Warrants to be
transferred are represented by Permanent Offshore Physical Securities,
the Warrant Agent shall register such transfer, (y) if the Warrants
to be transferred are represented by Temporary Offshore Physical
Securities, upon receipt of a certificate substantially in the form of
Exhibit D from the proposed transferor, the Warrant Agent shall
register such transfer and (z) in the case of either clause (x) or (y),
unless clause (ii) below is applicable, the Company shall execute, and
the Warrant Agent shall countersign and deliver, one or more Permanent
Offshore Physical Securities of like tenor and amount.
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(ii) If the proposed transferee is
an Agent Member, upon receipt by the Warrant Agent of instructions
given in accordance with the Depositary's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records
the date and an increase in the amount of Warrants represented by the
U.S. Global Security in an amount equal to the amount of Warrants
represented by the Temporary Offshore Physical Securities or Permanent
Offshore Physical Securities to be transferred, and the Warrant Agent
shall cancel the Physical Securities so transferred.
(e) Transfers to Non-U.S. Persons at Any
Time. The following provisions shall apply with respect to any transfer of
Warrants to a Non-U.S. Person:
(i) Prior to June 22, 1994, the
Warrant Agent shall register any proposed transfer of Warrants to a
Non-U.S. Person upon receipt of a certificate substantially in the
form of Exhibit D hereto from the proposed transferor, and the Company
shall execute, and the Warrant Agent shall countersign and deliver,
one or more Temporary Offshore Physical Securities of like tenor and
amount.
(ii) On and after June 22, 1994, the
Warrant Agent shall register any proposed transfer to any Non-U.S.
Person (w) if the Warrants to be transferred are represented by
Permanent Offshore Physical Securities, (x) if the Warrants to be
transferred are represented by Temporary Offshore Physical Securities,
upon receipt of a certificate substantially in the form of Exhibit D
from the proposed transferor, (y) if the Warrants to be transferred
are represented by U.S. Physical Securities or an interest in the U.S.
Global Security, upon receipt of a certificate substantially in the
form of Exhibit D from the proposed transferor and (z) in the case of
either clause (w), (x) or (y), the Company shall execute, and the
Warrant Agent shall countersign and deliver, one or more Permanent
Offshore Physical Securities of like tenor and amount.
(iii) If the proposed transferor is
an Agent Member holding a beneficial interest in the U.S. Global
Security, upon receipt by the Warrant Agent of (x) the documents, if
any, required by paragraph (i) or (ii) and (y) instructions in
accordance with the
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Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and a decrease in the
amount of Warrants represented by the U.S. Global Security in an
amount equal to the amount of the beneficial interest in the Warrants
represented by the U.S. Global Security to be transferred, and the
Company shall execute, and the Warrant Agent shall countersign and
deliver, one or more Temporary Offshore Physical Securities or
Permanent Offshore Physical Securities, as applicable, of like tenor
and amount.
(f) Private Placement Legend. Upon the
transfer, exchange or replacement of Warrant Certificates not bearing the
Private Placement Legend, the Warrant Agent shall deliver Warrant Certificates
that do not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates bearing the Private Placement Legend, the
Warrant Agent shall deliver only Warrant Certificates that bear the Private
Placement Legend unless there is delivered to the Warrant Agent an Opinion of
Counsel reasonably satisfactory to the Company and the Warrant Agent to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any
Warrants represented by a Warrant Certificate bearing the Private Placement
Legend, each Holder of such Warrants acknowledges the restrictions on transfer
of such Warrants set forth in this Agreement and in the Private Placement
Legend and agrees that it will transfer such Warrants only as provided in this
Agreement. The Warrant Agent shall not register a transfer of any Warrants
unless such transfer complies with the restrictions on transfer of such
Warrants set forth in this Agreement. In connection with any transfer of
Warrants, each Holder agrees by its acceptance of Warrants to furnish the
Warrant Agent or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
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The Warrant Agent shall retain copies of all
letters, notices and other written communications received pursuant to Section
8.2 or this Section 8.3. The Company shall provide notice to the Warrant Agent
of any registration of Warrants and Common Stock under the Securities Act
promptly upon such registration. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the Warrant
Agent.
Section 8.4. Surrender of Warrant
Certificates. Any Warrant Certificate surrendered for registration of
transfer, exchange, exercise or repurchase of the Warrants represented thereby
shall, if surrendered to the Company, be delivered to the Warrant Agent, and
all Warrant Certificates surrendered or so delivered to the Warrant Agent shall
be promptly cancelled by the Warrant Agent and shall not be reissued by the
Company and, except as provided in this Article VIII in case of an exchange,
Article III in case of the exercise or repurchase of less than all the Warrants
represented thereby or Article VI in case of a mutilated Warrant Certificate,
no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant
Agent shall deliver to the Company from time to time or otherwise dispose of
such cancelled Warrant Certificates as the Company may direct.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Not Deemed a
Stockholder. Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to consent to any
action of the stockholders, to receive dividends or other distributions, to
exercise any preemptive right or to receive any notice of meetings of
stockholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of
action with respect to this Agreement are vested in the Holders of the
Warrants, and any Holder of any Warrant, without the consent of the Warrant
Agent or the Holders of any other Warrant, may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise in respect of,
his
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right to exercise his Warrants in the manner provided in the Warrant
Certificate representing his Warrants and in this Agreement.
ARTICLE X
REMEDIES
Section 10.1. Defaults. It shall be deemed to
be a Default with respect to the Company's (or its successor's) obligations
under this Agreement if:
(a) the Company (or its successor) shall
fail to make a Repurchase Offer pursuant to Section 3.4 hereof;
(b) the Company (or its successor) shall
fail to purchase the Warrants pursuant to any Repurchase Offer in accordance
with the provisions of Section 3.4; or
(c) the Amendment shall not become
effective on or prior to November 14, 1995.
Section 10.2. Payment Obligations. Upon the
happening of a Default under Section 10.1(a) or (b) of this Agreement the
Company shall be obligated to increase the amount otherwise payable pursuant to
Section 3.4(d) in respect of the Repurchase Offer to which such Default relates
by an amount equal to interest thereon at a rate per annum equal to 12-3/4%
from the date of the Default to the date of payment, which interest shall
compound quarterly (all such payment obligations in respect of any such
Repurchase Offer, together with all such increased amounts, being the
"Repurchase Obligation").
Section 10.3. Remedies; No Waiver.
Notwithstanding any other provision of this Warrant Agreement, if a Default
occurs and is continuing, the Holders of the Warrants may pursue any available
remedy to collect the Repurchase Obligation or to enforce the performance of
any provision of this Warrant Agreement. A delay or omission by any Holder of
a Warrant in exercising, or a failure to exercise, any right or remedy arising
out of a Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Default. All remedies are cumulative to the extent
permitted by law.
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ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The
Warrant Agent hereby accepts the agency established by this Agreement and
agrees to perform the same upon the terms and conditions herein set forth, by
all of which the Company and the Holders of Warrants, by their acceptance
thereof, shall be bound. The Warrant Agent shall not, by countersigning
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or authorization of the Warrants or the
Warrant Certificates (except as to its countersignature thereon) or of any
securities or other property delivered upon exercise or repurchase of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of stock or other securities or other property
deliverable upon exercise or repurchase of any Warrant, or as to the
independence of any Independent Financial Expert or the correctness of the
representations of the Company made in the certificates that the Warrant Agent
receives. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant. The
Warrant Agent shall not have any duty to calculate or determine any adjustments
with respect to either the Exercise Price or the kind and amount of shares or
other securities or any property receivable by Holders upon the exercise or
repurchase of Warrants required from time to time and the Warrant Agent shall
have no duty or responsibility in determining the accuracy or correctness of
such calculation. The Warrant Agent shall not be (a) liable for any recital or
statement of fact contained herein or in the Warrant Certificates or for any
action taken, suffered or omitted by it in good faith in the belief that any
Warrant Certificate or any other documents or any signatures are genuine or
properly authorized, (b) responsible for any failure on the part of the Company
to comply with any of its covenants and obligations contained in this Agreement
or in the Warrant Certificates or (c) liable for any act or omission in
connection with this Agreement except for its own gross negligence or willful
misconduct. The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from the President, any Vice
President or the Secretary of the Company and to apply to any such officer for
instructions (which instructions will be promptly given in writing when
requested) and the Warrant Agent shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with the instructions of
any such officer; however, in its discretion the Warrant Agent may in
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lieu thereof accept other evidence of such or may require such further or
additional evidence as it may deem reasonable. The Warrant Agent shall not be
liable for any action taken in the event it requests instructions from the
Company and does not receive such instructions within a reasonable period of
time after the request therefor.
The Warrant Agent may execute and exercise any
of the rights and powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys, agents or employees, and the
Warrant Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys, agents or employees, provided
reasonable care has been exercised in the selection and in the continued
employment of any such attorney, agent or employee. The Warrant Agent shall
not be under any obligation or duty to institute, appear in or defend any
action, suit or legal proceeding in respect hereof, unless first indemnified to
its satisfaction, but this provision shall not affect the power of the Warrant
Agent to take such action as the Warrant Agent may consider proper, whether
with or without such indemnity. The Warrant Agent shall promptly notify the
Company in writing of any claim made or action, suit or proceeding instituted
against it arising out of or in connection with this Agreement.
The Company will perform, execute, acknowledge
and deliver or cause to be delivered all such further acts, instruments and
assurances as may reasonably be required by the Warrant Agent in order to
enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of
the Company hereunder. The Warrant Agent shall not be liable except for the
failure to perform such duties as are specifically set forth herein, and no
implied covenants or obligations shall be read into this Agreement against the
Warrant Agent, whose duties and obligations shall be determined solely by the
express provisions hereof.
Section 11.2. Right to Consult Counsel. The
Warrant Agent may at any time consult with legal counsel (who may be legal
counsel for the Company), and the opinion or advice of such counsel shall be
full and complete authorization and protection to the Warrant Agent and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Holder for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
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Section 11.3. Compensation; Indemnification.
The Company agrees promptly to pay the Warrant Agent from time to time, on
demand of the Warrant Agent, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
for reasonable expenses and counsel fees incurred in connection with the
execution and administration of this Agreement, and further agrees to indemnify
the Warrant Agent and save it harmless against any losses, liabilities or
expenses arising out of or in connection with the acceptance and administration
of this Agreement, including the costs and expenses of investigating or
defending any claim of such liability, except that the Company shall have no
liability hereunder to the extent that any such loss, liability or expense
results from the Warrant Agent's own gross negligence or willful misconduct.
