<PAGE>
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RESOURCE AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
72-0654145
(I.R.S. Employer Identification No.)
1521 Locust Street, Philadelphia, Pennsylvania 19102 (215-546-5005)
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael L. Staines, 1521 Locust Street, Philadelphia, Pennsylvania 19102
(215-546-5005)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
J. Baur Whittlesey, Esq. Dave Muchnikoff, P.C.
Ledgewood Law Firm, P.C. Silver, Freedman & Taff, L.L.P.
1521 Locust Street 1100 New York Avenue, N.W.
Philadelphia, PA 19102 Washington, D.C. 20005-3934
(215) 735-0663 (202) 682-0354
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box [ ].
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ]________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]__________.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class of Proposed Proposed maximum
securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per note(1) price(1) registration fee
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<S> <C> <C> <C> <C>
12% Senior Notes due 115,000 $1,000 $115,000,000 $34,848.48
2004
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933 based upon
the book value of the 12% Senior Notes as of November 14, 1997.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS Subject to Completion
November 14, 1997
[LOGO]
RESOURCE AMERICA, INC.
OFFER BY RESOURCE AMERICA, INC. TO EXCHANGE 12% SENIOR NOTES DUE 2004 (THE "NEW
NOTES"), WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY
AND ALL OF ITS CURRENTLY OUTSTANDING 12% SENIOR NOTES DUE 2004 (THE "OLD
NOTES").
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON FEBRUARY 15, 1998, UNLESS EXTENDED.
Resource America, Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal and related
documents (which together constitute the "Exchange Offer"), to exchange up to
$115 million aggregate principal amount of its 12% Senior Notes due 2004 (the
"New Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as defined
herein), of which this Prospectus is a part, for a like aggregate principal
amount of its currently outstanding 12% Senior Notes due 2004 (the "Old Notes"),
of which $115 million aggregate principal amount is outstanding. The Old Notes
and the New Notes are collectively sometimes referred to as the "Notes."
The terms of the New Notes are identical in all material respects
to the terms of the Old Notes, except that (i) the New Notes have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Notes, and (ii) the New Notes
will not provide for any increase in the interest rate thereon since the Old
Notes provided for such increases only in the event that the Old Notes were not
registered under the Securities Act within the period specified in the Old
Notes. See "Description of New Notes" and "Description of Old Notes." The New
Notes are being offered in exchange for the Old Notes in order to satisfy
certain obligations of the Company under the Registration Rights Agreement (the
"Registration Rights Agreement") dated July 22, 1997 between the Company and
Friedman, Billings, Ramsey & Co., Inc., the initial purchaser of the Old Notes
(the "Initial Purchaser"). In the event the Exchange Offer is consummated, any
Old Notes remaining outstanding after consummation of the Exchange Offer and the
New Notes issued in the Exchange Offer will vote together as a single class for
purposes of determining whether Holders of the requisite percentage in
<PAGE>
aggregate principal amount of Notes have taken certain actions or exercised
certain rights under the Indenture dated July 22, 1997 (the "Indenture")
pursuant to which the Old Notes were issued.
The New Notes will be unsecured general obligations of the Company
which will rank senior in right of payment to all subordinated debt of the
Company and pari passu with or senior to all existing and future general
unsecured indebtedness of the Company. The New Notes will be subordinate to all
liabilities under the Company's existing or future secured indebtedness or
indebtedness incurred under existing or future credit facilities. In addition,
the business operations of the Company are conducted through its Subsidiaries,
and accordingly, the New Notes will be effectively subordinated to all existing
and future obligations of the Company's Subsidiaries. As of September 30, 1997,
the Company and its Subsidiaries had outstanding $4.5 million of debt, with an
aggregate yearly debt service of $1.1 million, and $45 million available under
various credit facilities (which have an aggregate of $585,000 in outstanding
draws) which are senior to the New Notes, and an additional $4.2 million of
unsecured debt ranking pari passu with the New Notes. The Company has also
guaranteed performance by a Subsidiary of the Subsidiary's guarantee of a $5.5
million obligation of a special purpose financing entity.
The New Notes are not redeemable prior to August 1, 2002;
thereafter they are redeemable at the option of the Company at the redemption
prices set forth herein plus accrued interest to the redemption date. No sinking
fund is provided for the New Notes. Upon a Change in Control Event (as defined
in the Indenture), each Holder has the right to require the Company to
repurchase such Holder's Notes, in whole or in part, at 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the
repurchase date. See "Description of Old Notes" and "Description of New Notes."
The New Notes will be represented by one or more "global notes"
registered in the name of a nominee of The Depository Trust Company, as
depositary (the "Depositary"). Beneficial interests in the global notes will be
shown on, and transfer thereof will be effected only through, records maintained
by the Depositary and its participants. Owners of beneficial interests in the
global notes will not be considered Holders of the New Notes. See "Description
of Notes - Book-Entry Delivery and Form."
SEE "RISK FACTORS" COMMENCING ON PAGE 25 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS WHO TENDER OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November __, 1997.
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<PAGE>
Based upon certain interpretive letters issued by the staff of the
United States Securities and Exchange Commission (the "Commission") to third
parties in unrelated transactions, the Company is of the view that Holders of
the Old Notes (other than any Holder who is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who exchange their Old Notes
pursuant to the Exchange Offer generally may offer such New Notes for resale,
resell such New Notes and otherwise transfer such New Notes without compliance
with the registration and prospectus-delivery provisions of the Securities Act,
provided such New Notes are acquired in the ordinary course of the Holder's
business and such Holder has no arrangement with any person to participate in a
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. (See "Plan of
Distribution"). In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or in
compliance with an available exemption from registration or qualification. The
Company has agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the New Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
Holder of the New Notes reasonably requests in writing. If a Holder of Old Notes
does not exchange such Old Notes pursuant to the Exchange Offer, such Old Notes
will continue to be subject to the restrictions on transfer referred to in the
legend thereon. In general, the Old Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the Exchange Offer. (See
"Risk Factors--Consequences of a Failure to Exchange Old Notes;" "The Exchange
Offer--Resales of New Notes.")
Each Holder of Old Notes who wishes to exchange Old Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not
a broker-dealer, such Holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
In addition, the Company may require such Holder, as a condition of such
Holder's eligibility to participate in the Exchange Offer, to furnish to the
Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended [the "Exchange Act"]) on behalf of whom such
Holder holds the Old Notes to be exchanged in the Exchange Offer. Each
broker-dealer
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<PAGE>
that receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes for its own account as the result of
market-making activities or other trading activities, and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based upon the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Company believes that broker-dealers who acquired Old Notes for their
own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their
prospectus-delivery requirements with respect to the New Notes received upon
exchange of such Old Notes with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for the Exchange Offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Notes. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions of the Registration
Rights Agreement, the Company has agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Notes for a period of 180
days after the Expiration Date (as defined herein), or, if earlier, when all
such New Notes have been disposed of by such Participating Broker-Dealer. (See
"Plan of Distribution.") Any Participating Broker-Dealer (or other person) who
is an "affiliate" of the Company, and any person acquiring New Notes in the
Exchange Offer with the intent of participating in a distribution of the New
Notes, cannot rely upon the interpretive letters of the commission referred to
above and must comply with the registration and prospectus-delivery requirements
of the Securities Act in connection with any resale transaction. (See "The
Exchange Offer--Resales of New Notes.")
Each Participating Broker-Dealer who surrenders Old Notes pursuant
to the Exchange Offer will be deemed to have agreed, by execution of the Letter
of Transmittal or delivery of an Agent's Message (as defined herein), that, upon
receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect, or which causes
this Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the
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<PAGE>
sale of New Notes pursuant to this Prospectus until the Company has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited
secondary market and no public market for the Old Notes. The New Notes will be a
new issue of securities for which there currently is no market. Although the
Initial Purchaser, has informed the Company that it currently intends to make a
market in the New Notes, it is not obligated to do so, and any such
market-making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the New
Notes. The Company does not currently intend to apply for listing of the New
Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Indenture (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the Holders of Old Notes will
continue to be subject to all of the existing restrictions upon transfer
thereof, and the Company will have no further obligation to such Holders (other
than under certain limited circumstances) to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered Old Notes could be adversely affected. (See "Risk
Factors--Consequences of a Failure to Exchange Old Notes.")
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on February 15, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Company (in which case, the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended). Tenders of Old Notes may
be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions, which may be waived by the Company, and to the terms and provisions
of the Registration Rights Agreement. Old Notes may be tendered in whole or in
part in a principal amount of not less than $1,000 or any integral multiple of
$1,000 in excess thereof. The
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<PAGE>
Company has agreed to pay all expenses of the Exchange Offer. (See "The Exchange
Offer----Fees and Expenses.") Each New Note will pay interest from the most
recent Interest Payment Date (as defined herein) for the Old Notes surrendered
in exchange for such New Notes or, if no interest payments have been paid on
such Old Notes, from July 22, 1997. Holders of the Old Notes whose Old Notes are
accepted for exchange will not receive interest payments on such Old Notes for
any period from and after the last Interest Payment Date for such Old Notes, or,
if no such interest payments have been made, will not receive any interest
payments on such Old Notes, and will be deemed to have waived the right to
receive any interest payments on such Old Notes from and after such Interest
Payment Date or, if no such interest payments have been made or duly provided
for, from and after July 22, 1997. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered Holders of Old Notes as of November
1, 1997.
The Company will not receive any cash proceeds from the
issuance of the New Notes offered hereby. No dealer-manager is being
used in connection with this Exchange Offer. (See "Use of Proceeds"
and "Plan of Distribution.")
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PAGE
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Available Information..........................................................7
Incorporation of Certain Documents by Reference................................8
Forward Looking Statements.....................................................9
The Company...................................................................10
Summary of Exchange Offer.....................................................15
The New Notes.................................................................20
Risk Factors..................................................................24
Ratio of Earnings to Fixed Charges............................................36
Use of Proceeds...............................................................36
Capitalization................................................................36
The Exchange Offer............................................................37
Description of The New Notes..................................................51
Description of Old Notes......................................................80
Certain Federal Income Tax Consequences.......................................81
Plan of Distribution..........................................................84
Validity of The New Notes.....................................................85
Experts.......................................................................85
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, copies of such documents may be obtained through the Commission's
Internet address at http://www.sec.gov. The Company's Common Stock is authorized
for quotation on Nasdaq and, accordingly, such materials and other information
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement
on Form S-4 (No. 333-____) (together with any amendments thereto, the
"Registration Statement"), under the Securities Act, with respect to the
securities offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, omits certain information contained in the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information
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<PAGE>
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and financial statements, notes
and schedules filed as part thereof or incorporated by reference therein, which
may be inspected at the public reference facilities of the Commission, at the
addresses set forth above. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete, and
in each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or incorporated by
reference therein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed with the Commission
(File No. 0-4408) pursuant to Section 13 of the Exchange Act, are incorporated
by reference herein and made a part hereof: (i) the Company's Annual Report on
Form 10-K for the year ended September 30, 1996; (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996; (iii) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iv) the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (v)
the Company's Current Report on Form 8-K dated June 24, 1997; (vi) the Company's
Current Report on Form 8-K dated July 11, 1997; (vii) the Company's Current
Report on Form 8-K dated July 22, 1997; and (viii) the Company's Current Report
on Form 8-K dated September 3, 1997.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. All information
appearing in this Prospectus should be read in conjunction with, and is
qualified in its entirety by, the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference, except to the extent set forth in the immediately preceding
statement.
The Company will provide without charge to each person to whom
this Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference (other than exhibits not
specifically incorporated by reference therein). Written or oral requests for
such copies should be directed
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<PAGE>
to: Secretary, Resource America, Inc., 1521 Locust Street, Philadelphia,
Pennsylvania 19102 (215) 546-5005.
FORWARD LOOKING STATEMENTS
This Prospectus, including any document incorporated herein by
reference, contains certain forward-looking statements that involve substantial
risks and uncertainties as more fully described below. When used in this
Prospectus or in any such documents incorporated herein by reference, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as they
relate to the Company or its management are intended to identify such
forward-looking statements. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Commission, or in press releases or oral statements made
by or with the approval of an authorized executive officer of the Company. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's future
operating results include, without limitation, the effect of publicity on demand
for the Company's services, general economic conditions, the Company's ability
to attract and retain highly skilled managerial personnel, continued market
acceptance of the Company's services, the timing and complexity of large
transactions and competition in the marketplace. See "Risk Factors."
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THE COMPANY
General
The Company is a specialty finance company engaged in three lines
of business: real estate finance, "small ticket" commercial equipment leasing
and energy operations, including natural gas and oil production. For
approximately 25 years prior to 1991, the Company was principally involved in
the energy industry. Following the acquisition of a significant ownership
position in the Company by new stockholders in 1988 and the appointment of new
senior management (whose Chairman has been a senior officer of banking and other
financial institutions for the past 30 years), the Company's management
evaluated alternative strategies to expand and diversify its operations.