The obligations of the Company under this Section shall survive the exercise
and the expiration of the Warrants and the resignation or removal of the
Warrant Agent.
Section 11.4. No Restrictions on Actions. The
Warrant Agent and any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in transactions in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not the Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
Section 11.5. Discharge or Removal;
Replacement Warrant Agent. The Warrant Agent may resign from its position as
such and be discharged from all further duties and liabilities hereunder
(except liability arising as a result of the Warrant Agent's own gross
negligence or willful misconduct), after giving one month's prior written
notice to the Company. The Company may remove the Warrant Agent upon one
month's written notice specifying the date when such discharge shall take
effect, and the Warrant Agent shall thereupon in like manner be discharged
from all further duties and liabilities hereunder, except as aforesaid. The
Warrant Agent or the Company shall cause to be mailed to each Holder of a
Warrant a copy of said notice of resignation or notice of removal, as the case
may be. Upon such resignation or removal the Company shall appoint in writing
a new warrant agent. If the Company shall fail to make such appointment within
a period of 30 calendar days after it has been notified in writing of such
resignation by the resigning Warrant Agent or after such removal, then the
41
<PAGE> 46
resigning Warrant Agent or the Holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company doing business under the laws of the United States or any
state thereof, in good standing and having a combined capital and surplus of
not less than $25,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the requirements of a federal
or state supervising or examining authority. After acceptance in writing of
such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; however, if for any reason it shall be necessary or expedient to execute
and deliver any further assurance, conveyance, act or deed, the same shall be
done at the expense of the Company and shall be legally and validly executed
and delivered by the resigning or removed Warrant Agent. Not later than the
effective date of any such appointment the Company shall file notice thereof
with the resigning or removed Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to each Holder of a Warrant. Failure to give any
notice provided for in this Section 11.5, however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
Section 11.6. Successor Warrant Agent. Any
corporation into which the Warrant Agent or any new warrant agent may be
merged, or any corporation resulting from any consolidation to which the
Warrant Agent or any new warrant agent shall be a party, shall be a successor
Warrant Agent under this Agreement without any further act, provided that such
corporation would be eligible for appointment as successor to the Warrant Agent
under the provisions of Section 11.5. Any such successor Warrant Agent shall
promptly cause notice of its succession as Warrant Agent to be mailed to each
Holder of a Warrant.
42
<PAGE> 47
ARTICLE XII
MISCELLANEOUS
Section 12.1. Money Deposited with the Warrant
Agent. The Warrant Agent shall not be required to pay interest on any moneys
deposited pursuant to the provisions of this Agreement except such as it shall
agree in writing with the Company to pay thereon. Any moneys, securities or
other property which at any time shall be deposited by the Company or on its
behalf with the Warrant Agent pursuant to this Agreement shall be and are
hereby assigned, transferred and set over to the Warrant Agent in trust for the
purpose for which such moneys, securities or other property shall have been
deposited; but such moneys, securities or other property need not be segregated
from other funds, securities or other property except to the extent required by
law. Any money, securities or other property deposited with the Warrant Agent
for payment or distribution to the Holders that remains unclaimed for two years
after the date the money, securities or other property was deposited with the
Warrant Agent shall be delivered to the Company upon its request therefor.
Section 12.2. Payment of Taxes. All shares of
Common Stock or other securities issuable upon the exercise of Warrants shall
be validly issued, fully paid and nonassessable, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof or of other
securities deliverable upon exercise of Warrants or in respect of any
Repurchase Offer (other than income taxes imposed on the Holders). The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for
shares of Common Stock or other securities or property issuable upon the
exercise of the Warrants or in respect of any Repurchase Offer or payment of
cash to any Person other than the Holder of a Warrant Certificate surrendered
upon the exercise or repurchase of a Warrant and in case of such transfer or
payment, the Warrant Agent and the Company shall not be required to issue any
stock certificate or pay any cash until such tax or charge has been paid or it
has been established to the Warrant Agent's and the Company's satisfaction that
no such tax or charge is due.
43
<PAGE> 48
Section 12.3. No Merger, Consolidation or Sale
of Assets of the Company. Except as otherwise provided herein, the Company
will not merge into or consolidate with any other Person, or sell or otherwise
transfer its property, assets and business substantially as an entirety to a
successor of the Company, unless the Person resulting from such merger or
consolidation, or such successor of the Company, shall expressly assume, by
supplemental agreement satisfactory in form to the Warrant Agent and executed
and delivered to the Warrant Agent, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
Section 12.4. Reports to Holders. The Company
shall file with the Commission the annual, quarterly and other reports required
by Section 13(a), 13(c) or 15(d) of the Exchange Act, regardless of whether
such Sections of the Exchange Act are applicable to the Company, and shall
provide copies of such reports to each Holder, without cost to such Holder, and
the Warrant Agent within seven days after the date it would have been required
to file such reports or other information with the Commission had it been
subject to such sections.
Section 12.5. Notices. (a) Except as
otherwise provided in Section 12.5(b), any notice, demand or delivery
authorized by this Agreement shall be sufficiently given or made when mailed,
if sent by first class mail, postage prepaid, addressed to any Holder of a
Warrant at such Holder's last known address appearing on the register of the
Company maintained by the Warrant Agent and to the Company or the Warrant Agent
as follows:
To the Company: J.M. Peters Company, Inc.
3501 Jamboree Road
Suite 200
Newport Beach, California 92660
Attention: President
To the Warrant Agent: United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or
making such notice, demand or delivery. Any notice that is mailed in the
manner herein provided shall be
44
<PAGE> 49
conclusively presumed to have been duly given when mailed, whether or not the
Holder receives the notice.
(b) Any notice required to be given by the
Company to the Holders pursuant to Section 3.4(b) shall be made by mailing by
registered mail, return receipt requested, to the Holders at their last known
addresses appearing on the register of the Company maintained by the Warrant
Agent. The Company hereby irrevocably authorizes the Warrant Agent, in the
name and at the expense of the Company, to mail any such notice upon receipt
thereof from the Company. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
Section 12.6. Applicable Law. This Agreement,
each Warrant Certificate issued hereunder and all rights arising hereunder
shall be construed and determined in accordance with the laws of the State of
New York, and the performance thereof shall be governed and enforced in
accordance with such laws.
Section 12.7. Binding Effect. This Agreement
shall be binding upon and inure to the benefit of the Company and the Warrant
Agent and their respective successors and assigns, and the Holders from time to
time of the Warrants. Nothing in this Agreement is intended or shall be
construed to confer upon any Person, other than the Company, the Warrant Agent
and the Holders of the Warrants, any right, remedy or claim under or by reason
of this Agreement or any part hereof.
Section 12.8. Counterparts. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together constitute one and the same instrument.
Section 12.9. Amendments. The Warrant Agent
may, without the consent or concurrence of the Holders of the Warrants, by
supplemental agreement or otherwise, join with the Company in making any
changes or corrections in this Agreement that they shall have been advised by
counsel (a) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained or (b) add to the covenants and agreements of the Company in this
Agreement further covenants and agreements of the Company thereafter to be
observed, or surrender any rights or power reserved to or conferred upon the
Company in
45
<PAGE> 50
this Agreement; provided that in either case such changes or corrections do not
and will not adversely affect, alter or change the rights, privileges or
immunities of the Holders of Warrants.
Section 12.10. Headings. The descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 12.11. Common Stock Legend. Unless
and until the Common Stock issuable upon the exercise of the Warrants is
registered under the Securities Act, or unless otherwise agreed by the Company
and the holder thereof, such Common Stock will bear a legend to the following
effect:
THIS COMMON STOCK HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (B) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS
COMMON STOCK IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE
ISSUANCE OF THE COMMON STOCK OR THE LAST DATE
ON WHICH THIS COMMON STOCK WAS HELD BY AN
AFFILIATE OF THE COMPANY, RESELL OR OTHERWISE
TRANSFER THIS COMMON STOCK EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE REGISTRAR A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE COMMON STOCK (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE REGISTRAR), (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL
46
<PAGE> 51
DELIVER TO EACH PERSON TO WHOM THIS COMMON
STOCK IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS COMMON STOCK WITHIN THREE
YEARS AFTER THE LATER OF THE ISSUANCE OF THIS
COMMON STOCK OR THE LAST DATE ON WHICH THIS
COMMON STOCK WAS HELD BY AN AFFILIATE OF THE
COMPANY, THE HOLDER MUST PROVIDE A CERTIFICATE
TO THE REGISTRAR AS TO THE MANNER OF SUCH
TRANSFER (THE FORM OF WHICH CAN BE OBTAINED
FROM THE REGISTRAR). IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE REGISTRAR AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE REGISTRAR MAY
REFUSE TO REGISTER ANY TRANSFER OF THIS COMMON
STOCK IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
47
<PAGE> 52
IN WITNESS WHEREOF, the parties have caused
this Agreement to be duly executed, as of the day and year first above written.
J.M. PETERS COMPANY, INC.
By ____________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK, as Warrant Agent
By ____________________________
Name:
Title:
48
<PAGE> 53
EXHIBIT A
FORM OF WARRANT CERTIFICATE
J.M. PETERS COMPANY, INC.
CUSIP No. 716 035 11 8
No. _____ Certificate for _______ Warrants
WARRANTS TO PURCHASE COMMON STOCK
This certifies that _______________________, or
its registered assigns, is the owner of the number of Warrants set forth above,
each of which represents the right to purchase, after the Exercise Date (as
defined below), from J.M. PETERS COMPANY, INC., a Delaware corporation (the
"Company"), one share of Common Stock, par value $.10 per share, of the Company
("Common Stock") at the purchase price (the "Exercise Price") of $3.30 per
share (subject to adjustment as provided in the Warrant Agreement hereinafter
referred to), upon surrender hereof at the office of United States Trust
Company of New York or to its successor as the warrant agent under the Warrant
Agreement hereinafter referred to (any such warrant agent being herein called
the "Warrant Agent"), with the Subscription Form on the reverse hereof duly
executed, with signature guaranteed as therein specified and simultaneous
payment in full (in cash or by certified or official bank or bank cashier's
check payable to the order of the Company) of the purchase price for the
share(s) as to which the Warrant(s) represented by this Warrant Certificate are
exercised, all subject to the terms and conditions hereof and of the Warrant
Agreement. "Exercise Date" means the close of business upon the latter to
occur of (i) effectiveness of the Amendment, or (ii) November 14, 1995.