Since 1991, the Company's business strategy has focused on
locating and developing niche finance businesses in which the Company can
realize attractive returns by targeting well-defined financial services markets
and by developing specialized skills to service those markets on a
cost-effective basis. To date, the Company has developed two business lines:
real estate finance and equipment leasing. Within its real estate finance line,
the Company has developed a commercial mortgage loan acquisition and resolution
business line and a business line consisting of the origination, purchase
servicing and sale of non-conforming mortgage loans, secured by single-family
residences. Its equipment leasing operations include small ticket lease
financing for its own account and management of six publicly-owned equipment
leasing partnerships.
The Company was organized in 1947. Its executive offices are
located at 1521 Locust Street, Philadelphia, Pennsylvania 19102, and its
telephone number is (215) 546-5005.
Real Estate Finance
Commercial Mortgage Loan Acquisition and Resolution. The Company's
commercial mortgage loan acquisition and resolution business involves the
purchase at a discount of troubled commercial real estate mortgage loans at
purchase prices generally ranging from $1 million to $10 million from private
market sellers (primarily financial institutions), and the restructuring and
refinancing of those loans. These loans typically involve legal and other
disputes among the lender, the borrower and/or other parties in interest, and
generally are secured by properties which are unable to produce sufficient cash
flow to fully service the loans in accordance with the original lender's loan
terms. Since entering this business in 1991, the Company's aggregate commercial
loan mortgage portfolio has increased to $234 million (before discounts) at
September 30, 1997. During the fiscal years ended September 30, 1995, 1996 and
1997, the Company's yield on its net investment in commercial mortgage loans
acquired (including gains on refinancings and sales of senior lien interests)
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equalled 34.6%, 36.2% and 34.6%, respectively, while its gross profits from its
commercial mortgage loan activities (that is, revenues from commercial mortgage
loan activities minus costs attributable thereto and less depreciation,
depletion and amortization, but without allocation of corporate overhead) for
fiscal years 1995, 1996 and 1997 were million, $5.3 million, $6.7 million and
$17.6 million, respectively.
The Company seeks to reduce the amount of its own capital invested
in commercial mortgage loans after their acquisition, and to enhance its
returns, through prompt refinancing of the properties underlying its loans, or
through sale at a profit of senior lien interests in its loans (typically on a
recourse basis). The Company may also seek to sell loans at a profit without
retaining a junior lien interest; however, except for certain proposed sales to
a real estate investment trust which the Company is sponsoring (see "The Company
- - Recent Developments") no such sales have been arranged to date, and there can
be no assurance that any such sales will be arranged in the future. At September
30, 1997, senior lenders held outstanding obligations of $55.5 million, secured
by properties with an aggregate appraised value of $125 million, resulting in a
ratio of senior lien obligations-to-appraised value of property of 44%. At
September 30, 1997, the operating cash flow coverage on the required debt
service on refinancings and senior lien interests (exclusive of proceeds from
such refinancings or senior lien interests) was 268%. The balance of operating
cash flow is, pursuant to agreements with the borrowers, retained by the Company
as debt service on the outstanding balance of the Company's loans.
Residential Mortgage Originations. The Company's residential
mortgage lending business consists of making first and second mortgage loans on
single family residences to borrowers who do not conform to guidelines
established by Fannie Mae due to past credit impairment or other reasons. The
Company also originates mortgage loans on 2-4 family residences and small
mixed use (residential and commercial) properties. Through Fidelity Mortgage
Funding, Inc. ("FMF"), the Company is licensed as a mortgage lender in 16 states
and is currently originating loans in eight states (Connecticut, Delaware,
Indiana, Kentucky, Maryland, Mississippi, North Carolina and Virginia). The
Company began mortgage lending activities effective October 1, 1997. As of
November 12, 1997, FMF funded 40 loans with an aggregate principal amount of
$1.7 million. As of November 6, 1997, FMF had approximately 56 loan
applications, with an aggregate principal amount of $3.3 million, pending.
Equipment Leasing
In September 1995, the Company entered the commercial leasing
business through its acquisition of the leasing subsidiary of a regional
insurance company. This acquisition provided the Company with a servicing
portfolio of approximately 520 individual leases held by six leasing
partnerships which provided the Company with a servicing revenue stream of $1.1
million during fiscal 1996 and $864,000 during fiscal 1997. More importantly,
through this
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acquisition the Company acquired an infrastructure of operating systems,
computer hardware and proprietary software (generally referred to as a
"platform"), as well as personnel, which the Company has utilized to develop a
commercial leasing business for its own account.
In order to develop this business, in early 1996 the Company hired
a team of four experienced leasing executives, including the former chief
executive officer of the U.S. leasing subsidiary of Tokai Bank, a major Japanese
banking institution. The Company's strategy in developing its leasing business
is to focus on leases with equipment costs of between $5,000 to $100,000 (with a
targeted average transaction of approximately $10,000 per lease) ("small ticket"
leasing) and to market its equipment leasing products nationwide through vendor
programs with equipment manufacturers, regional distributors and other vendors.
The Company has currently entered into vendor program relationships with nine
vendors: Minolta Corporation (copiers), Celsis Incorporated (microbial testing
systems), American Marbacom Communications (Teleco) (telephone systems), CSI
(test equipment), Telrad Telecommunications (telephone systems), CT Solutions
(computer telephony), ATI Communications (telephone systems), the National
Association of College Stores (affinity program) and Millipore Corp. (test
equipment). In addition, Lucent Technologies (telecommunication equipment) has
designated the Company as an authorized lessor for its dealer distribution
channel. The Company believes that its targeted market is under-served by
equipment lessors, banks and other financial institutions, affording the Company
a niche market with significant growth potential. From the inception of leasing
activity for its own account in June 1996 through September 30, 1997, the
Company had received 8,373 lease proposals involving equipment with an aggregate
cost of $96.6 million, approved 4,689 such proposals involving equipment with an
aggregate cost of $53.1 million, and entered into 3,214 transactions involving
equipment with an aggregate cost of $34.7 million and had 538 such proposals
pending with an aggregate cost of $7.2 million. During fiscal 1997, the Company
sold equipment leases with an aggregate net book value of approximately $30.2
million to a special purpose financing entity owned by a third party in return
for cash of $20.6 million and notes aggregating $13.3 million (of which $8.5
million has since been paid). The aggregate gain on such sale was $3.7 million.
The Company has retained servicing on all equipment leases heretofore sold by it
and at September 30, 1997, had a servicing portfolio of $36.4 million (at cost)
of such leases.
Energy Operations
The Company produces natural gas and, to a lesser extent, oil from
locations principally in Ohio, Pennsylvania and New York. At September 30, 1997,
the Company had a net investment of $11.4 million in its energy operations,
including interests in 1,057 individual wells owned directly by the Company or
through 65 partnerships and joint ventures managed by the Company. While the
Company has focused its business development efforts on its specialty finance
operations
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over the past several years, its energy operations historically have provided a
steady source of cash flow and tax benefits.
Recent Developments
Real Estate Finance. Since June 30, 1997, the Company has acquired
or originated mortgage loans with an aggregate outstanding balance (at September
30, 1997) of $59.2 million carried at a cost of $34.3 million. The properties
underlying these loans have an aggregate appraised value of $52.5 million. At
September 30, 1997, senior lenders held outstanding obligations of $1.5 million
with respect to these loans. During the period, the Company sold $9.8 million of
senior lien interests in two mortgage loans held by it; in one other mortgage
loan, the borrower obtained $2.5 million of refinancing.
The Company is sponsoring a real estate investment trust ("REIT")
which has filed a registration statement with the Commission. The REIT's primary
business will be to acquire or originate mortgage loans in situations that,
generally, do not conform to the underwriting standards of institutional lenders
or sources that provide financing through securitization. Although the REIT may
acquire mortgage loans at a discount, it seeks to acquire such loans where the
workout process has been initiated and where, unlike the mortgage loans acquired
by the Company, there is no need for the REIT's active intervention. It is
anticipated that the REIT will begin operations in December, 1997.
As sponsor of the REIT, the Company will acquire 9.8% of the
REIT's common shares of beneficial interest, at an anticipated cost of
approximately $13.7 million, and have the right to purchase up to 15% of the
REIT's common shares. So long as the Company owns 5% or more of the REIT's
common shares, the Company will have the right to nominate one person to the
REIT's board of trustees. The Company will sell twelve of its mortgage loans
(with a cost basis to the Company of $23.4 million) to the REIT as part of the
REIT's initial investments for $29.7 million. The Company may sell further loans
to the REIT, to a maximum of 30% of the REIT's investments (on a cost basis),
excluding the initial investments. Betsy Z. Cohen, spouse of the Company's
Chairman and Chief Executive Officer, is the Chairman and Chief Executive
Officer of the REIT. Their son, Jonathan Z. Cohen, is the Company's nominee to
the REIT's board of trustees. To mitigate potential conflicts of interest, the
Company has agreed to certain restrictions for a period of two years following
completion of the REIT's offering of common shares, including agreements not to
sponsor another mortgage REIT and to provide certain rights of first refusal on
mortgage investments originated or sought to be sold by the Company.
Residential Mortgage Lending. FMF, the Company's residential
mortgage lending subsidiary, acquired Tristar Financial Services, Inc.
("Tristar"), an originator
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of non-conforming residential mortgage loans, in November 1997 for 47,147 shares
of the Company's common stock and cash of $998,000. Tristar originated $46
million and $51 million of residential mortgage loans for the year ended
December 31, 1996 and for the ten months ended October 31, 1997, respectively.
Sources of Funds. On July 24, 1997, Physicians Insurance Company
of Ohio ("PICO") exercised warrants held by it to purchase 983,150 shares of the
Company's Common Stock for an aggregate purchase price of $3.7 million. PICO
subsequently sold such shares. In connection with these transactions, John R.
Hart (a PICO officer and director) resigned as a director of the Company.
On September 23, 1997, FMF entered into a $5 million facility with
CoreStates Bank, bearing interest at either (i) CoreStates prime rate, (ii) the
federal funds rate plus 250 basis points, or (iii) an adjusted London Interbank
Offered Rate ("LIBOR") plus 150 basis points, with the rate to be elected by
FMF, and with the right in FMF to elect different rate formulas for separate
draws under of the credit facility. The facility will be secured by a first lien
interest in the loans being financed by facility draws. Under the facility, FMF
is required to maintain a minimum tangible net worth of $1 million, and a debt
to tangible net worth ratio of 5 to 1 (where debt includes the unused portion of
any financing commitment but excludes subordinated debt). The facility expires
on September 22, 1998 unless renewed by the parties. There is currently no
outstanding debt under this facility.
On October 16, 1997, FMF established a $15 million warehouse
credit facility with Morgan Stanley Mortgage Capital, Inc., bearing interest at
the London Interbank Offered Rate ("LIBOR") or, if unavailable, the interbank
eurodollars market rate, plus 90 basis points (currently 6.54%). The facility is
secured by a first lien interest in the loans being financed by facility draws.
Under the facility FMF is required to maintain tangible net worth (capital and
subordinated debt minus advances to affiliates and intangible assets
representing start up costs in excess of $1 million), and a ratio of total
indebtedness to tangible net worth of 10 to 1. The facility expires on October
16, 1998. FMF currently has $585,000 of outstanding debt under the Morgan
Stanley facility.
On October 9, 1997, the Company obtained a $5 million credit
facility from Keybank. For purposes of acquiring oil and gas assets, the
facility permits draws based on a percentage of reserves of oil and gas
properties pledged as security for the facility. Draws under the facility bear
interest at Keybank's prime rate plus 25 basis points. The facility requires the
Company to maintain a tangible net worth in excess of $31 million, a 2 to 1
ratio of assets to liabilities, a 1.5 to 1 ratio of cash flow to maturities of
long-term debt coming due within the calculation period and a ratio of adjusted
debt to tangible
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net worth of not more than 2 to 1. The facility terminates on June 30, 1999.
Other Developments. Scott F. Schaeffer and Daniel G. Cohen
have become Executive Vice Presidents and Directors of the Company.
The Company has appointed Steven J. Kessler as Senior Vice
President and Chief Financial Officer. Mr. Kessler was Vice President (Finance
and Acquisitions) at Kravco Company (a national shopping center developer and
operator) from March 1994 until joining the Company. Prior thereto, from 1983
through March of 1994, he was Chief Financial Officer and Chief Operating
Officer at Strouse Greenberg & Co., Inc., a regional full service real estate
company, and Vice President (Finance) and Chief Accounting Officer at its
successor, The Rubin Organization. Prior thereto, he was a partner at the
international accounting and consulting firm of Touche Ross & Co. (now Deloitte
& Touche LLP), Philadelphia, Pennsylvania.
SUMMARY OF EXCHANGE OFFER
The Exchange Offer........................... Up to $115,000,000 aggregate
principal amount of New Notes are
being offered in exchange for a
like aggregate principal amount of
Old Notes. Old Notes may be
tendered for exchange in whole or
in part in a principal amount of
not less than $1,000 or any
integral multiple of $1,000 in
excess thereof. The Company is
making the Exchange Offer in order
to satisfy its obligations under
the Registration Rights Agreement
related to the Old Notes.
(For a description of the
procedures for tendering Old
Notes, see "The Exchange Offer--
Procedures for Tendering Old
Notes.")