This Warrant Certificate is issued under and in
accordance with a Warrant Agreement dated as of May 13, 1994 (the "Warrant
Agreement"), between the Company and United States Trust Company of New York,
as Warrant Agent, and is subject to the terms and provisions contained therein,
to all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby made to the
Warrant Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Company and the Holders of
the Warrants. The summary of the terms of the Warrant Agreement contained in
this Warrant Certificate is qualified in its entirety by express reference to
the Warrant Agreement. All terms used in this Warrant Certificate that are
defined in the Warrant Agreement shall have the meanings assigned to them in
the Warrant Agreement.
<PAGE> 54
A-2
Copies of the Warrant Agreement are on file at
the office of the Warrant Agent and may be obtained by writing to the Warrant
Agent at the following address:
United States Trust Company
of New York
114 West 47th Street
New York, New York 10036
Attn: Corporate Trust Administration
A "Repurchase Event", as defined in the Warrant
Agreement, shall be deemed to occur on the earliest of any date prior to May 1,
2002 when the Company consolidates with, merges (other than in the Merger) into
or with (but only where holders of the Common Stock receive consideration in
exchange for all or part of such shares of Common Stock), or sells all or
substantially all of its assets to, another Person which does not have a class
of equity securities registered under the Exchange Act or a wholly owned
subsidiary of such Person, if the consideration for such transaction does not
consist solely of cash or such merger or consolidation is not effected solely
for the purpose of changing the Company's state of incorporation.
Following a Repurchase Event, the Company must
make an offer to repurchase all Warrants surrendered for repurchase (a
"Repurchase Offer").
Warrants received by the Warrant Agent in
proper form during a Repurchase Offer will, except as otherwise provided in the
Warrant Agreement, be repurchased by the Company at a price in cash (the
"Repurchase Price") equal to the value on the Valuation Date relating thereto
of the Common Stock and other securities or property of the Company which would
have been delivered upon exercise of the Warrants (whether or not the Warrants
are then exercisable), less the Exercise Price. The value of such Common Stock
and other securities will be (i) if the Common Stock (or other securities) is
registered under the Exchange Act, determined based upon the average of the
closing sales prices of the Common Stock (or other securities) for the 20
consecutive trading days immediately preceding such Valuation Date or (ii) if
the Common Stock (or other securities) is not registered under the Exchange Act
or if the value cannot be computed under clause (i) above, determined by the
Independent Financial Expert (as defined in the Warrant Agreement), in each
case as set forth in the Warrant Agreement.
<PAGE> 55
A-3
The "Valuation Date" as defined in the Warrant
Agreement shall be deemed to occur on the date five Business Days prior to the
date notice of the Repurchase Offer is first given.
If the Company fails to make or complete any
Repurchase Offer (a "Default") as required by the Warrant Agreement, it shall
be obligated to increase the amount otherwise payable pursuant to the Warrant
Agreement in respect of the Repurchase Offer to which such Default relates by
an amount equal to interest thereon at a rate of 12-3/4% per annum from the
date of the Default to the date of payment, which interest shall compound
quarterly.
If the Company merges (other than in the
Merger) or consolidates with, or sells all or substantially all of its property
and assets to, another Person solely for cash, the Holders of Warrants shall be
entitled to receive upon exercise cash on an equal basis with holders of Common
Stock, as if the Warrants had been exercised immediately prior to such
transaction or the amount payable pursuant to an outstanding Repurchase Offer,
if higher.
The number of shares of Common Stock
purchasable upon the exercise of each Warrant and the price per share are
subject to adjustment as provided in the Warrant Agreement. Except as stated
in the immediately preceding paragraph, in the event the Company merges or
consolidates with, or sells all or substantially all of its assets to, another
Person, each Warrant will, upon exercise, entitle the Holder thereof to receive
the number of shares of stock or other securities or the amount of money and
other property which the holder of a share of Common Stock (or other securities
or property issuable upon exercise of a Warrant) is entitled to receive upon
completion of such merger, consolidation or sale.
As to any final fraction of a share which the
same Holder of one or more Warrant Certificates would otherwise be entitled to
purchase upon exercise thereof in the same transaction, the Company shall pay
the cash value thereof determined as provided in the Warrant Agreement.
All shares of Common Stock or other securities
issuable by the Company upon the exercise of Warrants shall be validly issued,
fully paid and nonassessable, and the Company shall pay all taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political
<PAGE> 56
A-4
subdivision or taxing authority thereof or therein in respect of the issue or
delivery of such shares or of other securities deliverable upon exercise of
Warrants. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Common Stock, and in such case the Company shall not
be required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no tax or other charge is due.
In the absence of an exemption from applicable
state and federal securities laws, Holders will be able to exercise the
Warrants only if (i) a current prospectus under the Securities Act relating to
the securities underlying the Warrants is then in effect and (ii) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various Holders reside.
Subject to the restrictions on transfer set
forth in Article VIII of the Warrant Agreement, this Warrant Certificate and
all rights hereunder are transferable by the registered Holder hereof, in whole
or in part, on the register of the Company maintained by the Warrant Agent for
such purpose at its office in New York, New York, upon surrender of this
Warrant Certificate duly endorsed, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
issue and deliver to such Holder a new Warrant Certificate or Certificates with
respect to any portion not so transferred. Each taker and Holder of this
Warrant Certificate, by taking and holding the same, consents and agrees that
prior to the registration of transfer as provided in the Warrant Agreement, the
Company and the Warrant Agent may treat the person in whose name the Warrants
are registered as the absolute owner hereof for any purpose and as the Person
entitled to exercise the rights represented hereby, any notice to the contrary
notwithstanding.
This Warrant Certificate may be exchanged at
the office of the Warrant Agent maintained for such purpose in New York, New
York for Warrant Certificates representing the same aggregate number of
Warrants, each new Warrant Certificate to
<PAGE> 57
A-5
represent such number of Warrants as the Holder hereof shall designate at the
time of such exchange.
Prior to the exercise of the Warrants
represented hereby, the Holder of this Warrant Certificate, as such, shall not
be entitled to any right of a stockholder of the Company, including, without
limitation, the right to vote or to consent to any action of the stockholders,
to receive dividends or other distributions, to exercise any preemptive right
or to receive any notice of meetings of stockholders, and shall not be entitled
to receive any notice of any proceedings of the Company except as provided in
the Warrant Agreement.
This Warrant Certificate shall be void and all
rights evidenced hereby shall cease on May 1, 2002, unless sooner terminated by
the liquidation, dissolution or winding-up of the Company or as otherwise
provided in the Warrant Agreement upon the consolidation or merger of the
Company with or sale of the Company to, another Person, or unless such date is
extended as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid for
any purpose until it shall have been countersigned by the Warrant Agent.
Dated:
J.M. PETERS COMPANY, INC.
By: _________________________
Name:
Title:
Countersigned:
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Warrant Agent
By:________________________
<PAGE> 58
A-6
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercises ________
of the Warrants for the purchase of one share (subject to adjustment) of Common
Stock, par value $.10 per share, of J.M. PETERS COMPANY, INC. for each Warrant
represented by the Warrant Certificate and herewith makes payment of
$__________ (such payment being in cash or by certified or official bank or
bank cashier's check payable to the order of ____________________
__________________________________________________________), all at the
exercise price and on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to
_____________________________________________________________ and directs that
the shares of Common Stock deliverable upon the exercise of said Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE PHYSICAL CERTIFICATES]
The undersigned certifies that:
[Check One]
[ ] (a) (i) it is not a U.S. person (as defined in
Regulation S under the Securities Act) and the Warrants
are not being exercised on behalf of a U.S. person.
or
[ ] (ii) it is furnishing to the Warrant Agent a written
opinion of counsel to the effect that the Warrants and
the shares of Common Stock (or other securities)
issuable upon exercise of the Warrants have been
registered under the Securities Act or are exempt from
registration thereunder.
and (b) if an opinion is not being furnished, the undersigned is located
outside the United States at the time of the exercise hereof.
<PAGE> 59
A-7
Dated:
_________________________(1)
(Signature of Owner)
_____________________________
(Street Address)
_____________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_____________________________
Securities and/or check to be issued to:
Please insert social security
or identifying number:
Name:
Street Address:
City, State and Zip Code:
___________________
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 60
A-8
FORM OF CERTIFICATE FOR SURRENDER FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by the Company)
To:
The undersigned, having received prior notice
of the consideration for which J.M. PETERS COMPANY, INC. will repurchase the
Warrants represented by the within Warrant Certificate, hereby surrenders this
Warrant Certificate for repurchase by J.M. PETERS COMPANY, INC. of the number
of Warrants specified below for the consideration set forth in said notice.
Dated:
____________________________
(Number of Warrants)
(1)
_______________________________________
(Signature of Owner)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
____________________________
<PAGE> 61
Check to be issued to:
Please insert social security
or identifying number:
Name:
Street Address:
City, State and Zip Code:
___________________
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 62
A-9
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered
holder of the within Warrant Certificate hereby sells, assigns, and transfers
unto the Assignee(s) named below (including the undersigned with respect to any
Warrants constituting a part of the Warrants evidenced by the within Warrant
Certificate not being assigned hereby) all of the right of the undersigned
under the within Warrant Certificate, with respect to the number of Warrants
set forth below:
Name(s) of
Assignee(s) Address No. of Warrants
Please insert social security or other identifying number of assignee(s)
and does hereby irrevocably constitute and appoint _______________________ the
undersigned's attorney to make such transfer on the books of
_______________________________ maintained for the purposes, with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES EXCEPT
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of Warrants,
the undersigned confirms that without utilizing any general solicitation or
general advertising that:
[Check One]
[ ] (a) these Warrants are being transferred in
compliance with the exemption from registration
under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than
in accordance with (a) above and documents are
being furnished which comply with the
conditions of transfer set forth in this
Warrant Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until
<PAGE> 63
A-10
the conditions to any such transfer of registration set forth herein and in
Article VIII of the Warrant Agreement shall have been satisfied.
Dated:
(1)
_____________________________
(Signature of Owner)
_____________________________
(Street Address)
_____________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_____________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it
is purchasing the Warrant(s) for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such account
is a "qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:____________________ _____________________________
NOTICE: To be executed by an
executive officer
___________________
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 64
EXHIBIT B
Form of Certificate
____________, ____
United States Trust Company of
New York, as Trustee
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company") Warrants to Purchase Common
Stock (the "Warrants")
Dear Ladies and Gentlemen:
This letter relates to __________ Warrant(s)
represented by the attached certificate(s) (each, a "Legended Warrant
Certificate") which bears a legend outlining restrictions upon transfer of each
Legended Warrant Certificate. Pursuant to Section 2.1 of the Warrant Agreement
(the "Warrant Agreement") dated as of May 13, 1994 relating to the Warrants, we
hereby certify that (1) we are a person outside the United States to whom the
Warrants could be transferred in accordance with Rule 904 of Regulation S
("Regulation S") promulgated under the U.S. Securities Act of 1933, as amended,
and (2) the distribution of the Warrants has been completed and the restricted
period (as defined in Regulation S) with respect to the offer and sale of the
Warrants have been terminated. Accordingly, you are hereby requested to
exchange the Legended Warrant Certificate for an unlegended certificate
representing an identical number of Warrants, all in the manner provided for in
the Warrant Agreement.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
<PAGE> 65
Very truly yours,
[Name of Holder]
By: ______________________
Authorized Signature
<PAGE> 66
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
____________, ____
United States Trust Company
of New York,
as Warrant Agent
114 W. 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company") Warrants to Purchase Common
Stock (the "Warrants")
Dear Ladies and Gentlemen:
In connection with our proposed purchase of _____ Warrants, we confirm that:
1. We understand that any subsequent transfer
of the Warrants and any transfer of the Common Stock
issuable upon exercise of the Warrants is subject to
certain restrictions and conditions set forth in the
Warrant Agreement dated as of May 13, 1994 relating to
the Warrants (the "Warrant Agreement") and the
undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Warrants and Common
Stock except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the offer and sale of the
Warrants have not been registered under the Securities
Act, and that the Warrants and Common Stock may not be
offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter
stated, that if we should sell any Warrants or Common
Stock, we will do so only (A) to the Company or any
subsidiary thereof, (B) with respect to the Warrants
only, in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined
therein), (C) to an institutional "accredited investor"
(as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed
<PAGE> 67
C-2
letter substantially in the form of this letter, (D)
outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant
to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F)
pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to
any person purchasing any of the Warrants or Common
Stock from us a notice advising such purchaser that
resales of the Warrants or Common Stock are restricted
as stated herein.
3. We understand that, on any proposed
resale of any Warrants or Common Stock, we will be
required to furnish to you and the Company such
certifications, legal opinions and other information as
you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing
restrictions. We further understand that the Warrants
and Common Stock purchased by us will bear a legend to
the foregoing effect.
4. We are an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of our investment in the Warrants or Common
Stock, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Warrants or
Common Stock purchased by us for our own account or for
one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise
sole investment discretion.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_______________________________
Authorized Signature
<PAGE> 68
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________, ____
United States Trust Company
of New York,
as Warrant Agent
114 W. 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Re: J.M. Peters Company, Inc. (the "Company") Warrants to Purchase Common
Stock (the "Warrants")
Dear Ladies and Gentlemen:
In connection with our proposed sale of _____
Warrants, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended, and,
accordingly, we represent that:
(1) the offer of the Warrants was not made
to a person in the United States;
(2) at the time the buy order was
originated, the transferee was outside the United States or we and any
person acting on our behalf reasonably believed that the transferee was
outside the United States;
(3) no directed selling efforts have been
made by us in the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan
or scheme to evade the registration requirements of the U.S. Securities
Act of 1933.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:___________________________
Authorized Signature
<PAGE> 69
Appendix A
LIST OF FINANCIAL EXPERTS
Alex. Brown & Sons Incorporated
Bear, Stearns & Co. Inc.
The First Boston Corporation
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Kidder, Peabody & Co. Incorporated
Lazard Freres & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc.
Lehman Brothers
Smith Barney Shearson Inc.
Dean Witter Reynolds, Inc.
<PAGE> 1
Exhibit 10.17
EXECUTION COPY
________________________________________________________________________________
WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of May 13, 1994
between
J.M. PETERS COMPANY, INC.
and
MORGAN STANLEY & CO. INCORPORATED
________________________________________________________________________________
<PAGE> 2
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made and entered into May 13, 1994, between J.M. PETERS COMPANY, INC., a
Delaware corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED
(the "Placement Agent").
This Agreement is made pursuant to the Placement Agreement
dated May 6, 1994, between the Company and the Placement Agent (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agent
of 10,000 units (the "Units"), each Unit consisting of (i) ten 12-3/4% Senior
Notes due 2002 (the "Notes") of the Company and (ii) 79 Warrants (each, a
"Warrant"), each Warrant entitling the holder thereof to purchase one share of
Common Stock, par value $0.10 per share, of the Company. In order to induce
the Placement Agent to enter into the Placement Agreement, the Company has
agreed to provide to the Placement Agent and its direct and indirect
transferees the registration rights set forth in this Agreement. The execution
of this Agreement is a condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
also includes the Company's successors.
<PAGE> 3
"Common Stock" means the Common Stock of the Company and any
other capital stock of the Company into which such common stock may be
converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution of, such common stock by reason of
any stock splits, stock dividends, distributions, mergers,
consolidations or other like events.
"Exercise Date" shall mean the later of (a) the date on which
the Certificate of Incorporation of the Company is amended in order to
increase the number of shares of Common Stock to a number sufficient
to permit the Company to issue and deliver Common Stock upon the
exercise in full of all outstanding Warrants, or (b) November 14,
1995.
"Expiration Date" shall mean May 1, 2002, the date upon which
the Warrants expire.
"Holder" shall mean the Placement Agent, for so long as it
owns any Registrable Securities, and each of its successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Warrant Agreement.
"Majority Holders" shall mean the Holders of a majority of the
outstanding Registrable Securities; provided that whenever the consent
or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Company or any of its affiliates (as such term is defined in Rule 405
under the 1933 Act) (other than the Placement Agent or subsequent
holders of Registrable Securities if such subsequent holders are
deemed to be such affiliates solely by reason of their holding of such
Registrable Securities) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage or amount.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Placement Agent" shall have the meaning set forth in the
preamble.
"Placement Agreement" shall have the meaning set forth in the
preamble.
2
<PAGE> 4
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Warrants
covered by a Shelf Registration Statement, and by all other amendments
and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by
reference therein.
"Registrable Securities" shall mean (i) the Registrable
Warrants and (ii) the Warrant Shares.
"Registrable Warrants" shall mean the Warrants; provided,
however, that the Warrants shall cease to be Registrable Warrants when
(i) a Registration Statement with respect to such Warrants shall have
been declared effective under the 1933 Act and such Warrants shall
have been disposed of pursuant to such Registration Statement, (ii)
such Warrants shall have been sold to the public pursuant to Rule
144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act or (iii) such Warrants shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange
or National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters in
connection with blue sky qualification of any of the Registrable
Securities), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and
other documents relating to the performance of and compliance with
this Agreement, (iv) all rating agency fees, (v) the fees and
disbursements of the Warrant Agent, (vi) the fees and disbursements of
counsel for the Company and the fees and disbursements of one counsel
for
3
<PAGE> 5
the Holders of the Registrable Warrants (which counsel shall be
selected by the Majority Holders and which counsel may also be counsel
for the Placement Agent), and (vii) the fees and disbursements of the
independent public accountants of the Company and any partnership or
joint venture in which the Company or any of its subsidiaries is a
partner, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, but excluding fees of counsel to the underwriters (other
than fees and expenses set forth in clause (ii) above) or the Holders
(other than fees and expenses set forth in clause (vi) above) and
underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a
Holder.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected in
accordance with Section 2(a) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(a) of this Agreement which covers all of the Registrable
Securities on an appropriate form under Rule 415 under the 1933 Act,
or any similar rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
4
<PAGE> 6
"Underlying Securities" shall mean the Common Stock or other
securities issuable upon the exercise of the Warrants.
"Underwriters" shall have the meaning set forth in the last
paragraph of Section 3 of this Agreement.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Warrants are sold to an
Underwriter for reoffering to the public.
"Warrant Agent" shall mean the warrant agent with respect to
the Warrants under the Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement relating
to the Warrants dated as of May 13, 1994 between the Company and
United States Trust Company of New York, a New York corporation, as
warrant agent, as the same may be amended from time to time in
accordance with the terms thereof.
"Warrant Shares" shall mean (i) Underlying Securities, (ii)
any common stock or other security issued as (or issuable upon the
conversion or exercise of any warrant, right, option or other
convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement
of, the Underlying Securities, and (iii) any common stock issued by
way of a stock split of the Underlying Securities referred to in
clauses (i) or (ii) above.
"Warrants" shall have the meaning set forth in the second
paragraph of this Agreement.
2. Registration Under the 1933 Act. (a) The Company
shall use its best efforts to cause to be filed with the SEC, a Shelf
Registration Statement providing for (i) the offer and sale by the Holders of
all of the Registrable Warrants, and (ii) the registration of the issuance by
the Company of all of the Warrant Shares. The Company agrees to use its best
efforts to have such Shelf Registration Statement filed pursuant to this
Section 2 declared effective by the SEC no later than the close of business on
the date that is the last date prior to the Exercise Date. The Company shall
use its best efforts to
5
<PAGE> 7
keep the Shelf Registration Statement filed pursuant to this Section 2
continuously effective until the close of business on the thirtieth day after
the Expiration Date or such shorter period that will terminate when all of the
Registrable Securities covered by such Shelf Registration Statement have been
sold pursuant to such Shelf Registration Statement or are no longer
outstanding, and the Company shall comply with the applicable requirements of
the 1933 Act, the 1934 Act and other applicable laws and regulations in
connection with such Shelf Registration. The Company further agrees to
supplement or amend the Shelf Registration Statement, if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any
other rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder of Registrable Warrants with respect to information
relating to such Holder in order to accurately reflect information regarding
such Holder or such Holder's plan of distribution of Registrable Warrants as
required by the Registration Statement, and to use all reasonable best efforts
to cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable. The Company
agrees to furnish to the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed with the SEC
and, with respect to the registration of the Warrant Shares, to furnish to the
Warrant Agent current Prospectuses meeting the requirements of the 1933 Act and
the rules and regulations of the SEC thereunder in sufficient quantity to
permit the Warrant Agent to deliver a Prospectus to each Holder of a Warrant
upon the exercise thereof. The Company further agrees to pay all fees, costs
and expenses in connection with the preparation and delivery to the Warrant
Agent of the Prospectuses and the delivery thereof by the Warrant Agent to the
Holders of the Warrants.
(b) Each Holder whose Registrable Warrants are covered by a
Shelf Registration Statement filed pursuant to this Section 2 agrees, upon the
request of the Underwriter(s) in any Underwritten Offering permitted pursuant
to this Agreement, not to effect any public sale or distribution of securities
of the Company of the same class as the Registrable Warrants included in such
Registration Statement, including a
6
<PAGE> 8
sale pursuant to Rule 144 under the 1933 Act (except as part of such
registration), during the 10-day period prior to, and during the 90-day period
beginning on, the closing date of any such Underwritten Offering made pursuant
to such Registration Statement, to the extent timely notified in writing by the
Company or such Underwriter(s).