Expiration Date.............................. 5:00 p.m., New York City time, on
February 15, 1998 (such time on
such date being hereinafter called
the "Expiration Date") unless the
Exchange Offer is extended by the
Company (in which case the term
"Expiration Date" shall mean the
latest date and time to which the
Exchange Offer is extended). (See
"The Exchange Offer-Expiration
Date; Extensions; Amendments.")
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<PAGE>
Conditions to the Exchange
Offer...................................... The Exchange Offer is subject to
certain conditions, which may be
waived by the Company in its sole
discretion. The Exchange Offer is
not conditioned upon any minimum
principal amount of Old Notes
being tendered. (See "The Exchange
Offer--Conditions to the Exchange
Offer.")
The Company reserves the right in
its sole and absolute discretion,
subject to applicable law, at any
time and from time to time, (i) to
delay the acceptance of the Old
Notes for exchange, (ii) to
terminate the Exchange Offer if
certain specified conditions have
not been satisfied, (iii) to
extend the Expiration Date of the
Exchange Offer and retain all Old
Notes tendered pursuant to the
Exchange Offer, subject, however,
to the right of Holders of Old
Notes to withdraw their tendered
Old Notes, or (iv) to waive any
condition or otherwise amend the
terms of the Exchange Offer in any
respect. (See "The Exchange
Offer-Expiration Date; Extensions;
Amendments.")
Withdrawal Rights............................ Tenders of Old Notes may be
withdrawn at any time on or prior
to the Expiration Date by
delivering a written notice of
such withdrawal to the Exchange
Agent (as defined herein) in
conformity with certain procedures
set forth below under "The
Exchange Offer--Withdrawal
Rights."
Procedures for Tendering Old
Notes...................................... Tendering Holders of Old Notes
must complete and sign a Letter of
Transmittal in accordance with the
instructions contained therein and
forward the same by mail,
facsimile or hand delivery,
together with any other required
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<PAGE>
documents, to the Exchange Agent,
either with the Old Notes to be
tendered or in compliance with the
specified procedures for
guaranteed delivery of Old Notes.
Certain brokers, dealers,
commercial banks and other
nominees may also effect tenders
by book-entry transfer, including
an Agent's Message in lieu of the
Letter of Transmittal. Holders of
Old Notes registered in the name
of a broker, dealer, commercial
bank, trust company or other
nominee are urged to contact such
person promptly if they wish to
tender Old Notes pursuant to the
Exchange Offer. (See "The Exchange
Offer-Procedures for Tendering Old
Notes.") Letters of Transmittal
and certificates representing Old
Notes should not be sent to the
Company. Such documents should
only be sent to the Exchange
Agent. Questions regarding how to
tender and requests for
information should be directed to
the Exchange Agent. See "The
Exchange Offer--Exchange Agent."
Sales of New Notes........................... The Company believes that New
Notes issued pursuant to this
Exchange Offer in exchange for Old
Notes may be offered for resale,
resold and otherwise transferred
by a Holder thereof (other than a
Holder who is a broker-dealer)
without further compliance with
the registration and prospectus
delivery requirements of the
Securities Act, provided that such
New Notes are acquired in the
ordinary course of such Holder's
business and that such Holder is
not participating, and has no
arrangement or understanding, with
any person to participate, in a
distribution (within the meaning
of the Securities Act) of such New
Notes. However, any Holder of Old
Notes who is an "affiliate" of the
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<PAGE>
Company or who intends to
participate in the Exchange Offer
for the purpose of distributing
the New Notes, or any
broker-dealer who purchased the
Old Notes from the Company to
resell pursuant to Rule 144A or
any other available exemption
under the Securities Act, (a) will
not be permitted or entitled to
tender such Old Notes in the
Exchange Offer and (b) must comply
with the registration and
prospectus delivery requirements
of the Securities Act in
connection with any sale or other
transfer of such Old Notes unless
such sale is made pursuant to an
exemption from such requirements.
In addition, as described below,
if any broker-dealer holds Old
Notes acquired for its own account
as a result of market-making or
other trading activities
("Participating Broker-Dealers")
and exchanges such Old Notes for
New Notes, then such broker-dealer
must deliver a prospectus meeting
the requirements of the Securities
Act in connection with any resales
of such New Notes.
Each Holder of Old Notes who
wishes to exchange Old Notes for
New Notes in the Exchange Offer
will be required to represent that
(i) it is not an "affiliate" of
the Company, (ii) any New Notes to
be received by it are being
acquired in the ordinary course of
its business, (iii) it has no
arrangement or understanding with
any person to participate in a
distribution (within the meaning
of the Securities Act) of such New
Notes, and (iv) if such Holder is
not a broker-dealer, such Holder
is not engaged in, and does not
intend to engage in, a
distribution (within the meaning
of the Securities Act) of such New
Notes. Each broker-dealer that
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<PAGE>
receives New Notes for its own
account pursuant to the Exchange
Offer must acknowledge that it
acquired the Old Notes for its own
account as the result of market-
making activities or other trading
activities and must agree that it
will deliver a prospectus meeting
the requirements of the Securities
Act in connection with any resale
of such New Notes. The Letter of
Transmittal states that by so
acknowledging and by delivering a
prospectus, a broker-dealer will
not be deemed to admit that it is
an "underwriter" within the
meaning of the Securities Act.
Participating Broker-Dealers may
fulfill their prospectus-delivery
requirements with respect to the
New Notes received upon exchange
of such Old Notes with a
Prospectus meeting the
requirements of the Securities
Act, which may be this Prospectus,
as it may be amended or
supplemented from time to time,
for a period ending 180 days after
the Expiration Date or, if
earlier, when all such New Notes
have been disposed of by such
Participating Broker-Dealer. (See
"Plan of Distribution.") Any
Participating Broker-Dealer who is
an "affiliate" of the Company and
any Participating Broker who
purchased the Old Notes from the
Company for resale must comply
with the registration and
prospectus delivery requirements
of the Securities Act in
connection with any resale
transaction. (See "The Exchange
Offer-Resales of New Notes.")
Exchange Agent............................... The exchange agent with respect to
the Exchange Offer is The Bank of
New York (the "Exchange Agent").
The addresses, and telephone and
facsimile numbers of the Exchange
Agent are set forth in "The
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<PAGE>
Exchange Offer--Exchange Agent"
and in the Letter of Transmittal.
Use of Proceeds.............................. The Company will not receive any
cash proceeds from the issuance of
the New Notes offered hereby. (See
"Use of Proceeds.")
Certain United States Federal
Income Tax Considerations;
ERISA Considerations....................... Holders of Old Notes should review
the information set forth under
"Certain Federal Income Tax
Consequences" and "ERISA
Considerations" prior to tendering
Old Notes in the Exchange Offer.
THE NEW NOTES
Securities Offered........................... $115 million aggregate principal
amount of 12% Senior Notes due
August 1, 2004.
Interest Payment Dates....................... Semi-annually on February 1 and
August 1 of each year commencing
August 1, 1998.
Optional Redemption.......................... The New Notes will be redeemable,
in whole or in part, at the option
of the Company at any time on or
after August 1, 2002 at the
redemption prices set forth
herein, plus accrued and unpaid
interest, if any, to the
redemption date. See "Description
of Notes - Optional Redemption."
Mandatory Redemption......................... None.
Sinking Fund................................. None.
Ranking...................................... The New Notes will be senior
general unsecured obligations of
the Company ranking pari passu
with or senior to the Company's
existing and future general
unsecured indebtedness. Subject to
certain limitations, the Company
and its Subsidiaries may incur
additional indebtedness in the
future; however, the Company
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<PAGE>
may not issue any pari passu or
junior indebtedness with a
maturity date prior to the
maturity date of the New Notes.
Because the Company is a holding
company that currently conducts
substantially all of its
operations through its
Subsidiaries, the right of the
Company (and therefore the right
of the Company's creditors and
stockholders) to participate in
any distribution of the assets or
earnings of any Subsidiary is
subject to the prior claims of
creditors of such Subsidiaries,
including any claims of the
Company as a creditor to the
extent such claims may be
recognized. As a result, the New
Notes will be effectively
subordinate to the claims of
creditors of the Company's
Subsidiaries.
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<PAGE>
Repurchase at Option
of Holders Upon Change
of Control................................. Under the Indenture pursuant to
which the Old Notes were issued,
upon a Change of Control Event (as
defined herein; see "Description
of Notes - Certain Definitions"),
Holders of the New Notes will have
the option to require the Company
to repurchase all outstanding
Notes at 101% of their principal
amount, plus accrued interest to
the date of repurchase. A "Change
of Control Event" includes the
following events, among others:
the acquisition by any person or
group (other than the Existing
Management Group (as defined
herein) of the Company) of more
than 40% of the Company's voting
stock; a merger, consolidation or
other business combination between
the Company and another person in
which more than 40% of the voting
stock of the surviving or
transferee company is owned by
persons other than the Existing
Management Group of the Company or
a change in a majority of the
directors on the Board of
Directors of the Company within a
two-year period which is not
approved by the incumbent
directors. There can be no
assurance that the Company will
have the funds available to
repurchase the New Notes in the
event of a Change of Control
Event.
Certain Covenants............................ The Indenture contains certain
covenants that, among other
things, require the Company to
maintain certain levels of
Consolidated Net Worth (as defined
herein) and liquid assets, limit
the ability of the Company and its
Subsidiaries to incur certain
indebtedness (not including
secured indebtedness used to
acquire or refinance the
acquisition of loans, equipment
leases or other assets), pay
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<PAGE>
dividends or make other
distributions, engage in
transactions with affiliates,
dispose of Subsidiaries, create
certain liens and guarantees with
respect to pari passu or junior
indebtedness and enter into any
arrangement that would impose
certain restrictions on the
ability of Subsidiaries to make
dividend and other payments to the
Company. The Indenture also
restricts the Company's ability to
merge, consolidate or sell all of
its assets. See "Description of
New Notes--Certain Covenants."
Absence of Market
for the New Notes.......................... The New Notes will be new
securities for which there is
currently no trading market.
Although the Company has been
advised by the Initial Purchaser
that, it presently intends to make
a market in the New Notes, the
Initial Purchaser is under no
obligation to do so and may
discontinue any market making
activities at any time without
notice. Accordingly, there can be
no assurance as to the development
or liquidity of any market for the
New Notes. The Company does not
intend to apply for listing of the
New Notes, on any securities
exchange or through the National
Association of Securities Dealers
Automated Quotation System.
Holders tendering the Old Notes in the Exchange Offer should carefully
consider the matters set forth under "Risk Factors."
For further information regarding the New Notes, see "Description
of the New Notes."
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating the New Notes
before deciding whether to accept the Exchange Offer. The risk factors set forth
below are generally applicable to the Old Notes as well as the New Notes.
General
Consequences of a Failure to Exchange the Old Notes. The Old Notes
have not been registered under the Securities Act or any state securities laws
and therefore may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act and any
other applicable securities laws, or pursuant to an exemption therefrom or in a
transaction not subject thereto, and in each case in compliance with certain
other conditions and restrictions. The Old Notes which remain outstanding after
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, Holders of the Old Notes which remain outstanding will not be entitled to
any rights to have such Old Notes registered under the Securities Act or to any
similar rights pursuant to the Registration Rights set forth in the Indenture.
The Company does not intend to register under the Securities Act any of the Old
Notes which remain outstanding after consummation of the Exchange Offer.
A Holder's ability to sell untendered Old Notes could be adversely
affected. In addition, although the Old Notes have been designated for trading
in the Private Offerings, Resale and Trading through Automatic Linkages
("PORTAL") market, to the extent that the Old Notes are tendered and accepted in
connection with the Exchange Offer, any trading market for the Old Notes which
remain outstanding after the Exchange Offer could be adversely affected.
The New Notes and any Old Notes which remain outstanding after
the consummation of the Exchange Offer will vote together as a single
class. See "Description of the New Notes."
The Old Notes provide that if (i) the Registration Statement is
not filed with the Commission on or prior to November 15, 1997, (ii) the
Registration Statement is not declared effective on or prior to December 30,
1997 or (ii) the Exchange Offer is not consummated on or prior to February 15,
1998, the interest rate borne by the Old Notes shall be increased by one-half
percent per annum following November 15, 1997 in the case of clause (i) above,
or following December 30, 1997 in the case of clause (ii) above, or following
February 15, 1998 in the case of clause (iii) above, which rate will be
increased by an additional one-half of one percent for each 90-day period that
such additional interest continues to accrue. The aggregate amount of such
increase from the original interest rate
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<PAGE>
pursuant to these provisions will in no event exceed one percent per annum.
Following consummation of the Exchange Offer, the Old Notes will not be entitled
to any increase in the interest rate thereon. The New Notes will not be entitled
to any such increase in the interest rate thereon. See "Description of Old Notes
- -- Registration Rights."
Absence of Public Market; Trading Characteristics of the Old
Notes. The Old Notes were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for the New Notes.
Although the New Notes will generally be permitted to be resold or otherwise
transferred by the Holders (who are not affiliates of the Company) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
The Company has been advised by the Initial Purchaser that the Initial Purchaser
presently intends to make a market in the New Notes. However, the Initial
Purchaser is not obligated to do so and any market-making activity with respect
to the New Notes may be discontinued at any time without notice. In addition,
such market-making activity will be subject to the limitations imposed by the
Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the New Notes or as to the liquidity of or the trading
market for the New Notes. If an active public market does not develop, the
market price and liquidity of the New Notes may be adversely affected.