The foregoing provision shall not apply to any Holder of
Registrable Warrants if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such Holder shall undertake, in its request to participate in any such
Underwritten Offering, not to effect any public sale or distribution of any of
its Registrable Warrants commencing on the date of sale of such Registrable
Warrants unless it has provided 45 days' prior written notice of such sale or
distribution to the Underwriter(s).
The Company agrees not to effect any public or private offer,
sale or distribution of securities of the same quality and nature of the
Registrable Warrants, including a sale pursuant to Regulation D under the 1933
Act, during the 10-day period prior to, and during the 90-day period beginning
on, the closing date of each Underwritten Offering permitted pursuant to
Section 3 hereof made pursuant to the Registration Statement, to the extent
timely notified in writing by the Underwriter(s) and to cause each holder of
securities of the same quality and nature as the Registrable Warrants obtained
from the Company at any time on or after the date of this Agreement to agree
not to effect any public sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144 under the 1933 Act (except
as part of such registration).
(c) Expenses. The Company shall pay all Registration
Expenses in connection with any registration pursuant to Section 2. Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Warrants pursuant to the Registration Statement.
(d) Effective Registration Statement. A Registration
Statement pursuant to Section 2 hereof will not be deemed to have become
effective unless it has been declared effective by
7
<PAGE> 9
the SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to such Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.
(e) Remedies. Without limiting the remedies available to the
Placement Agent and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) hereof may result
in material irreparable injury to the Placement Agent or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Placement Agent or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Section 2(a) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements pursuant
to Section 2(a) hereof, the Company shall as expeditiously as possible within
the above time limits:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company and (y) shall be available for the sale of the
Registrable Warrants by the selling Holders thereof and (z) shall
comply as to form in all material respects with the requirements of
the applicable form and include all financial statements required by
the SEC to be filed therewith, and use all reasonable best efforts to
cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period under the Agreement and cause each Prospectus to be
supplemented by any required
8
<PAGE> 10
prospectus supplement and, as so supplemented to be filed pursuant to
Rule 424 under the 1933 Act;
(c) in the case of the registration of the Registrable
Warrants, furnish to each Holder of Registrable Warrants, to counsel
for the Placement Agent, to counsel for the Holders and to each
Underwriter of an Underwritten Offering of Registrable Warrants, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder or Underwriter may reasonably
request, in order to facilitate the public sale or other disposition
of the Registrable Warrants; and the Company consents to the use of
such Prospectus and any amendment or supplement thereto in accordance
with applicable law by each of the selling holders of Registrable
Warrants and any such Underwriters in connection with the offering and
sale of the Registrable Warrants covered by and in the manner
described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use its reasonable best efforts to register or qualify
the Registrable Securities under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall reasonably
request in writing by the time the applicable Registration Statement
is declared effective by the SEC, to cooperate with such Holders in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. and do any and all other acts
and things which may be reasonably necessary or advisable to enable
such Holder to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder; provided, however,
that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d),
(ii) file any general consent to service of process or (iii) subject
itself to taxation in any such jurisdiction if it is not so subject;
9
<PAGE> 11
(e) in the case of the registration of Registrable Warrants,
notify each Holder of Registrable Warrants, counsel for the Holders
and counsel for the Placement Agent promptly and, if requested by any
such Holder, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendments
and supplements thereto have been filed and become effective, (ii) of
any request by the SEC or any state securities authority for
amendments and supplements to a Registration Statement and Prospectus
or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Warrants covered
thereby, the representations and warranties of the Company contained
in any underwriting agreement, securities sales agreement or other
similar agreement, if any, relating to such offering cease to be true
and correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of
the Registrable Warrants for sale in any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the happening of
any event during the period the Registration Statement is effective
which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or Prospectus
in order to make the statements therein not misleading, and (vi) of
any determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide prompt notice to each Holder
of the withdrawal of any such order;
10
<PAGE> 12
(g) furnish to each Holder of the Registrable Warrants,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of the registration of the Registrable
Warrants, cooperate with the selling Holders of Registrable Warrants
to facilitate the timely preparation and delivery of certificates
representing Registrable Warrants to be sold and not bearing any
restrictive legends and enable such Registrable Warrants to be in such
denominations (consistent with the provisions of the Warrant
Agreement) and registered in such names as the selling Holders may
reasonably request at least two business days prior to the closing of
any sale of Registrable Warrants;
(i) in the case of the registration of Registrable Warrants,
upon the occurrence of any event contemplated by Section 3(e)(v)
hereof, use its reasonable best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Warrants, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Company agrees to notify each Holder of Registrable Warrants to
suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and each such Holder hereby agrees to
suspend use of the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement
or amendment or supplement to a Prospectus or any document which is to
be incorporated by reference into a Registration Statement or a
Prospectus after initial filing of a Registration Statement, provide
11
<PAGE> 13
copies of such document to the Placement Agent and its counsel and the
Holders of Registrable Warrants and their counsel and make such of the
representatives of the Company as shall be reasonably requested by the
Placement Agent or its counsel and the Holders of Registrable Warrants
or their counsel available for discussion of such document, and shall
not at any time file or make any amendment to the Registration
Statement, any Prospectus or any amendment of or supplement to a
Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a
Prospectus, of which the Placement Agent and its counsel and the
Holders of Registrable Warrants and their counsel shall not have
previously been advised and furnished a copy or in a form to which the
Placement Agent or its counsel and the Holders of Registrable Warrants
or their counsel shall reasonably object;
(k) in the case of the registration of Registrable
Warrants, make available for inspection by a representative of the
Holders of the Registrable Warrants, any Underwriter participating in
any disposition pursuant to such Shelf Registration Statement, and
attorneys and accountants designated by such Holders, at reasonable
times and in a reasonable manner, all financial and other records,
pertinent documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with a Shelf
Registration Statement;provided, however, that such Underwriters,
representatives, attorneys or accountants agree to keep confidential
any records, information or documents that are designated by the
Company in writing as confidential unless such records, information or
documents are (i) available to the public, (ii) were already in such
Underwriters', representatives', attorneys' or accountants' possession
prior to its receipt from the Company, (iii) is obtained by such
Underwriters, representatives, attorneys or accountants from a third
person who, insofar as is known to such Underwriters, representatives,
attorneys or accountants, is not prohibited from transmitting the
information to such Underwriters, representatives, attorneys or
accountants by a contractual, legal or
12
<PAGE> 14
fiduciary obligation to the Company, or (iv) disclosure of such
records, information or documents is required by court or
administrative order after the exhaustion of appeals therefrom and to
use such information obtained pursuant to this provision only in
connection with the transaction for which such information was
obtained, and not for any other purpose;
(l) use its reasonable best efforts to cause all
Registrable Securities to be listed on any securities exchange or any
automated quotation system on which the same or a similar class of
securities issued by the Company are then listed, to the extent such
Registrable Securities satisfy applicable listing requirements;
(m) if reasonably requested by any Holder of Registrable
Warrants covered by a Registration Statement in order to accurately
reflect information regarding such Holder or such Holder's plan of
distribution of Registrable Warrants as required by such Registration
Statement, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information with respect to such Holder
as such Holder reasonably requests to be included therein and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such filing; and
(n) in the case of the registration of Registrable
Warrants, enter into such customary agreements and take all such other
actions in connection therewith (including those requested by the
Holders of a majority of the Registrable Warrants being sold) in order
to expedite or facilitate the disposition of such Registrable Warrants
including, but not limited to, an Underwritten Offering and in such
connection, (i) to the extent possible, make such representations and
warranties to such Holders and any Underwriters of such Registrable
Warrants with respect to the business of the Company and its
subsidiaries and its or its subsidiaries' joint ventures, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case,
in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings
13
<PAGE> 15
and confirm the same if and when requested, (ii) obtain opinions of
counsel to the Company (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to such Holders and such
Underwriters and their respective counsel) addressed to each such
selling Holder and Underwriter of Registrable Warrants, covering the
matters customarily covered in opinions requested in underwritten
offerings, (iii) obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any
other certified public accountant of any subsidiary of the Company or
any joint venture in which the Company or any of its subsidiaries is a
partner, or of any business acquired by the Company for which
financial statements and financial data are or are required to be
included in the Registration Statement) addressed to each such selling
Holder and Underwriter of Registrable Warrants, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount of the
Registrable Warrants being sold or the Underwriters, and which are
customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the
Company made pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in an underwriting agreement.
In the case of the registration of Registrable Warrants, the
Company may require each Holder of Registrable Warrants to furnish to the
Company such information regarding such Holder and the proposed distribution by
such Holder of such Registrable Warrants as the Company may from time to time
reasonably request in writing.
In the case of the registration of Registrable Warrants, each
Holder of Registrable Warrants agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of Registrable
Warrants pursuant to a Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
3(i) hereof, and, if so
14
<PAGE> 16
directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Warrants
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Warrants pursuant to a
Registration Statement, the Company shall extend the period during which the
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Company shall have
made available to the Holders copies of the supplemented or amended Prospectus
necessary to resume such dispositions.
The Holders of Registrable Warrants covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Warrants
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Warrants included in such offering.
4. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless the Placement Agent, each Holder and each
person, if any, who controls the Placement Agent or any Holder within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, the
Placement Agent or any Holder, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by the Placement Agent, any Holder or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact
15
<PAGE> 17
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact necessary to make
the statements therein in light of the circumstances under which they were made
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to the Placement Agent or any
Holder furnished to the Company in writing by the Placement Agent or any
selling Holder expressly for use therein. In connection with any Underwritten
Offering permitted by Section 3, the Company will also indemnify the
Underwriters, if any, selling brokers, dealers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of the Securities
Act and the Exchange Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection with any
Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agent, and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, the
Placement Agent, and any other selling Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to the Placement Agent and
the Holders but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
such person is entitled to indemnity pursuant to either paragraph (a) or (b)
above, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory
16
<PAGE> 18
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the (A) fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Placement Agent and all persons, if any, who control the Placement Agent within
the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act,
(B) the fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either such Section and (C) the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Holders and all
persons, if any, who control any Holders within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In such case involving the Placement Agent and persons who control
the Placement Agent, such firm shall be designated in writing by the Placement
Agent. In such case involving the Holders and such persons who control
Holders, such firm shall be designated in writing by the Majority Holders. In
all other cases, such firm shall be designated by the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the forgoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expense of counsel
17
<PAGE> 19
as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party for such fees and expenses of counsel in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a)
or (b) of this Section 4 is unavailable to or insufficient to hold harmless an
indemnified party, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the indemnified party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with such
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders' respective
obligations to contribute pursuant to this Section 4(d) are several in
proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
18
<PAGE> 20
(e) The Company and each Holder agree that it would not
be just or equitable if contribution pursuant to this Section 4 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 4 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 4 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agent, any Holder or any person controlling the Placement
Agent or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company and (iii) any sale of
Registrable Securities pursuant to a Shelf Registration Statement.