The Company does not intend to have the New Notes quoted on the
NASDAQ National Market System or listed on any securities exchange.
If a public trading market develops for the New Notes, future
trading prices of such securities will depend upon many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending upon prevailing
interest rates, the market for similar securities and other factors including
the financial condition of the Company, the New Notes may trade at a discount.
Notwithstanding the registration of the New Notes in the Exchange
Offer, Holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Company may publicly offer for sale or resell the New Notes only in
compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in
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<PAGE>
connection with any resale of such New Notes. See "Plan of Distribution."
Exchange Offer Procedures. Issuance of the New Notes in exchange
for the Old Notes pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal or Agent's Message in lieu thereof, and all other
required documents. Therefore, Holders of Old Notes desiring to tender such Old
Notes in exchange for New Notes should allow sufficient time to ensure timely
delivery. Neither the Company nor the Exchange Agent is under any duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange.
Priority of Notes. As with the Old Notes, the New Notes will be
unsecured general obligations of the Company which will rank senior in right of
payment to all subordinated debt (that is, debt which by its terms is expressly
subordinated to the New Notes) and pari passu with or senior to all other
existing or future unsecured debt. Any current and future secured debt, and debt
under existing or future credit facilities, will have priority over the New
Notes with respect to the assets securing such debt. The Indenture permits the
Company to incur both secured and unsecured debt in the future, subject to
specific limitations (see "Description of the Old Notes--Certain Covenants"),
although the Indenture prohibits the Company from incurring pari passu or junior
debt with a maturity prior to that of the New Notes. As of September 30, 1997,
the Company and its Subsidiaries had outstanding $4.5 million of debt (excluding
the Old Notes), with an aggregate yearly debt service of $1.1 million, and $45
million available under various credit facilities (which have an aggregate of
$585,000 in outstanding draws) which will be senior to the New Notes, and an
additional $4.2 million of unsecured debt ranking pari passu with the New Notes.
The Company has also guaranteed performance by a Subsidiary of the Subsidiary's
guarantee of a $5.5 million obligation of a special purpose financing entity.
Ability to Service New Notes. The Company's ability to repay the
New Notes, and any other debt it incurs, will depend directly upon the Company's
future operating performance which is subject to numerous factors beyond the
Company's control including prevailing economic conditions, changes in interest
rate levels, the performance of the Company's mortgage loan and equipment lease
portfolios and other factors. Although the Company believes that cash available
from operations and financing activities will be sufficient to make required
debt service payments on the New Notes as and when due, a significant portion of
the Company's earnings derives from accretion of discount on its portfolio of
mortgage loans. It is anticipated that, in the future, the Company's earnings
will include amounts attributable to the amortization of the residual value of
leased equipment. The ability of the Company to realize accreted discounts and
residual values, and the timing of such realizations, may affect the Company's
ability to pay debt service on the New Notes or to
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<PAGE>
repurchase any New Notes tendered upon a Change in Control Event (as defined in
the Indenture), or repay principal and accrued interest on the New Notes on
their maturity or upon an Event of Default (as defined in the Indenture). See
"Description of Old Notes," "Risk Factors--Real Estate Finance Considerations:
Possible Fluctuations in Earnings from Asset Acquisition and Resolution
Business" and "-- Equipment Leasing Considerations: Financing for Equipment
Leasing Operations" and "--Residuals." In addition, the Company has pledged the
stock of its leasing Subsidiaries (Fidelity Leasing, Inc. and its holding
company, Resource Leasing, Inc.) as security for the credit facility relating to
its equipment leasing operations. A default on such facility, if it were to
result in foreclosure on the stock of either or both Subsidiaries, would
materially adversely affect the Company's ability to service the New Notes.
Holding Company Structure; Limitations on Access to Cash Flow of
Operating Companies; Effective Subordination. The New Notes will be obligations
solely of the Company, which is a holding company with no material business
operations of its own. The Company's assets consist primarily of its ownership
interests in its operating Subsidiaries through which all of the operations of
the Company are conducted. The Subsidiaries are separate and distinct legal
entities which have no obligation, contingent or otherwise, to pay any amounts
due under the New Notes or to make any funds available to the Company to enable
it to make payments on the New Notes. In addition, to the extent that any of the
operating Subsidiaries generates positive cash flow, the Company may be unable
to access such cash flow because of credit or other borrowing agreements to
which such Subsidiaries are or may become parties that restrict the payment of
dividends or other distributions to the Company. The New Notes also will be
effectively subordinated to all existing and future indebtedness and other
liabilities of the Company's Subsidiaries because the Company's right, as sole
or primary shareholder, to receive the assets of any such entities upon their
liquidation, dissolution or reorganization will be effectively subordinated to
the claims of such entities' creditors. To the extent that the Company is itself
recognized as a creditor of any such Subsidiary, the claims of the Company could
still be subordinated to the claims of such entities' trade creditors as well as
any indebtedness of such entity that is senior in right of payment to the
Company's claim or that is secured by the assets of any such entity. At
September 30, 1997, the Company's Subsidiaries had liabilities aggregating $3.8
million, all of which constituted indebtedness permitted under the Indenture.
Ability to Generate Funding for Growth. The success of the
Company's future operations will be largely dependent upon the continued
availability of funds for its real estate finance and equipment leasing
operations. Funding for the Company's real estate finance operations has
heretofore been derived from internally generated funds, a portion of the
proceeds from the sale of the Old Notes, prior financings which have heretofore
been repaid, sales by the Company of senior lien interests in its portfolio
loans,
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borrowers' refinancing of their mortgage obligations and a portion of the
proceeds of the Company's sale of common stock in December 1996. Funding for the
Company's residential mortgage origination operations will be initially provided
by internally available funds. It is anticipated that funding for the Company's
real estate finance operations in the future will be derived from internally
generated funds and existing or future third-party sources.
Funding for the Company's equipment leasing operations has,
through the date of this Prospectus, been provided by internally generated
funds, a portion of the proceeds of the December 1996 common stock offering, a
portion of the proceeds from the sale of the Old Notes, by the sale of equipment
leases during the first six months of fiscal 1997 and the Company's existing
leasing credit facility. Future funding will be obtained through third-party
warehouse financing (full recourse, short-term borrowings secured by the
underlying equipment and repaid with the proceeds of permanent funding) and
third-party permanent funding (bank term loans, lease portfolio sales and
securitization of lease portfolios).
The availability of third-party financing for each of the
Company's specialty finance businesses will be dependent upon a number of
factors over which the Company has limited or no control, including general
conditions in the credit markets, the size, pricing and liquidity of the market
for the types of real estate loans or equipment leases in the Company's
portfolio and the financial performance of the loans and equipment leases in the
Company's portfolio. There can be no assurance that the Company will be able to
generate funding on satisfactory terms and in acceptable amounts.
Any failure to renew or obtain adequate funding under a warehouse
credit facility or other borrowing could have a material adverse effect on the
Company's results of operations and financial condition. To the extent the
Company is not successful in maintaining or replacing existing financing, the
Company would have to curtail its activities, thereby having a material adverse
effect on the Company's results of operations and financial condition.
Ability to Generate Growth Opportunities. The success of the
Company's operations will also depend on its continued ability to generate
attractive opportunities for acquiring commercial mortgage loans at a discount
and to originate equipment leases and its ability in the future to originate and
resell residential mortgage loans. In each area, the Company will rely primarily
upon the knowledge, experience and industry contacts of its senior management to
generate investment opportunities. There can be no assurance that the Company
will generate opportunities satisfactory to it or sufficient to sustain growth
or that, in its commercial mortgage loan acquisition and resolution activities,
the Company will be able to acquire loans in the same manner, on similar terms
or at similar levels of discount as its current portfolio loans. The
availability of commercial mortgage loans for acquisition on terms acceptable to
the Company, and
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the ability of the Company to originate satisfactory equipment leases and
residential mortgage loans, will be dependent upon a number of factors over
which the Company has no control, including economic conditions, interest rates,
the market for and value of properties securing loans which the Company may seek
to acquire, and the willingness of financial institutions to dispose of troubled
or under-performing mortgage loans in their portfolios.
Risks Related to Management of Growth. The Company has undergone a
period of significant growth, and further expansion may significantly strain the
Company's management, financial and other resources. There is no assurance that
the Company can manage its growth effectively or that the Company will be able
to attract and retain the personnel necessary to meet its business objectives.
If the Company is unable to manage its growth effectively, the Company's
business, operating results and financial condition could be materially
adversely affected.
Credit Risks. Mortgage loans and equipment leases are subject to
the risk of default in payment by borrowers and lessees. Defaults by borrowers
and lessees could adversely affect the Company's financial position. Upon a
default, the Company will have the responsibility of seeking to recover
outstanding loan or lease balances through foreclosure, repossession of
equipment or similar procedures. With respect to any particular mortgage loan or
equipment lease, instituting any of these procedures could adversely impact the
Company's yield on such loan or lease. There can be no assurance that, in the
event of default, the amount realizable from the property securing a defaulted
loan or the equipment subject to a defaulted lease will be sufficient to recover
amounts invested by or owed to the Company. See "Risk Factors--Real Estate
Finance Considerations: Lien Priority" and "--Equipment Leasing Considerations:
Residuals."
The commercial mortgage loans acquired in the Company's asset
acquisition and resolution operations are typically not the general obligations
of the borrower and, accordingly, in seeking to collect amounts owed on a loan,
the Company must rely solely on the value of the property underlying the loan to
satisfy the obligation. This value will be affected by numerous factors beyond
the Company's control, including general or local economic conditions,
neighborhood real property values, interest rates, operating expenses (such as
real estate taxes and insurance costs), occupancy rates and the presence of
competitive properties. In addition, most of the Company's loans require a
substantial lump sum payment at maturity. The ability of a borrower to pay a
lump sum, and thus the ability of the Company to collect promptly all amounts
due upon maturity, may be dependent on the borrower's ability to obtain suitable
refinancing or otherwise raise a substantial amount of cash which, in turn, will
depend upon factors (such as those referred to previously) over which the
Company has no control. To the extent that the Company has sold a senior lien
position in a loan, or the loan has been refinanced, the Company will typically
retain a subordinated interest in the loan, which in certain
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instances may be unsecured. See "Risk Factors--Real Estate Finance
Considerations: Lien Priority." Such retained interests are subject to
materially increased risks of collection upon default.
The Company anticipates that many of the end-users of the
equipment it leases for its own account will be small businesses which may not
be able to supply the kinds of financial information available from larger
businesses, and which may be more susceptible to changes in economic conditions
or have lesser financial resources with which to meet lease obligations than
larger businesses. Although the Company will seek to mitigate this risk through
the use of its credit scoring, asset tracking and loan servicing and collection
systems and procedures, there can be no assurance that the Company will not be
subject to higher risks of default than firms leasing to larger entities.
Credit Facility Restrictions. The Company anticipates that it may
be required to provide credit enhancement for debt incurred as a part of any
warehouse or permanent financing utilized in its equipment leasing operations.
See "Risk Factors--General: Ability to Generate Funding for Growth." These
credit enhancements may include cash deposits, funding of subordinated tranches
of securitizations, the pledge of additional mortgage loans, equipment leases or
other collateral which are funded by the Company's capital, and/or (as is the
case with the Company's existing credit equipment leasing and residential
mortgage facilities) a guaranty by the Company of any facility obtained by a
Subsidiary. Each of the Company's existing credit facilities also contains
restrictive covenants concerning maintenance by the Company of minimum capital
levels or debt to equity ratios. Any such requirements may reduce the Company's
liquidity and require it to obtain additional capital.
The Company anticipates that warehouse financing (as is the case
with the Company's existing credit facilities) will bear interest at variable
rates while its permanent funding will typically be at fixed rates set at the
time the financing is provided. Accordingly, the Company will be subject to
interest rate risk to the extent interest rates increase between the time a
mortgage loan or equipment lease is funded by warehouse facilities and the time
of permanent funding. Increases in interest rates during this period could
narrow or eliminate the spread between the effective interest rates on the
Company's equipment leases and the rates on the Company's funding, or result in
a negative spread.
Competition. In each of its business operations, the Company is
subject to intense competition from numerous competitors, many of whom possess
far greater financial and other resources than the Company. The Company will
also have to compete for the capital necessary to fund both its real estate
finance and equipment leasing operations based largely upon the performance of
the mortgage loans and equipment leases it generates or acquires. See "Risk
Factors-- General: Credit Risks."
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Real Estate Finance Considerations
Troubled Status of Acquired Commercial Mortgage Loans and
Underlying Properties. The Company seeks to acquire commercial mortgage loans at
a discount from both the unpaid principal and interest amounts of the loans and
the appraised value of the underlying properties. As a consequence, the Company
will frequently be involved with loans which are the subject of contentious and
often complex disputes among various parties regarding application of cash flow
from the underlying properties, loan terms, lease terms or similar matters, or
which are secured by properties that, while income producing, are unable to
generate sufficient revenues to pay the full amount of debt service under the
original loan terms. Although, prior to acquisition of a loan, the Company will
generally negotiate with the borrower or other parties in interest and, where
appropriate, make financial accommodations to take into account the operating
conditions of an underlying property, resolve outstanding disputes and ensure
the Company's control of the cash flow from the underlying property, there can
be no assurance that the underlying property will not be subject to recurrence
of the problems which existed prior to the Company's acquisition of the loan, or
other problems.