5. Miscellaneous. (a) No Inconsistent Agreements. The
Company has not entered into, and on or after the date of this Agreement will
not enter into, any agreement which is inconsistent with the rights granted to
the Holders of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof. The rights granted to the Holders
19
<PAGE> 21
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
departure; provided, however, that no amendment, modification, supplement,
waiver or consent to the departure with respect to the provisions of Section 4
hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder of Registrable Securities.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by
such Holder to the Company by means of a notice given in accordance with the
provisions of this Section 5(c), which address initially is, with respect to
the Placement Agent, the address set forth in the Placement Agreement; and (ii)
if to the Company, initially at the Company's address set forth in the
Placement Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 5(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Warrant
Agent, at the address specified in the Warrant Agreement.
20
<PAGE> 22
(d) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees
of each of the parties, including, without limitation and without the need for
an express assignment, subsequent Holders; provided that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Placement Agreement.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such Person shall be entitled to receive the benefits
hereof. The Placement Agent (in its capacity as Placement Agent) shall have no
liability or obligation to the Company with respect to any failure by any other
Holder to comply with, or any breach by any other Holder of, any of the
obligations of such other Holder under this Agreement.
(e) Purchases and Sales of Registrable Securities. The
Company shall not, and shall use its best efforts to cause its affiliates (as
defined in Rule 405 under the 1933 Act) not to, purchase and then resell or
otherwise transfer any Registrable Securities.
(f) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on
the one hand, and the Placement Agent, on the other hand, and the Placement
Agent and the Holders shall have the right to enforce such agreements directly
to the extent they deem such enforcement necessary or advisable to protect the
rights of the Placement Agent or the Holders hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
21
<PAGE> 23
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
J.M. PETERS COMPANY, INC.
By: _____________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By: _____________________________
Name: Michael A. Happel
Title: Vice President
22
<PAGE> 1
Exhibit 10.18
EXECUTION COPY
________________________________________________________________________________
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of May 13, 1994
between
J.M. PETERS COMPANY, INC.
and
MORGAN STANLEY & CO. INCORPORATED
________________________________________________________________________________
<PAGE> 2
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and entered into May 13, 1994, between J.M. PETERS
COMPANY, INC., a Delaware corporation (the "Company"), and MORGAN STANLEY & CO.
INCORPORATED (the "Placement Agent").
This Agreement is made pursuant to the
Placement Agreement dated May 6, 1994, between the Company and the Placement
Agent (the "Placement Agreement"), which provides for the sale by the Company
to the Placement Agent of 10,000 units (the "Units"), each Unit consisting of
(i) ten 12-3/4% Senior Notes due 2002 of the Company (the "Notes") and (ii) 79
Warrants (each, a "Warrant"), each Warrant entitling the holder thereof to
purchase one share of Common Stock, $0.10 par value per share (the "Common
Stock"), of the Company. In order to induce the Placement Agent to enter into
the Placement Agreement, the Company has agreed to provide to the Placement
Agent and its direct and indirect transferees the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the
closing under the Placement Agreement.
In consideration of the foregoing, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement,
the following capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of
1933, as amended from time to time.
"1934 Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
"Closing Date" shall mean the Closing Date as
defined in the Placement Agreement.
"Company" shall have the meaning set forth in
the preamble and also includes the Company's
successors.
"Exchange Offer" shall mean the exchange offer
by the Company of Exchange Notes for Registrable Notes
pursuant to Section 2(a) hereof.
<PAGE> 3
"Exchange Offer Registration" shall mean a
registration under the 1933 Act effected in accordance
with Section 2(a) hereof.
"Exchange Offer Registration Statement" shall
mean an exchange offer registration statement on Form
S-4 (or, if applicable, on another appropriate form),
and all amendments and supplements to such registration
statement, in each case including the Prospectus
contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Notes" shall mean securities issued
by the Company under the Indenture containing terms
identical to the Notes (except that (i) interest
thereon shall accrue from the last date on which
interest was paid on the Notes or, if no such interest
has been paid, from the Closing Date, (ii) the transfer
restrictions thereon shall be modified or eliminated,
as appropriate and (iii) certain provisions relating to
an increase in the stated rate of interest thereon
shall be eliminated), to be offered to Holders of Notes
in exchange for such Notes pursuant to the Exchange
Offer.
"Holder" shall mean the Placement Agent, for so
long@as it owns any Registrable Notes, and each of its
successors, assigns and direct and indirect transferees
who become registered owners of Registrable Notes under
the Indenture; provided that for purposes of Sections 4
and 5 of this Agreement, the term "Holder" shall
include Participating Broker-Dealers (as defined in
Section 4(a)).
"Indenture" shall mean the Indenture relating
to the Notes dated as of the Closing Date between the
Company and United States Trust Company of New York, as
trustee, as the same may be amended from time to time
in accordance with the terms thereof.
1
<PAGE> 4
"Majority Holders" shall mean the Holders of a
majority of the aggregate principal amount of
outstanding Registrable Notes; provided that whenever
the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder,
Registrable Notes held by the Company or any of its
affiliates (as such term is defined in Rule 405 under
the 1933 Act) (other than the Placement Agent or
subsequent holders of Registrable Notes if such
subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable
Notes) shall not be counted in determining whether such
consent or approval was given by the Holders of such
required percentage or amount.
"Notes" shall have the meaning set forth in the
second paragraph of this Agreement.
"Person" shall mean an individual, partnership,
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Placement Agent" shall have the meaning set
forth in the preamble.
"Placement Agreement" shall have the meaning
set forth in the preamble.
"Prospectus" shall mean the prospectus included
in a Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Notes
covered by a Shelf Registration Statement, and by all
other amendments and supplements to such prospectus,
including post-effective amendments, and in each case
including all material incorporated by reference
therein.
2
<PAGE> 5
"Registrable Notes" shall mean the Notes;
provided, however, that the Notes shall cease to be
Registrable Notes when (i) the Exchange Offer has been
consummated, (ii) a Registration Statement with respect
to such Notes shall have been declared effective under
the 1933 Act and such Notes shall have been disposed of
pursuant to such Registration Statement, (iii) such
Notes shall have been sold to the public pursuant to
Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the 1933 Act or (iv) such
Notes shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all
expenses incident to performance of or compliance by
the Company with this Agreement, including without
limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. registration
and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or
blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters in
connection with blue sky qualification of any of the
Exchange Notes or Registrable Notes), (iii) all
expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other
documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, (v)
all fees and disbursements relating to the
qualification of the Indenture under applicable
securities laws, (vi) the fees and disbursements of the
Trustee, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf
Registration Statement, the fees and disbursements of
one counsel for the Holders (which counsel shall be
selected by the Majority Holders and which counsel may
also be counsel for the Placement Agent), and (viii)
the fees and disbursements of the independent public
accountants of the Company and any partnership or joint
venture in which the Company or any of its subsidiaries
is a partner, including the expenses of any special
audits or "cold comfort" letters required by or
incident to such performance and compliance, but
excluding fees of counsel to the underwriters (other
than fees and expenses set forth in clause (ii) above)
or the Holders (other than fees and
3
<PAGE> 6
expenses set forth in clause (vii) above) and
underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of
Registrable Notes by a Holder.
"Registration Statement" shall mean any
registration statement of the Company which covers any
of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement,
including post-effective amendments, in each case
including the Prospectus contained therein, all
exhibits thereto and all material incorporated by
reference therein.
"SEC" shall mean the Securities and Exchange
Commission.
"Shelf Registration" shall mean a registration
effected in accordance with Section 2(b) hereof.
"Shelf Registration Statement" shall mean a
"shelf" registration statement of the Company pursuant
to the provisions of Section 2(b) of this Agreement
which covers all of the Registrable Notes (but no other
securities unless approved by the Person or Persons who
have requested the Company to file the Shelf
Registration Statement) on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that
may be adopted by the SEC, and all amendments and
supplements to such registration statement, including
post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect
to the Notes under the Indenture.
"Underwritten Registration" or "Underwritten
Offering" shall mean a registration in which
Registrable Notes are sold to an Underwriter (as
hereinafter defined) for reoffering to the public.
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<PAGE> 7
2. Registration Under the 1933 Act. (a)
Exchange Offer Registration. To the extent not prohibited by any applicable
law or applicable interpretation of the Staff of the SEC, the Company shall use
its best efforts to cause to be filed after the Closing Date an Exchange Offer
Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Notes for Exchange Notes, to have such Exchange
Offer Registration Statement declared effective by the SEC not later than the
date which is 135 days after the Closing Date, and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The
Company shall commence the Exchange Offer promptly after the Exchange Offer
Registration Statement has been declared effective by the SEC and use its best
efforts to have the Exchange Offer consummated not later than 180 days after
the Closing Date. The Company shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made
pursuant to this Agreement and that all Registrable
Notes validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange
(which shall be each business day during a period of at
least 45 days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Note not tendered
will remain outstanding and continue to accrue
interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a
Registrable Note exchanged pursuant to the Exchange
Offer will be required to surrender such Registrable
Note, together with the enclosed letters of
transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New
York) specified in the notice prior to the close of
business on the last Exchange Date; and
5
<PAGE> 8
(v) that Holders will be entitled to
withdraw their election, not later than the close of
business on the last Exchange Date, by sending to the
institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the
notice, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is
withdrawing his election to have such Notes exchanged.
As soon as practicable after the last Exchange
Date, the Company or its agent shall:
(i) accept for exchange Registrable Notes
or portions thereof tendered and not validly withdrawn
pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to
the Trustee for cancellation all Registrable Notes or
portions thereof so accepted for exchange by the
Company, and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Note
equal in principal amount to the principal amount of
the Registrable Notes surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC and that no order of any
governmental agency or court of competent jurisdiction would be violated by
consummating the Exchange Offer. The Company shall inform the Placement Agent
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Placement Agent shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Registrable Notes
in the Exchange Offer.
6
<PAGE> 9
(b) Shelf Registration. (i) In the event that
(A) the Company determines that the Exchange Offer Registration provided in
Section 2(a) above is not available or in the event the Exchange Offer will not
for any reason be commenced by September 26, 1994, including the failure to
commence the Exchange Offer by such date because it would violate applicable
law or the applicable interpretations of the staff of the SEC, (B) the Exchange
Offer is not for any reason consummated by November 14, 1994 or (C) in the
opinion of counsel for the Placement Agent a Registration Statement must be
filed and a Prospectus must be delivered by the Placement Agent in connection
with any offering or sale of Registrable Notes, the Company shall use all
reasonable best efforts to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Notes, and to have such Shelf
Registration Statement declared effective by the SEC no later than November 14,
1994. In the event the Company is required to file a Shelf Registration
Statement solely as a result of the matters referred to in clause (C) of the
preceding sentence, the Company shall file and have declared effective by the
SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf Registration Statement (which may
be a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Notes held by the
Placement Agent after completion of the Exchange Offer. The Company agrees to
use all reasonable best efforts to keep the Shelf Registration Statement
continuously effective until November 14, 1997 or such shorter period that will
terminate when all of the Registrable Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement or are no
longer outstanding. The Company further agrees to supplement or amend the
Shelf Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder with respect to information relating to such Holder in order to
accurately reflect information regarding such Holder or such Holder's plan of
distribution as required by the Registration Statement, and to
7
<PAGE> 10
use all reasonable best efforts to cause any such amendment to become effective
and such Shelf Registration Statement to become usable as soon as thereafter
practicable. The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(ii) Each Holder whose Registrable
Notes are covered by a Shelf Registration Statement filed pursuant to this
Section 2(b) agrees, upon the request of the Underwriter(s) (as hereinafter
defined) in any Underwritten Offering permitted pursuant to this Agreement, not
to effect any public sale or distribution of securities of the Company of the
same class as the Registrable Notes included in such Shelf Registration
Statement, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such registration), during the 10-day period prior to, and
during the 90-day period beginning on, the closing date of any such
Underwritten Offering made pursuant to such Shelf Registration Statement, to
the extent timely notified in writing by the Company or such Underwriter(s).
The foregoing provision shall not apply to any
Holder of Registrable Notes if such Holder is prevented by applicable statute
or regulation from entering into any such agreement; provided, however, that
any such Holder shall undertake, in its request to participate in any such
Underwritten Offering, not to effect any public sale or distribution of any of
its Registrable Notes commencing on the date of sale of such Registrable Notes
unless it has provided 45 days' prior written notice of such sale or
distribution to the Underwriter(s).
(iii) The Company agrees not to effect
any public or private offer, sale or distribution of securities of the same
quality and nature of the Registrable Notes, including a sale pursuant to
Regulation D under the Act, during the 10-day period prior to, and during the
90-day period beginning on, the closing date of each Underwritten Offering
permitted pursuant to Section 6 hereof made pursuant to the Shelf Registration
Statement, to the extent timely notified in writing by the Underwriter(s) and
to cause each holder of securities of the same quality and nature as the
Registrable Notes purchased from the Company at any time on or after the date
of this Agreement to agree not to effect any public sale
8
<PAGE> 11
or distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
registration).
(c) Expenses. The Company shall pay all
Registration Expenses in connection with the registration pursuant to Section
2(a) or 2(b). Each Holder shall pay all underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of such
Holder's Registrable Notes pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An
Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a
Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed
to have become effective unless it has been declared effective by the SEC;
provided, however, that if, after it has been declared effective, the offering
of Registrable Notes pursuant to a Shelf Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Registration Statement will be
deemed not to have been effective during the period of such interference until
the offering of Registrable Notes pursuant to such Registration Statement may
legally resume. As provided for in the Indenture, if either (i) the Exchange
Offer has not been consummated or (ii) the Shelf Registration Statement has not
been declared effective by the SEC, in either case by November 14, 1994, the
interest rate on the Notes will be permanently increased by 0.5% per annum.
(e) Without limiting the remedies available to the
Placement Agent and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Placement Agent or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Placement Agent or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
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<PAGE> 12
3. Registration Procedures. In connection
with the obligations of the Company with respect to the Registration Statements
pursuant to Sections 2(a) and 2(b) hereof, the Company shall as expeditiously
as possible:
(a) prepare and file with the SEC a
Registration Statement on the appropriate form under
the 1933 Act, which form (x) shall be selected by the
Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and
(z) shall comply as to form in all material respects
with the requirements of the applicable form and
include all financial statements required by the SEC to
be filed therewith, and use all reasonable best efforts
to cause such Registration Statement to become
effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such
amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable
period under the Agreement and cause each Prospectus to
be supplemented by any required prospectus supplement
and, as so supplemented to be filed pursuant to Rule
424 under the 1933 Act;
(c) in the case of a Shelf Registration,
furnish to each Holder of Registrable Notes, to counsel
for the Placement Agent, to counsel for the Holders and
to each Underwriter of an Underwritten Offering of
Registrable Notes, if any, without charge, as many
copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and
such other documents as such Holder or Underwriter may
reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Notes; and
the Company consents to the use of such Prospectus and
any amendment or supplement thereto in accordance with
applicable law by each of the selling holders of
Registrable Notes and any such Underwriters in
connection with the offering and sale of the
Registrable Notes covered by and in the manner
described in such Prospectus or any amendment or
supplement thereto in accordance with applicable law;
10
<PAGE> 13
(d) use its reasonable best efforts to
register or qualify the Registrable Notes under all
applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes
covered by a Registration Statement shall reasonably
request in writing by the time the applicable
Registration Statement is declared effective by the
SEC, to cooperate with such Holders in connection with
any filings required to be made with the National
Association of Securities Dealers, Inc. and do any and
all other acts and things which may be reasonably
necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of
such Registrable Notes owned by such Holder; provided,
however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section
3(d), (ii) file any general consent to service of
process or (iii) subject itself to taxation in any such
jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration,
notify each Holder of Registrable Notes, counsel for
the Holders and counsel for the Placement Agent
promptly and, if requested by any such Holder, confirm
such advice in writing (i) when a Registration
Statement has become effective and when any
post-effective amendments and supplements thereto have
been filed and become effective, (ii) of any request by
the SEC or any state securities authority for
amendments and supplements to a Registration Statement
and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of
the issuance by the SEC or any state securities
authority of any stop order suspending the
effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv)
if, between the effective date of a Registration
Statement and the closing of any sale of Registrable
Notes covered thereby, the representations and
warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar
agreement, if any, relating to such offering cease to
be true and correct in all material respects or if the
Company receives any notification with respect to the
suspension of the qualification of the Registrable
Notes for sale in any jurisdiction or the
11
<PAGE> 14
initiation of any proceeding for such purpose, (v) of
the happening of any event during the period a Shelf
Registration Statement is effective which makes any
statement made in such Registration Statement or the
related Prospectus untrue in any material respect or
which requires the making of any changes in such
Registration Statement or Prospectus in order to make
the statements therein not misleading, and (vi) of any
determination by the Company that a post-effective
amendment to a Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of
a Registration Statement at the earliest possible
moment and provide prompt notice to each Holder of the
withdrawal of any such order;
(g) in the case of a Shelf Registration,
furnish to each Holder of Registrable Notes, without
charge, at least one conformed copy of each
Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration,
cooperate with the selling Holders of Registrable Notes
to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold
and not bearing any restrictive legends and enable such
Registrable Notes to be in such denominations
(consistent with the provisions of the Indenture) and
registered in such names as the selling Holders may
reasonably request at least two business days prior to
the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon
the occurrence of any event contemplated by Section
3(e)(v) hereof, use its reasonable best efforts to
prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any
other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes,
such Prospectus will not contain any untrue statement
of a material fact or omit
12
<PAGE> 15
to state a material fact necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading. The Company
agrees to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the
occurrence of such an event, and each Holder hereby
agrees to suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of
any Registration Statement, any Prospectus, any
amendment to a Registration Statement or amendment or
supplement to a Prospectus or any document which is to
be incorporated by reference into a Registration
Statement or a Prospectus after initial filing of a
Registration Statement, provide copies of such document
to the Placement Agent and its counsel (and, in the
case of a Shelf Registration Statement, the Holders and
their counsel) and make such of the representatives of
the Company as shall be reasonably requested by the
Placement Agent or its counsel (and, in the case of a
Shelf Registration Statement, the Holders or their
counsel) available for discussion of such document, and
shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment
of or supplement to a Registration Statement or a
Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a
Prospectus, of which the Placement Agent and its
counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) shall not
have previously been advised and furnished a copy or in
a form to which the Placement Agent or its counsel
(and, in the case of a Shelf Registration Statement,
the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange
Notes or Registrable Notes, as the case may be, not
later than the effective date of a Registration
Statement;
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<PAGE> 16
(l) cause the Indenture to be qualified under
the Trust Indenture Act of 1939 (the "TIA") in
connection with the registration of the Exchange Notes
or Registrable Notes, as the case may be, cooperate
with the Trustee and the Holders to effect such changes
to the Indenture as may be required for the Indenture
to be so qualified in accordance with the terms of the
TIA and execute, and use its reasonable best efforts to
cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms
and documents required to be filed with the SEC to
enable the Indenture to be so qualified in a timely
manner;
(m) in the case of a Shelf Registration,
make available for inspection by a representative of
the Holders of the Registrable Notes, any Underwriter
participating in any disposition pursuant to such Shelf
Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a
reasonable manner, all financial and other records,
pertinent documents and properties of the Company, and
cause the respective officers, directors and employees
of the Company to supply all information reasonably
requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf
Registration Statement; provided, however, that such
Underwriters, representatives, attorneys or accountants
agree to keep confidential any records, information or
documents that are designated by the Company in writing
as confidential unless such records, information or
documents are (i) available to the public, (ii) were
already in such Underwriters', representatives',
attorneys' or accountants' possession prior to its
receipt from the Company, (iii) is obtained by such
Underwriters, representatives, attorneys or accountants
from a third person who, insofar as is known to such
Underwriters, representatives, attorneys or
accountants, is not prohibited from transmitting the
information to such Underwriters, representatives,
attorneys or accountants by a contractual, legal or
fiduciary obligation to the Company, or (iv) disclosure
of such records, information or documents is required
by court or administrative order after the exhaustion
of appeals therefrom and to use such information
obtained pursuant to this provision only in
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<PAGE> 17
connection with the transaction for which such
information was obtained, and not for any other
purpose;
(n) in the case of a Shelf Registration,
use its reasonable best efforts to cause all
Registrable Notes to be listed on any securities
exchange or any automated quotation system on which
similar securities issued by the Company are then
listed if requested by the Majority Holders, to the
extent such Registrable Notes satisfy applicable
listing requirements;
(o) use its reasonable best efforts to
cause the Exchange Notes or Registrable Notes, as the
case may be, to be rated by two nationally recognized
statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder
of Registrable Notes covered by a Registration
Statement in order to accurately reflect information
regarding such Holder or such Holder's plan of
distribution as required by such Registration
Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information
with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all
required filings of such Prospectus supplement or such
post- effective amendment as soon as the Company has
received notification of the matters to be incorporated
in such filing; and
(q) in the case of a Shelf Registration,
enter into such customary agreements and take all such
other actions in connection therewith (including those
requested by the Holders of a majority of the
Registrable Notes being sold) in order to expedite or
facilitate the disposition of such Registrable Notes
including, but not limited to, an Underwritten Offering
and in such connection, (i) to the extent possible,
make such representations and warranties to the Holders
and any Underwriters of such Registrable Notes with
respect to the business of the Company and its
subsidiaries and its or its subsidiaries' joint
ventures, the Registration Statement, Prospectus and
documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in
form, substance and
15
<PAGE> 18
scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the
same if and when requested, (ii) obtain opinions of
counsel to the Company (which counsel and opinions, in
form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and
their respective counsel) addressed to each selling
Holder and Underwriter of Registrable Notes, covering
the matters customarily covered in opinions requested
in underwritten offerings, (iii) obtain "cold comfort"
letters from the independent certified public
accountants of the Company (and, if necessary, any
other certified public accountant of any subsidiary of
the Company or any joint venture in which the Company
or any of its subsidiaries is a partner, or of any
business acquired by the Company for which financial
statements and financial data are or are required to be
included in the Registration Statement) addressed to
each selling Holder and Underwriter of Registrable
Notes, such letters to be in customary form and
covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten
offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the
Holders of a majority in principal amount of the
Registrable Notes being sold or the Underwriters, and
which are customarily delivered in underwritten
offerings, to evidence the continued validity of the
representations and warranties of the Company made
pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in an
underwriting agreement.