Lien Priority. Although in its asset acquisition and resolution
operations the Company normally acquires first mortgage loans, it is not limited
as to the lien priority of a loan which it may acquire. Moreover, a lender
refinancing a loan in the Company's portfolio will typically require, as a
condition to its refinancing, that the Company's remaining interest in the loan
be subordinated to such lender's interest. The Company currently holds 32 junior
lien loans or subordinated lien interests. For seven prior loans, (constituting
8.3% by book value, of the Company's real estate loans), the refinancing lender
did not permit the loan to be formally secured by a recorded mortgage (although
the loans are secured by judgment liens, unrecorded deeds in lieu of
foreclosure, borrowers' covenants not to further encumber the property without
the Company's consent, or similar devices). In addition, in certain
circumstances, mortgage loans, including first mortgage loans, may be subject to
mechanics', materialmens' or government liens which may be prior in right of
payment to liens held by the Company. To the extent that either the lien
securing a loan is junior to other liens encumbering an underlying property or
the loan is not secured by a perfected mortgage lien, the Company will be
subject to greater risks of loss upon a default. See "Risk Factors--General:
Credit Risks." In the event of a default on a senior mortgage, the Company may
make payments, if it has the right to do so, in order to prevent foreclosure on
the senior mortgage, increasing its investment cost without necessarily
improving its lien position.
In the event of a foreclosure, the Company will only be entitled
to share in the net proceeds after the payment of all senior lienors, including
senior mortgagees, and holders of mechanics', materialmens' and government
liens. It is therefore possible that the
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total amount which may be recovered by the Company upon a foreclosure may be
less than the outstanding balance of the loan or the Company's investment in the
loan, with resultant loss to the Company. It is also possible that, in some
cases, a "due on sale" clause included in a senior mortgage, which accelerates
the amount due under the senior mortgage in case of the sale of the property,
may apply to the sale of the property upon foreclosure of a junior loan, and may
accordingly increase the risks to the Company in the event of a default by the
borrower on the junior loan.
Environmental Liabilities. In the event of a default on a
portfolio loan, the Company may acquire the underlying property through
foreclosure. There is a risk that hazardous substances, wastes, contaminants or
pollutants would be discovered on the foreclosed property after acquisition by
the Company. In such event, the Company might be required to remove such
substances from the property at its sole cost and expense. There can be no
assurance that the cost of such removal would not substantially exceed the value
of the affected property or the loan secured by the property, that the Company
would have adequate remedies against the prior owner or other responsible
parties or that the Company would not find it difficult or impossible to sell
the affected properties either prior to or following any such removal.
Disposition of Acquired Commercial Loan Interests. In its
commercial mortgage loan acquisition and resolution operations, after the
Company has acquired a loan, the Company will typically sell a senior lien
position in the loan, or assist the borrower in obtaining third-party
refinancing, while retaining a junior lien position in the loan. Although the
sale of a senior lien position or a refinancing often results in the return of
the entire amount of (or, in some cases, more than) the Company's investment in
the loan (including amounts advanced to the borrower after loan acquisition), in
most such sales or refinancings a reduced portion of the Company's investment in
the loan remains unrecovered. Based upon the appraised value of the properties
underlying the loans, the Company believes that it will recover amounts
substantially in excess of the Company's remaining invested capital; however,
there can be no assurance that, upon termination of the loan, the borrower will
be able to repay the loan in an amount equal to or in excess of the Company's
remaining investment in such loan or that, if the borrower is not able to do so,
the Company will be able to dispose of its remaining loan interest for an amount
equal to or in excess of its remaining investment or that the property
underlying the loan can be disposed of for an amount equal to or in excess of
the interests of senior lienors and the Company's remaining investment.
Sales of Senior Lien Positions to Institutional Investor. Senior
lien positions in nine of the Company's portfolio loans have been sold to an
institutional investor. Pursuant to the terms of these sales, if the borrower
under any such loan defaults in the payment of debt service, the Company is
required to replace the defaulted
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obligation with a performing one. Since the Company has sold senior positions
in, or refinanced, most of its current portfolio loans, if the Company were
required to replace a defaulted loan with a performing loan, it may not be able
to do so without acquiring additional commercial real estate loans. If the
Company could not fulfill its obligation, the institutional investor would have
various legal remedies including foreclosure on and sale of the underlying
property (see "Risk Factors--General: Credit Risks"), or requiring the Company
to repay its senior lien position. There can be no assurance that borrowers on
one or more of such loans will not default or that, in such event, the Company
would be able to acquire additional commercial real estate loans to substitute,
if a replacement loan is not so acquired and substituted, that the investor
would not seek to require the Company to repay it.
Loss Reserves. The Company records the investments in its loan
portfolio at cost, which is significantly discounted from the face value of, and
accrued interest and penalties on, the loans. The cost basis in the loans is
reviewed periodically to determine that it is not greater than the sum of the
projected cash flows and appraised values of the underlying properties. If the
cost basis is found to be greater, the Company provides an appropriate allowance
through a charge to operations. The Company did not establish any reserves with
respect to its portfolio loans for fiscal 1994, 1995 and 1996. For the year
ended September 30, 1997, the Company recorded an allowance of $400,000. There
can be no assurance that future charges to operations will not occur or that the
actual amount of such charges will not be materially greater than the amount of
the charge for the particular period.
Obligation of Company to Acquire Interest of, or Repay, Existing
Senior Lienors. The Company is required to repurchase three senior loans held by
a single lender in the event that the loans are not repaid, in accordance with
their terms, by June 27, 2002, September 29, 2002 and September 27, 2011,
respectively. These senior loans have an aggregate outstanding balance of $12.6
million at September 30, 1997. In addition, the Company is required to
repurchase a senior lien interest in one of the Company's portfolio loans held
by a single lender in the event that the senior lien interest is not repaid by
May 21, 2002.
Possible Fluctuations in Earnings from Asset Acquisition and
Resolution Business. A material portion of the Company's revenues from its
commercial mortgage loan acquisition and resolution business is derived from the
sale of senior lien positions in, or refinancings of, its portfolio loans. These
sales and refinancings are, with respect to any one loan, non-recurring.
Accordingly, the Company's ability to recognize these gains in the future will
depend upon its continuing ability to acquire loans and the sale of senior lien
positions in, or refinancings of, such loans. See "Risk Factors--General:
Ability to Generate Growth Opportunities." Moreover, depending upon the timing
of portfolio acquisitions and sales of
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senior lien positions or refinancings, the Company's revenues from its
commercial mortgage loan acquisition and resolution business could be subject to
significant fluctuations from period to period.
Residential Mortgage Loan Originations. In addition to the risks
usually associated with mortgage lending (see "Risk Factors -- General: Credit
Risks" and "Risk Factors - Real Estate Finance Considerations: Lien Priority"
and "--Real Estate Finance Considerations: Environmental Liability"), the
Company's residential mortgage loan origination business, may involve a number
of risks, including loan quality risks (principally involving the risk that
loans not conforming to FNMA and FHLMC guidelines or loans to credit impaired
borrowers may result in higher rates of default than conforming loans), the
potential dependence of the Company's revenues from residential mortgage lending
on its ability to sell or securitize its residential mortgage loans (and the
possible contingent liability of the Company in any such sale or securitization
for the repurchase of some or all defaulted loans sold or securitized) and
claims made against the Company for breaches of fiduciary duty,
misrepresentations, violations of federal or state laws relating to truth in
lending, equal credit opportunity, settlement procedures, mortgage disclosure,
debt collection practices or similar matters. As a new business line,
residential mortgage loan origination is also subject to the risks, expenses and
difficulties frequently encountered in the establishment of a new business which
may materially adversely affect the Company's ability to develop the business,
and the Company's investment in it.
Equipment Leasing Considerations
Limited Equipment Leasing Operating History. The Company acquired
the equipment leasing operations of The Fidelity Mutual Life Insurance Company
("Fidelity") in September 1995 and, in 1996, the Company expanded these leasing
operations to include small ticket equipment leasing for its own account.
Although the leasing business acquired by the Company has been in operation
since 1986, and the executives primarily responsible for developing the
Company's proprietary leasing program have had lengthy experience in the
equipment leasing industry, the Company has only a limited amount of direct
experience upon which an evaluation of its prospects in the equipment leasing
business can be based.
Demand for Company's Equipment Leasing Services. The demand for
the equipment leasing services provided by the Company is subject to numerous
factors beyond the control of the Company, including general economic
conditions, fluctuations in interest rate levels and fluctuations in demand for
the types of equipment as to which the Company provides equipment leases. In
addition, the demand for the Company's equipment lease services will be
materially affected by the ability of the Company to market its services to
manufacturers, regional distributors and other vendors.
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Residuals. The Company anticipates that a significant portion of
the Company's revenues from leasing operations may result from the sale or
re-leasing of equipment upon lease termination or from the extension of lease
terms beyond their initial expiration dates ("residuals"). The Company's
realization of residuals will be subject to numerous factors beyond the
Company's control, including the ability or willingness of a lessee to continue
a lease or acquire the equipment, equipment obsolescence, excessive supply of
similar equipment, reductions in manufacturer's prices for similar equipment and
similar matters, which could materially adversely affect the amount of residuals
obtainable by the Company and, accordingly, the operating results and financial
condition of the Company.
Energy Industry Considerations
Market for Production. Historically, the availability of a ready
market for oil and natural gas, and the price obtained therefor, has depended
upon numerous factors including the extent of domestic production, import of
foreign natural gas and/or oil, political instability in oil and gas producing
countries and regions, market demand, the effect of federal regulation on the
sale of natural gas and/or oil in interstate commerce, and other governmental
regulation of the production and transportation of natural gas and/or oil.
Certain other factors outside the Company's control, such as operational and
transportation difficulties of pipeline or oil purchasing companies, may also
limit sales. In addition, the marketability of natural gas depends upon the
needs of the purchasers to which the producer has access. Depending upon the
purchasers' needs, the price obtainable for natural gas produced by the Company,
or the amount of natural gas which the Company is able to sell, the revenues of
the Company may be materially adversely affected.
Possible Decline in Production. Production of oil and gas from a
particular well generally declines over time until it is no longer economical to
produce from the well, at which time the well is plugged and abandoned. The
Company's wells have been drilled at various times from 1966 to the present. The
Company's wells generally have productive lives of 15 to 20 years and have been
subject to normal production declines. To date, these declines have been offset
largely by the acquisition of additional wells and, to a materially lesser
extent, drilling of new wells. The Company cannot predict whether the Company
will acquire further energy assets or as to the timing or cost thereof.
Environmental Liabilities. Oil and gas operations are subject to
numerous hazards (such as seepage, spillage of well substances such as brine or
oil, and escape of oil or gas from wells, tanks or pipelines) which can cause
substantial pollution damage to the environment or severely damage the property
of others. While the Company maintains liability insurance coverage and has not
had a material environmental incident, there can be no assurance that
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incidents will not occur in the future or that the liability resulting therefrom
will not be substantial.
Importance of Key Employees
The Company's future success will depend upon the continued
services of the Company's senior management and, with respect to its leasing
operations, the Chairman and Chief Executive Officer of its leasing subsidiary.
The unexpected loss of the services of any of these management personnel could
have a material adverse effect upon the Company. The Company does not maintain
key man life insurance on, nor (except for employment agreements with Edward E.
Cohen, the Chairman, Chief Executive Officer and President of the Company,
Abraham Bernstein, the Chairman and Chief Executive Officer of its leasing
operations, and Daniel G. Cohen, the Chairman and Chief Executive Officer of the
Company's residential mortgage origination business and an Executive Vice
President of the Company) does it have employment agreements with, any of its
senior management.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed
charges of the Company for the respective periods indicated (unaudited).
For The
For The Years Ended September 30, Nine Months
--------------------------------- Ended
1992 1993 1994 1995 1996 June 30,1997
---- ---- ---- ---- ---- ------------
Ratio of Earnings to
Fixed Charges:.........(1) 16.45 4.89 4.07 9.44 6.95
- ----------------------
(1) Earnings in 1992 were inadequate to cover fixed charges by $506,000.
The ratio of earnings to fixed charges is calculated by dividing
income from continuing operations before income taxes, extraordinary gains and
cumulative effect of a change in accounting principal plus fixed charges by
fixed charges. Fixed charges represent total interest expense, including
amortization of debt expense and discount relating to indebtedness.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance
of the New Notes offered hereby.
CAPITALIZATION
The following table sets forth the consolidated capitalization of
the Company as of September 30, 1997, and as adjusted for the exchange of the
New Notes for the Old Notes. The following data should be read in
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conjunction with the consolidated financial statements and notes thereto of the
Company incorporated by reference herein. The issuance of the New Notes will
have no effect on the capitalization of the Company.