In the case of a Shelf Registration Statement,
the Company may require each Holder of Registrable Notes to furnish to the
Company such information regarding the Holder and the proposed distribution by
such Holder of such Registrable Notes as the Company may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement,
each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(v) hereof, such
Holder will forthwith discontinue disposition of Registrable Notes pursuant to
a Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i)
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<PAGE> 19
hereof, and, if so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in its possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Notes current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Notes pursuant to a Registration Statement, the Company shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including
the date of the giving of such notice to and including the date when the
Company shall have made available to the Holders copies of the supplemented or
amended Prospectus necessary to resume such dispositions.
The Holders of Registrable Notes covered by a
Shelf Registration Statement who desire to do so may sell such Registrable
Notes in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers (the
"Underwriters") that will administer the offering will be selected by the
Majority Holders of the Registrable Notes included in such offering.
4. Participation of Broker-Dealers in
Exchange Offer. (a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Notes for its own account in the Exchange
Offer in exchange for Notes that were acquired by such broker-dealer as a
result of market making or other trading activities (a "Participating
Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the
1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act
in connection with any resale of such Exchange Notes.
The Company understands that it is the Staff's
position that if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Notes, without naming the Participating Broker-Dealers or specifying
the amount of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act
17
<PAGE> 20
in connection with resales of Exchange Notes for their own accounts, so long as
the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding
the other provisions of this Agreement, the Company agrees that the provisions
of this Agreement as they relate to a Shelf Registration shall also apply to an
Exchange Offer Registration to the extent, and with such reasonable
modifications thereto as may be reasonably requested by the Placement Agent or
by one or more Participating Broker-Dealers, in each case as provided in clause
(ii) below, in order to expedite or facilitate the disposition of any Exchange
Notes by Participating Broker-Dealers consistent with the positions of the
Staff recited in Section 4(a) above; provided that:
(i) the Company shall not be required to
amend or supplement the Prospectus contained in the
Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), for a period
exceeding 90 days after the last Exchange Date (as such
period may be extended pursuant to the penultimate
paragraph of Section 3 of this Agreement) and
Participating Broker-Dealers shall not be authorized by
the Company to deliver and shall not deliver such
Prospectus after such period in connection with the
resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration
procedures set forth in Section 3 of this Agreement
to an Exchange Offer Registration, to the extent
not required by the positions of the Staff of the
SEC or the 1933 Act and the rules and regulations
thereunder, will be in conformity with the reasonable
request to the Company by the Placement Agent or with
the reasonable request in writing to the Company by one
or more broker-dealers who certify to the Placement
Agent and the Company in writing that they are, or will
be, Participating Broker-Dealers; and provided further
that in connection with such application of the Shelf
Registration procedures set forth in Section 3 to an
Exchange Offer Registration, the Company shall be
obligated (x) to deal only with one entity representing
the Participating Broker-Dealers, which shall be the
Placement Agent unless it elects not to act as such
representative,
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<PAGE> 21
(y) to pay fees and expenses of only one counsel
representing the Participating Broker-Dealers, which
shall be counsel to the Placement Agent unless such
counsel elects not to so act and (z) to cause to be
delivered only one, if any, "cold comfort" letter with
respect to the Prospectus in the form existing on the
last Exchange Date and with respect to each subsequent
amendment or supplement, if any effected during the
period specified in clause (i) above.
(c) The Placement Agent shall have no
liability to the Company or any Holder with respect to any request that it may
make pursuant to Section 4(b) above.
5. Indemnification and Contribution. (a) The
Company agrees to indemnify and hold harmless the Placement Agent, each
Holder and each person, if any, who controls the Placement Agent or any Holder
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, the
Placement Agent or any Holder, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by the Placement Agent, any Holder or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Exchange Notes or Registrable Notes were
registered under the 1933 Act, including all documents incorporated therein by
reference, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to the Placement Agent or any Holder furnished to the Company in
writing by the Placement
19
<PAGE> 22
Agent or any selling Holder expressly for use therein. In connection with any
Underwritten Offering permitted by Section 3, the Company will also indemnify
the Underwriters, if any, selling brokers, dealers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of the
Securities Act and the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders, if requested in connection with
any Registration Statement.
(b) Each Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company, the Placement Agent, and
the other selling Holders, and each of their respective directors, officers who
sign the Registration Statement and each Person, if any, who controls the
Company, the Placement Agent, and any other selling Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to the Placement
Agent and the Holders but only with reference to information relating to such
Holder furnished to the Company in writing by such Holder expressly for use in
the Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which such person is entitled to indemnity pursuant to either paragraph (a)
or (b) above, such person (the "indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
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indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the (A) fees and expenses of more than one separate firm (in addition to any
local counsel) for the Placement Agent and all persons, if any, who control the
Placement Agent within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, (B) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either such Section and (C) the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Holders and all persons, if any, who control any Holders within the
meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving the Placement Agent
and persons who control the Placement Agent, such firm shall be designated in
writing by the Placement Agent. In such case involving the Holders and such
persons who control Holders, such firm shall be designated in writing by the
Majority Holders. In all other cases, such firm shall be designated by the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
forgoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expense of
counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party for such fees and expenses of counsel in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding
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in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to or insufficient to
hold harmless an indemnified party, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnified party or parties
on the one hand and of the indemnified party or parties on the other hand in
connection with such statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective principal amount of Registrable Notes of such
Holder that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that
it would not be just or equitable if contribution pursuant to this Section 5
were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder
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shall be required to indemnify or contribute any amount in excess of the amount
by which the total price at which the Registrable Notes sold by such Holder
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions
contained in this Section 5 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of the Placement Agent, any Holder or any person
controlling the Placement Agent or any Holder, or by or on behalf of the
Company, its officers or directors or any person controlling the Company, (iii)
acceptance of any of the Exchange Notes and (iv) any sale of Registrable Notes
pursuant to a Shelf Registration Statement.
6. Miscellaneous. (a) No Inconsistent
Agreements. The Company has not entered into, and on or after the date of this
Agreement will not enter into, any agreement which is inconsistent with the
rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(b) Amendments and Waivers. The provisions of
this Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided,
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however, that no amendment, modification, supplement, waiver or consent to the
departure with respect to the provisions of Section 5 hereof shall be effective
as against any Holder of Registrable Notes unless consented to in writing by
such Holder of Registrable Notes.
(c) Notices. All notices and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or any courier
guaranteeing overnight delivery (i) if to a Holder, at the most current address
given by such Holder to the Company by means of a notice given in accordance
with the provisions of this Section 6(c), which address initially is, with
respect to the Placement Agent, the address set forth in the Placement
Agreement; and (ii) if to the Company, initially at the Company's address set
forth in the Placement Agreement and thereafter at such other address, notice
of which is given in accordance with the provisions of this Section 6(c).
All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and on the next business day if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other
communications shall be concurrently delivered by the person giving the same to
the Trustee, at the address specified in the Indenture.
(d) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including, without limitation
and without the need for an express assignment, subsequent Holders; provided
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms of the Placement
Agreement. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be
24
<PAGE> 27
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof. The Placement Agent (in its capacity as Placement
Agent) shall have no liability or obligation to the Company with respect to any
failure by any other Holder to comply with, or any breach by any other Holder
of, any of the obligations of such other Holder under this Agreement.
(e) Purchases and Sale of Notes. The
Company shall not, and shall use its best efforts to cause its affiliates (as
defined in Rule 405 under the 1933 Act) not to purchase and then resell or
otherwise transfer any Notes.
(f) Third Party Beneficiary. The Holders
shall be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Placement Agent, on the other hand, and the
Placement Agent and the Holders shall have the right to enforce such agreements
directly to the extent they deem such enforcement necessary or advisable to
protect the rights of the Placement Agent or the Holders hereunder.
(g) Counterparts. This Agreement may be
executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York.
(j) Severability. In the event that any
one or more of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
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IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first written above.
J.M. PETERS COMPANY, INC.
By: _________________________
Name:
Title:
Confirmed and accepted as of
the date first above
written:
MORGAN STANLEY & CO. INCORPORATED
By: __________________________
Name: Michael A. Happel
Title: Vice President
26
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EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
DURABLE HOMES, INC., a Nevada Corporation
PETERS RANCHLAND, INC., a Delaware Corporation
J.M. PETERS NEVADA, INC., a Delaware Corporation
NEWPORT DESIGN CENTER, INC., a California Corporation
BAY HILL ESCROW, INC., a California Corporation
CAPITAL PACIFIC COMMUNITIES, INC., a Delaware Corporation
CAPITAL PACIFIC MORTGAGE, INC. a Delaware Corporation