<TABLE>
<CAPTION>
As of September 30, 1997
------------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Current portion of long-term debt $ 708 $ 708
Long-term debt:
Equipment lease credit facility 0 0
Other debt 3,786 3,786
Notes 0 115,000
Old Notes 115,000 0
-------- --------
Total long-term debt $119,494 $119,494
======== ========
Stockholders' equity
Preferred Stock, $1.00 par value, 1,000,000
shares authorized, none issued $ 0 $ 0
Common Stock, $.01 par value, 8,000,000
shares authorized, 5,410,645 shares issued
and outstanding 54 54
Additional paid-in capital 56,787 56,787
Retained earnings 22,005 22,005
Less cost of treasury shares (13,664) (13,664)
Less loan receivable from ESOP (353) (353)
-------- --------
Total stockholders' equity 64,829 64,829
-------- --------
Total capitalization $184,323 $184,323
======== ========
</TABLE>
THE EXCHANGE OFFER
Purpose and effect of the Exchange Offer
In connection with the sale of the Old Notes, and pursuant to the
Indenture, the Company granted certain Registration Rights to the Initial
Purchaser, pursuant to which the Company agreed, among other things, to file on
or before November 15, 1997 and to use its best efforts to cause to become
effective on or before December 30, 1997 with the Commission the Registration
Statement with respect to the exchange of the New Notes with terms identical in
all material respects to the terms of the Old Notes. The Registration Rights
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual
obligations of the Company under the Registration Rights Agreement. The form and
terms of the New Notes are the same as the form and terms of the Old Notes
except that the New Notes have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Notes and will not provide for any increase in the interest rate
thereon.
In that regard, the Old Notes provide, among other things, that, in
the event that either (i) the Registration Statement is not filed with the
Commission on or prior to November 15, 1997, (ii) the Registration Statement is
not declared effective on or prior to
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December 30, 1997, or (iii) the Exchange Offer is not consummated on or prior to
February 15, 1998 or a Shelf Registration Statement is not declared effective on
or prior to February 15, 1998, the interest rate borne by the Old Notes shall be
increased by one-half of one percent per annum following November 15, 1997 in
the case of clause (i) above, December 30, 1997 in the case of clause (ii) above
or February 15, 1998 in the case of clause (iii) above, which rate will be
increased by an additional one-half of one percent per annum for each 90-day
period that any such additional interest continues to accrue; provided that the
aggregate increase in such interest rate will in no event exceed one percent per
annum.
In the event that any changes in law or the applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer or if for any other reason the Registration Statement
is not declared effective on or prior to December 30, 1997, the Exchange Offer
is not consummated on or prior to February 15, 1998, any Holder of the Old Notes
(other than the Initial Purchaser) is not eligible to participate in the
Exchange Offer or upon the request of the Initial Purchaser under certain
circumstances, the Company will at its cost, (a) as promptly as practicable,
file with the Commission a Shelf Registration Statement covering resales of the
Old Notes, (b) use its best efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act on or prior to February 15, 1998
(or promptly in the event of a request by the Initial Purchaser) and (c) use its
best efforts to keep effective the Shelf Registration Statement for a period of
two years after its effective date (or for a period of one year after such
effective date if such Shelf Registration Statement is filed at the request of
the Initial Purchaser or, for such shorter period, when all of the Old Notes
covered by the Shelf Registration Statement have been sold pursuant thereto).
The Company will, in the event of the filing of a Shelf Registration Statement,
provide to each Holder of the Old Notes copies of the prospectus which is a part
of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Old Notes has become effective and take certain
other actions as are required to permit unrestricted resales of the Old Notes. A
Holder of Old Notes who sells such Old Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling security Holder in
the related prospectus and to deliver the prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a Holder (including
certain indemnification obligations). In addition, each Holder of the Old Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Old Notes included in the Shelf Registration Statement
and to benefit from the provisions regarding liquidated damages set forth in the
following paragraph.
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Upon (x) the filing of the Registration Statement after November
15, 1997, (y) the effectiveness of the Registration Statement after December 30,
1997, or (z) the day before the date of the consummation of the Exchange Offer
or the effectiveness of a Shelf Registration Statement, as the case may be,
after February 15, 1998, the interest rate borne by the Old Notes from the date
of such filing, effectiveness or the day before the date of the consummation, as
the case may be, will be reduced by the full amount of such increase from the
original interest rate of the Old Notes; provided, however, that, if after any
such reduction in interest rate, a different event specified in clause (i), (ii)
or (iii) above occurs, the interest rate may again be increased and thereafter
reduced pursuant to the foregoing provisions.
If the Exchange Offer is consummated, Old Notes that remain
outstanding thereafter and the New Notes issued in connection with the Exchange
Offer will be treated as a single class of securities under the Indenture.
The Exchange Offer is not being made to, nor will the Company
accept tenders for exchange from, Holders of Old Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "Holder" with
respect to the Exchange Offer means any person in whose name the Old Notes are
registered on the books of the Company, or any person whose Old Notes are held
of record by The Depository Trust Company who desires to deliver such Old Notes
by book-entry transfer at The Depository Trust Company.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is an exhibit to the Registration Statement of which
this Prospectus is a part.
Terms of the Exchange
The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, to exchange up to $115,000,000 aggregate principal amount of New
Notes for a like aggregate principal amount of Old Notes properly tendered on or
prior to the Expiration Date and not properly withdrawn in accordance with the
procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate Liquidation Amount of up to $115,000,000 of New
Notes in exchange for a like principal amount of outstanding Old Notes tendered
and accepted in connection with the Exchange Offer. Holders may tender their Old
Notes in whole or in part in denominations of not less than $1,000 or any
integral multiple thereof.
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The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered. As of the date of this Prospectus
$115,000,000 aggregate principal amount of the Old Notes is outstanding.
Holders of the Old Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Notes which are not tendered
for or are tendered but not accepted in connection with the Exchange Offer will
remain outstanding and be entitled to the benefits of the Indenture, but will
not be entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors-- Consequences
of a Failure to Exchange Old Notes" and "Description of the Old Notes."
If any tendered Old Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of the Old Notes in connection with the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer.
THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATION TO
HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS
PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF
ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The term "Expiration Date" means 5:00 p.m., New York City time, on
February 15, 1998 unless the Exchange Offer is extended by the Company (in which
case the term "Expiration Date") shall mean the latest date and time to which
the Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Old Notes for exchange, (ii) to terminate the
Exchange Offer (whether or not any of
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the Old Notes have theretofore been accepted for exchange) if the Company
determines in its sole and absolute discretion, that any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have occurred
or exist or have not been satisfied, (iii) to extend the Expiration Date of the
Exchange Offer and retain all of the Old Notes tendered pursuant to the Exchange
Offer, subject, however, to the right of Holders of the Old Notes to withdraw
their tendered Old Notes as described under "--Withdrawal Rights," and (iv) to
waive any condition or otherwise amend the terms of the Exchange Offer in any
respect. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, or if the Company waives a material condition
of the Exchange Offer, the Company will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
Holders of the Old Notes, and the Company will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment
will be followed promptly by oral or written notice thereof to the Exchange
Agent and by making a public announcement thereof, and such announcement in the
case of an extension will be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall not have any
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
Acceptance for the Exchange and Issuance of New Notes
Upon the terms and subject to the conditions of the Exchange Offer,
the Company will exchange, and will issue to the Exchange Agent, the New Notes
for the Old Notes validly tendered and not withdrawn (pursuant to the withdrawal
rights described under "--Withdrawal Rights") promptly after the Expiration
Date.
In all cases, delivery of the New Notes in exchange for the Old
Notes tendered and accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of (i) the Old Notes or a
book-entry confirmation of a book-entry transfer of the Old Notes into the
Exchange Agent's account at The Depository Trust Company ("DTC"), including an
Agent's Message if the tendering Holder has not delivered a Letter of
Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of the Old Notes into the Exchange Agent's
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account at DTC. The term "Agent's Message" means a message, transmitted by DTC
to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgement from
the tendering participant, which acknowledgement states that such participant
has received and agreed to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such a participant.
Subject to the terms and conditions of the Exchange Offer, the
Company will be deemed to have accepted for exchange, and thereby exchanged, the
Old Notes validly tendered and not withdrawn as, if and when the Company gives
oral or written notice to the Exchange Agent of the Company's acceptance of such
Old Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will
act as agent for the Company for the purpose of receiving tenders of the Old
Notes, Letters of Transmittal and related documents, and as agent for tendering
Holders for the purpose of receiving the Old Notes, Letters of Transmittal and
related documents and transmitting the New Notes to validly tendering Holders.
Such exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Notes tendered
pursuant to the Exchange Offer is delayed (whether before or after the Company's
acceptance for exchange of the Old Notes) or the Company extends the Exchange
Offer or is unable to accept for exchange or exchange the Old Notes tendered
pursuant to the Exchange Offer, then, without prejudice to the Company's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes
and such Old Notes may not be withdrawn except to the extent tendering Holders
are entitled to withdrawal rights as described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, or Agent's Message in lieu
thereof, a Holder of the Old Notes will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer the Old Notes, that the Company will acquire good,
marketable and unencumbered title to the tendered Old Notes free and clear of
all liens, restrictions, charges and encumbrances, and the Old Notes tendered
for exchange are not subject to any adverse claims or proxies. The Holder also
will warrant and agree that it will, upon request, execute and delivery any
additional documents deemed by the Company or the Exchange Agent to be necessary
or desirable to complete the exchange, sale, assignment, and transfer of the Old
Notes tendered pursuant to the Exchange Offer.
Procedures for Tendering Old Notes
Valid Tender. Except as set forth below, in order for the Old Notes
to be validly tendered pursuant to the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry tender, an Agent's Message
in lieu of the Letter
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of Transmittal, and any other required documents, must be received by the
Exchange Agent at one of its addresses set forth under "--Exchange Agent," and
either (i) tendered Old Notes must be received by the Exchange Agent, or (ii)
such Old Notes must be tendered pursuant to the procedures for book-entry
transfer set forth below and a book-entry confirmation, including an Agent's
Message if the tendering Holder has not delivered a Letter of Transmittal, must
be received by the Exchange Agent, in each case on or prior to the Expiration
Date, or (iii) the guaranteed delivery procedures set forth below must be
complied with.
If less than all of the Old Notes are tendered, but in no case less
than $1,000 principal amount of Old Notes, a tendering Holder should fill in the
amount of the Old Notes being tendered in the appropriate box on the Letter of
Transmittal. The entire amount of the Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATIONS, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE
TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book Entry Transfer. The Exchange Agent will establish an account
with respect to the Old Notes at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any financial institution
that is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfers. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or any Agent's Message in lieu of the Letter
of Transmittal, and any other required documents, must in any case be delivered
to and received by the Exchange Agent at its address set forth under "--
Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery
procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Notes need not be
endorsed and signature guarantees on the Letter of Transmittal are unnecessary
unless (a) a certificate for the Old Notes is registered in a name other than
that of the person surrendering the certificate or (b) such registered Holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the
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Letter of Transmittal. In the case of (a) or (b) above, such certificates for
Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
Guaranteed Delivery. If a Holder desires to tender Old Notes
pursuant to the Exchange Offer and the certificates for such Old Notes are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Old Notes may
nevertheless be tendered, provided that all of the following guaranteed delivery
procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter
of Transmittal, is received by the Exchange Agent, as
provided below, on or prior to Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing
all tendered Old Notes, in proper form for transfer, together
with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any
other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail, to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of the New
Notes in exchange for the Old Notes tendered and accepted for exchange pursuant
to the Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of the Old Notes, or of a
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book-entry confirmation with respect to such Old Notes, and a properly completed
and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
the New Notes might not be made to all tendering Holders at the same time, and
will depend upon when the Old Notes, book-entry confirmations with respect to
the Old Notes and other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of the Old Notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered Old
Notes will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. The Company reserves
the absolute right, in its sole and absolute discretion, to reject any and all
tenders determined by it not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under "--Conditions to
the Exchange Offer" or any condition or irregularity in any tender of the Old
Notes of any particular Holder whether or not similar conditions or
irregularities are waived in the case of other Holders.
The Company's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of the Old Notes will be deemed to
have been validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Company, any affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of the Old Notes that are held by or registered
in the name of a broker, dealer, commercial bank, trust
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company or other nominee or custodian is urged to contact such entity promptly
if such beneficial Holder wishes to participate in the Exchange Offer.
Resales of New Notes
The Company is making the Exchange Offer for the Old Notes in
reliance upon the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based upon these interpretations by the staff of the Division of
Corporation Finance, and subject to the two immediately following sentences, the
Company believes that New Notes issued pursuant to this Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by a Holder thereof (other than a Holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holder's business and that such Holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes. However, any Holder of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing New Notes, or any broker-dealer who purchased Old Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act, (a) will not be permitted or entitled to tender such Old
Notes in the Exchange Offer and (b) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Notes unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Notes for New
Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes.
Each Holder of Old Notes who wishes to exchange Old Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not
a broker-dealer, such Holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
In addition, the Company may require such Holder, as a
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condition to its participation in the Exchange Offer, to furnish to the Company
(or an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such Holder holds the Old Notes to be exchanged in the Exchange Offer. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Broker-dealers who acquired Old Notes for their
own accounts as a result of market-making activities or other trading activities
("Participating Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to the New Notes received upon exchange of the Old
Notes with a prospectus meeting the requirements of the Securities Act, which
may be this Prospectus, as it may be amended or supplemented from time to time
for a period ending 180 days after the Expiration Date or, if earlier, when all
such New Notes have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of
the Company and any Participating Broker-Dealer who purchased the Old Notes
specifically for resale may not use this Prospectus and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, or delivery of an Agent's Message in lieu thereof,
that, upon receipt of notice from the Company of the occurrence of any event or
the discovery of any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or which causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of the New Notes pursuant to
this Prospectus until the Company has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the Company has
given notice that the sale of the New Notes may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of the Old Notes may
be withdrawn at any time on or prior to the Expiration Date.
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In order for a withdrawal to be effective, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of the Old Notes to be withdrawn, and, if certificates for such
Old Notes have been tendered, the name of the registered Holder of the Old Notes
as set forth on the Old Notes, if different from that of the person who tendered
the Old Notes. If the Old Notes have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such Old Notes, the
tendering Holder must submit the serial numbers shown on the particular Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If the Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "-- Procedures
for Tendering Old Notes," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of the Old
Notes, in which case a notice of withdrawal will be effective if delivered to
the Exchange Agent by written or facsimile transmission. Withdrawals of tenders
of the Old Notes may not be rescinded. Old Notes properly withdrawn will not be
deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Notes which have
been tendered but which are withdrawn will be returned to the Holder thereof
promptly after withdrawal.
Interest Payments on the New Notes
Holders of Old Notes whose Old Notes are accepted for exchange will
not receive accumulated interest on such Old Notes for any period from and after
the last Interest Payment Date with respect to such Old Notes prior to the
original issue date of the New Notes or, if no such interest payment has been
made, will not receive any accumulated interest on such Old Notes, and will be
deemed to have waived the right to receive any interest on such Old Notes
accumulated from and after such Interest Payment Date or, if no such interest
has been paid or duly provided for, from and after February 1, 1997. However,
because interest on the New Notes will accumulate from February 1,
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1997, the amount of the interest received by Holders whose Old Notes are
accepted for exchange will not be affected by the exchange.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions or amend the
Exchange Offer, if any of the following conditions have occurred or exists or
have not been satisfied:
(a) there shall occur a change in the current
interpretation by the staff of the Commission which
permits the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes to be offered for
resale, resold and otherwise transferred by Holders
thereof (other than broker-dealers and any such Holder
which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act provided that
such New Notes are acquired in the ordinary course of
such Holders' business and such Holders have no
arrangement or understanding with any person to
participate in the distribution of such New Notes; or
(b) any action or proceeding shall have been instituted or
threatened in any court or by or before any
governmental agency or body with respect to the
Exchange Offer which, in the Company's judgment, would
reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been
adopted or enacted which, in the Company's judgment,
would reasonably be expected to impair the ability of
the Company to proceed with the Exchange Offer;
If the Company determines in its sole and absolute discretion that
any of the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Notes have theretofore been accepted for exchange)
or may waive any such conditions or otherwise amend the terms of the Exchange
Offer in any respect. If such waiver or amendment constitutes a material change
to
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the Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders of the
Old Notes, and the Company will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Exchange Agent
The Bank of New York has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
By Hand or Overnight Delivery: By Registered or Certified Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Reorganization Section
New York, New York 10286
Attention: Reorganization Section
By Facsimile Delivery:
(Eligible Institutions Only)
(212) 571-3080
Delivery to other than one of above addresses or the facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Notes, and in handling and
tendering for their customers.
Holders who tender their Old Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Notes are to be delivered to, or are to be issued in the name of, any person
other than the registered Holder of the Old Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Old Notes in connection
with the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
taxes will be billed directly to such tendering Holder.
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The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
DESCRIPTION OF THE NEW NOTES
The terms of the New Notes are identical in all material respects
to the respective terms of the Old Notes except as otherwise set forth herein.
The New Notes are to be issued under the Indenture between the Company and The
Bank of New York, as Trustee (the "Trustee"). Upon issuance of the New Notes,
the Indenture will be subject to and governed by the provisions of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon request, the
Company will provide copies of the Indenture to Holders of the Old Notes. Copies
of the Indenture are also available for inspection at the corporate trust office
of the Trustee in New York, New York. Capitalized terms not otherwise defined
herein have the meanings specified in the Indenture. A glossary of such terms is
set forth at "Description of New Notes - Certain Definitions." Wherever a
defined term of the Indenture is referred to, the definition of such term set
forth in the Indenture is incorporated herein by such reference.
The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Indenture, including the definitions
therein of certain terms and those terms made part of the Indenture by reference
to the Trust Indenture Act. For purposes of this Section, the term "Company"
refers only to Resource America, Inc. and not any of its Subsidiaries.
General
The New Notes will be limited in aggregate original principal
amount to $115 million. The New Notes will mature on August 1, 2004 (the "Stated
Maturity"). The New Notes will rank pari passu with all other general unsecured
obligations of the Company.
The New Notes will bear interest from the date of their initial
issuance, at the rate of twelve percent (12%) per annum, payable semi-annually
in arrears on February 1 and August 1 of each year (each an "Interest Payment
Date"), commencing February 1, 1998, to the Holders of record at the close of
business on January 15 or July 15 (whether or not a business day), as the case
may be, next preceding such Interest Payment Date (each, a "Regular Record
Date"). Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The New Notes will not be secured by the assets of the Company or
any of its Subsidiaries, or otherwise, and will not have the benefit of a
sinking fund for the retirement of principal or interest. Because the Company is
a holding company that currently conducts substantially all of its operations
through its Subsidiaries, the right of the Company to participate in any
distribution of assets of
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the Subsidiaries upon their liquidation or reorganization or otherwise (and thus
the ability of Holders of the New Notes to benefit indirectly from such
distribution) are subject to the prior claims of creditors of the Subsidiaries.
See "Risk Factors - General: Holding Company Structure; Limitations on Access to
Cash Flow of Operating Companies; Effective Subordination."
Book-Entry Delivery and Form
General. The certificates representing the New Notes will be issued
in fully registered form, without coupons. Except as described in the next
paragraph, the New Notes will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York (the "Depositary"), and registered in the name
of Cede & Co., as the Depositary's nominee, in the form of a global Note
certificate (the "Global Certificate") or will remain in the custody of the
Trustee pursuant to a FAST Balance Certificate Agreement between the Depositary
and the Trustee. Unless and until it is exchangeable in whole or in part for New
Notes in definitive form, a Global Note may not be transferred except as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor of the Depositary or a nominee of
such successor.
Book-Entry Securities. Ownership of beneficial interests in a
Global Note will be limited to persons that have accounts with the Depositary or
its nominee ("Participants") or persons that may hold interests through
Participants. The Company expects that upon the issuance of a Global Note, the
Depositary will credit, on its book-entry registration and transfer system, the
Participants' accounts with their respective principal amounts of the New Notes
represented by such Global Note. Ownership of beneficial interests in such
Global Note will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by the Depositary (with respect to
interests of Participants) and on the records of Participants (with respect to
interests of beneficial owners held through Participants). Beneficial owners
will not receive written confirmation from the Depositary of their purchase, but
are expected to receive written confirmations from the Participants through
which the beneficial owner entered into the transaction. Transfers of ownership
interests will be accomplished by entries on the books of Participants acting on
behalf of the beneficial owners.
So long as the Depositary, or its nominee, is the registered owner
of a Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or Holder of the New Notes represented by such Global
Note for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to receive physical
delivery of the New Notes in definitive form and will not be considered the
owners or Holders thereof under the Indenture. Accordingly, each owner of a
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beneficial interest in such a Global Note must rely on the procedures of the
Depositary and, if such beneficial owner is not a Participant, on the procedures
of the Participant through which such beneficial owner owns its interest, to
exercise any rights of a Holder under the Indenture. The Company understands
that, under the Depositary's existing practices, in the event that the Company
requests any action of Holders, or an owner of a beneficial interest in such a
Global Note desires to take any action which a Holder is entitled to take under
the Indenture, the Depositary would authorize the Participants holding the
relevant beneficial interests to take such action, and such Participants would
authorize beneficial owners owning through such Participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them. Redemption notices will also be sent to the Depositary. If less than all
of the New Notes are being redeemed, the Company understands that it is the
Depositary's existing practice to determine by lot the amount of the interest of
each Participant to be redeemed.
Payment of principal of, and premium, if any, and interest on New
Notes registered in the name of the Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Note representing such New Notes. None of the Company, the Trustee or
any agent of the Company or the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Note for such New Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. Disbursements of payments of principal, premium, if any,
and interest to Participants shall be the responsibility of the Depositary. The
Depositary's practice is to credit Participants' accounts on a payable date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive payment on
such payable date. Payments by Participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of the
Depositary, the Company, the Trustee or any agent of the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
The Depositary may discontinue providing its services as securities
depository with respect to the New Notes at any time by giving reasonable notice
to the Company or the Trustee. If the Depositary notifies the Company that it is
unwilling to continue as such, or if it is unable to continue or ceases to be a
clearing agency registered under the Exchange Act and a successor depository is
not appointed by the Company within ninety days after receiving such notice or
becoming aware that the Depositary is no longer so registered, the Company will
issue the New Notes in definitive form upon registration of transfer of, or in
exchange for, such Global Note. In addition, the Company may at any time and in
its sole
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discretion determine not to have the New Notes represented by one or more Global
Notes and, in such event, will issue New Notes in definitive form in exchange
for all of the Global Notes representing such New Notes.
The Depositary has advised the Company as follows: it is a
limited-purpose trust company organized under the New York Banking Law, a "bank
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions among its Participants in such securities
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's Participants include securities broker-dealers (such as the Initial
Purchaser), banks, trust companies, clearing corporations and certain other
organizations. Persons who are not Participants in the Depositary may
beneficially own securities held by the Depositary only through Persons who are
participants or who clear through or maintain a custodial relationship with a
Participant. The Depositary is owned by a number of its Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the NASD.
The regulations applicable to the Depositary and its Participants are on file
with the Commission.
Optional Redemption
The New Notes may not be redeemed prior to August 1, 2002. On or
after such date, the New Notes may be redeemed, in whole or in part, at the
following redemption prices (expressed as a percentage of the principal amount)
plus accrued and unpaid interest to (but excluding) the redemption date, if
redeemed during the 12-month period, beginning January 1, of the years indicated
below:
Year Redemption Price
---- ----------------
2002....................... 106%
2003....................... 103%
If at any time fewer than all of the New Notes then outstanding
are to be redeemed, the Trustee shall select the New Notes or portions thereof
to be redeemed by any method the Trustee shall deem fair and reasonable. New
Notes in denominations larger than $1,000 may be redeemed in part in integral
multiples of $1,000. Notice of redemption will be mailed to each Holder of New
Notes to be redeemed at such Holder's registered address at least 30, but not
more than 60, days before the redemption date. On or after the redemption date,
interest will cease to accrue on the New Notes or portions thereof called for
redemption.
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In addition to permitted redemptions, the Company may from time to
time purchase the New Notes in the open market, in private transactions or
otherwise, as permitted by applicable law.
No Sinking Fund or Mandatory Redemption
The New Notes will not be entitled to the benefit of any sinking
fund or mandatory redemption.
Certain Covenants
The Indenture contains, among others, the following covenants:
Net Worth Maintenance. Commencing on the date of issuance of the
Old Notes and at all times thereafter including upon the exchange of Old Notes
for New Notes, determined at the end of each fiscal quarter, the Company shall
maintain Consolidated Net Worth, equal to (i) $50.0 million plus (ii) a
cumulative amount equal to twenty-five percent (25%) of the Consolidated Net
Income (but not loss), if any, of the Company and its Subsidiaries for each
fiscal quarter commencing with the first full quarter ending after issuance of
the Old Notes.
Limitations on Indebtedness.
(a) Except for the issuance of the New Notes, the Company
shall not incur, directly or indirectly, any Indebtedness
or issue any Disqualified Capital Stock; provided,
however, that the Company may incur Indebtedness or issue
Disqualified Capital Stock if, on the date of such
incurrence or issuance and after giving effect thereto,
(i) no Default or Event of Default has occurred and is
continuing or would result therefrom and (ii) the
Leverage Ratio does not exceed 2.0 to 1.0.
(b) The Company will not create, incur, issue, assume,
guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to, or otherwise
permit to exist, any Junior Indebtedness or Pari Passu
Indebtedness (other than Acquired Indebtedness) unless
the Stated Maturity of principal (or any required
repurchase, redemption, defeasance or sinking fund
payments) of such Junior Indebtedness or Pari Passu
Indebtedness is after the final Stated Maturity of
principal of the Notes.
(c) The Company will not permit any Subsidiary to, directly or
indirectly, incur any Indebtedness or issue any
Disqualified Capital Stock.
(d) The Company will not incur any Indebtedness which is
senior in right of payment to the Notes.
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(e) The foregoing provisions shall not apply to:
(1) Permitted Acquisition Indebtedness of the Company
and its Subsidiaries;
(2) Permitted Repurchase Facilities of the Company
and its Subsidiaries;
(3) Guarantees by the Company of (1) and (2);
(4) Intercompany Indebtedness owed by the Company to
any of its Subsidiaries or owed by any Subsidiary
to the Company;
(5) Incurrence by the Company of its obligations
under the Notes;
(6) Non-Recourse Indebtedness of the Company and its
Subsidiaries;
(7) Securities issued in a securitization by a
Securitization Entity formed by or on behalf of
the Company or its Subsidiaries, regardless of
whether such securities are treated as
indebtedness for tax purposes, provided that
neither the Company nor any Subsidiary (other
than the Securitization Entity formed solely for
the purpose of such securitization) is directly
or indirectly liable as a guarantor or otherwise
(excluding the provision of Credit Support) for
such securities or obligations of the
Securitization Entity;
(8) Unsecured working capital loans to Subsidiaries,
not to exceed $5.0 million in the aggregate,
provided, however, that such Indebtedness shall
be considered to be Indebtedness of the Company
for the purpose of the Leverage Ratio;
(9) Acquired Indebtedness of Subsidiaries, provided,
however, that such Acquired Indebtedness shall be
considered to be Indebtedness of the Company for
the purpose of the Leverage Ratio;
(10) Indebtedness secured by Permitted Liens; or
(11) Hedging Obligations directly related to:
(i) Indebtedness permitted to be incurred by
the Company or its Subsidiaries pursuant
to the Indenture;
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(ii) loans held by the Company or its
Subsidiaries pending sale; or
(iii) loans with respect to which the Company
or any Subsidiary has an outstanding
purchase offer or commitment, financing
commitment or security interest.
(f) For purposes of determining compliance with the foregoing
covenants:
(1) in the event that an item of Indebtedness meets
the criteria of more than one of the types of
Indebtedness described above, the Company, in
good faith, will classify such item of
Indebtedness and be required to include the
amount and type of such Indebtedness in one of
the above clauses; and
(2) an item of Indebtedness may be divided and
classified in more than one of the types of
Indebtedness described above.
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The
Company (a) will not permit any Subsidiary to issue or sell any shares of its
Capital Stock (other than to the Company or a Wholly Owned Subsidiary) and (b)
except pursuant to existing agreements, options or option plans, will not permit
any Person to own any shares of Capital Stock of any Subsidiary.
Liquidity Maintenance. The Company shall, at all times when the New Notes
are not rated in an investment grade category by one or more nationally
recognized statistical rating organizations, maintain Liquid Assets with a value
equal to at least 100% of the required interest payments due on the New Notes on
the next succeeding semi-annual Interest Payment Date. Liquid Assets of a
Subsidiary may be included in such calculation only to the extent that such
Liquid Assets may at such time be distributed to the Company without restriction
or notice to any Person. Such Liquid Assets shall not be the subject of any
pledge, Lien, encumbrance or charge of any kind and shall not be used as
collateral or security for Indebtedness for borrowed money or otherwise of the
Company or its Subsidiaries nor may such Liquid Assets be used as reserves for
any self-insurance maintained by the Company.
Limitations on Restricted Payments. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, make any
Restricted Payment if, at the time of such Restricted Payment or after
giving effect thereto,
(a) a Default or Event of Default shall have occurred and be
continuing; or
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(b) the Company would fail to maintain sufficient Liquid
Assets to comply with the terms of the covenant described
above under "Liquidity Maintenance"; or
(c) the aggregate amount of all Restricted Payments (the
amount of such payments, if other than in cash, having
been determined in good faith by the relevant Board of
Directors, whose determination shall be conclusive and
evidenced by a Board resolution filed with the Trustee)
declared and made after the issue date of the Old Notes
would exceed the sum of:
(i) 25% of the aggregate Consolidated Net Income (or,
if such Consolidated Net Income is a deficit,
100% of such deficit) of the Company accrued on a
cumulative basis during the period beginning on
the first day of the fiscal quarter during which
the issue date of the Old Notes occurred and
ending on the last day of the Company's last
fiscal quarter ending prior to the date of such
proposed Restricted Payment; plus
(ii) the aggregate Net Cash Proceeds received by the
Company as capital contributions (other than from
a Subsidiary) after the issue date of the Old
Notes; plus
(iii) the aggregate Net Cash Proceeds and the Fair
Market Value of property not constituting Net
Cash Proceeds received by the Company from the
issuance or sale (other than to a Subsidiary) of
Qualified Capital Stock after the issue date of
the Old Notes; plus
(iv) 100% of the amount of any Indebtedness of the
Company or a Subsidiary that is issued after the
issue date of the Old Notes that is thereafter
converted into or exchanged for Qualified Capital
Stock of the Company; or
(d) the Unsecured Debt Coverage Ratio for the Company for the
most recently ended four full fiscal quarters for which
internal financial statements are available immediately
preceding the date of such Restricted Payment is less
than 2.00 to 1.00, determined after giving effect to such
Restricted Payment; provided, however, that the foregoing
provisions will not prevent (y) the payment of a dividend
within 60 days after the date of its declaration if at
the date of declaration such payment was permitted by the
foregoing provisions, or (z) any Permitted Payment.
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its
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Subsidiaries (other than a Securitization Entity) to, create, assume or
otherwise cause or suffer to exist or to become effective any consensual
encumbrance or restriction on the ability of any such Subsidiary to
(a) pay any dividends or make any other distribution on its
Capital Stock;
(b) make payments in respect of any Indebtedness owed to the
Company or any other Subsidiary; or
(c) make loans or advances to the Company or any Subsidiary or
to guarantee Indebtedness of the Company or any other
Subsidiary; other than, in the case of (a), (b) and (c),
(1) restrictions imposed by applicable law;
(2) restrictions existing under agreements in effect
on the date of the Indenture or under renewals or
extensions thereof on substantially the same
terms and conditions;
(3) consensual encumbrances or restrictions binding
upon any Person at the time such Person becomes a
Subsidiary of the Company so long as such
encumbrances or restrictions are not created,
incurred or assumed in contemplation of such
Person becoming a Subsidiary;
(4) restrictions with respect to a Subsidiary imposed
pursuant to an agreement entered into for the
sale or disposition of all or substantially all
the assets (which term may include the Capital
Stock) of such Subsidiary;
(5) restrictions on the transfer of assets which are
subject to Liens;
(6) restrictions existing under agreements evidencing
Permitted Acquisition Indebtedness or Permitted
Repurchase Facilities if such Indebtedness (i) is
made without recourse to, and with no cross
collateralization (which shall not include
Guarantees) against the assets of the Company or
any other subsidiary, and (ii) upon complete or
partial liquidation of which the Indebtedness
must be correspondingly repaid in whole or in
part, as the case may be; and
(7) restrictions existing under any agreement that
renews, extends, increases, refinances or
replaces any of the agreements containing the
restrictions in
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clauses (2), (3) and (6); provided that the terms
and conditions of any such restrictions (except
for changes in interest rates related to changes
in market rates) are not less favorable to the
Holders than those under the agreement evidencing
or relating to the Indebtedness renewed,
extended, increased, refinanced or replaced.
Limitations on Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, enter into
any transaction or series of related transactions (including without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (except that the Company and any of its Subsidiaries
may enter into any transaction or series of related transactions with any
Subsidiary of the Company without limitation under this covenant) unless: (i)
such transactions or series of related transactions is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than would be
available in a comparable transaction in an arm's length dealing with a Person
that is not such an Affiliate or, in the absence of such a comparable
transaction, on terms that the relevant Board of Directors determines in good
faith would be offered to a Person that is not an Affiliate; (ii) with respect
to any transaction or series of related transactions involving aggregate
payments in excess of $250,000, the Company delivers an officers' certificate to
the Trustee certifying that such transaction or series of transactions complies
with clause (i) above and has been approved by a majority of the Disinterested
Directors of the relevant Board of Directors of the Company or such Subsidiary,
as the case may be; and (iii) with respect to any transaction or series of
related transactions involving aggregate payments in excess of $1.0 million, or
in the event that no members of the Board of Directors are Disinterested
Directors with respect to any transaction or series of transactions included in
clause (ii), (x) in the case of a transaction involving real property, the
aggregate rental or sale price of such real property shall be the fair market
rental or sale value of such real property as determined in a written opinion by
a nationally recognized expert with experience in appraising the terms and
conditions of the type of transaction or series of transactions for which
approval is required and (y) in all other cases, the Company delivers to the
Trustee a written opinion of a nationally recognized expert with experience in
appraising the terms and conditions of the type of transaction or series of
transactions for which approval is required to the effect that the transaction
or series of transactions are fair to the Company or such Subsidiary from a
financial point of view. The limitations set forth in this paragraph will not
apply to (i) transactions entered into pursuant to any agreement already in
effect on the date of the Indenture and any renewals or extensions thereof not
involving modifications materially adverse to the Company or any Subsidiary,
(ii) normal banking relationships with an Affiliate on an arms' length basis,
(iii) any employment agreement, stock option, employee benefit, indemnification,
compensation, business
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expense reimbursement or other employment-related agreement, arrangement or plan
entered into by the Company or any of its Subsidiaries which agreement,
arrangement or plan was adopted by the Board of Directors of the Company or such
Subsidiary (including a majority of the Disinterested Directors), as the case
may be, (iv) any Restricted Payment or Permitted Payment, (v) any transaction or
series of transactions in which the total amount involved does not exceed
$125,000, or (vi) services rendered and obligations incurred by the Company or
any of its Subsidiaries pursuant to existing agreements or agreements between
the Company and/or any of its Subsidiaries.
Limitations on Liens and Guarantees. The Company will not create, assume,
incur or suffer to exist any Lien (other than a Permitted Lien) upon any of the
Company's assets (including the Capital Stock of any Subsidiary) as security for
Indebtedness, without effectively providing that the Notes will be equally and
ratably secured with (or prior to) such Indebtedness.
In addition, the Company will not permit any Subsidiary of the Company,
directly or indirectly, to guarantee or assume, or subject any of its assets to
a Lien (other than a Permitted Lien) to secure any Pari Passu Indebtedness or
Junior Indebtedness unless (i) such Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a guarantee of,
or pledge of assets to secure, the Notes by such Subsidiary on terms at least as
favorable to the Holders of the Notes as such guarantee or security interest in
such assets is to the Holders of such Pari Passu Indebtedness or Junior
Indebtedness, except that in the event of a guarantee or security interest in
such assets with respect to (x) Pari Passu Indebtedness, the guarantee or
security interest in such assets under the supplemental indenture shall be made
pari passu to the guarantee or security interest in such assets with respect to
such Pari Passu Indebtedness or (y) Junior Indebtedness, any such guarantee or
security interest in such assets with respect to such Junior Indebtedness shall
be subordinated to such Subsidiary's guarantee or security interest in such
assets with respect to the Notes to the same extent as such Junior Indebtedness
is subordinated to the Notes and (ii) such Subsidiary waives and will not in any
manner whatsoever claim, or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary of the Company as a result of any payment by such
Subsidiary under its guarantees.
Offer to Purchase upon a Change of Control. If a Change of Control Event
shall occur at any time, then each Holder will have the right to require the
Company to repurchase such Holder's Notes (pursuant to an offer made to all
Holders), in whole or in part, in integral multiples of $1,000 at a purchase
price in cash equal to 101% of the principal amount of such Notes, plus accrued
and unpaid interest, if any, to the date of repurchase. There can be no
assurance that the Company will have the funds available to repurchase the Notes
in the event of a Change of Control Event.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes upon the occurrence of a Change of Control Event. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
Additional Covenants. The Indenture also contains covenants with respect
to, among other things, the following matters: (i) payment of principal, premium
and interest; (ii) maintenance of corporate existence; (iii) payment of taxes
and other claims; (iv) maintenance of properties; and (v) maintenance of
insurance.
Merger and Consolidation
The Indenture provides that the Company may not, in a single transaction
or a series of transactions, consolidate with or merge into any other Person or
sell, assign, convey, transfer, lease all or substantially all of its assets to
any Person or group of affiliated Persons unless (a) either (i) the Company
shall be the continuing entity, or (ii) the Person (if other than the Company)
formed by such consolidation or into which the Company is merged or the Person
that acquires by sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the assets of the Company (the
"Surviving Entity") is organized under the laws of the United States or a state
thereof or the District of Columbia and such Surviving Entity assumes by
supplemental indenture, executed and delivered to the Trustee in form reasonably
satisfactory to the Trustee, all obligations of the Company on the Notes and
under the Indenture, (b) immediately after giving effect to such transaction or
series of transactions, no Default or Event of Default shall have occurred and
be continuing; (c) the Company or the Surviving Entity, as applicable, could
incur at least $1.00 of additional Indebtedness without violating the Leverage
Ratio described above under "Limitation on Indebtedness;" and (d) the Company or
the Surviving Entity, as applicable, shall have delivered, or caused to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officer's certificate and an opinion of counsel, each to the effect
that such consolidation, merger, sale, assignment, conveyance, transfer, lease
or other disposition and the supplemental indenture in respect thereto comply
with the Indenture and that all conditions precedent provided for relating to
such transaction have been complied with.
Modification of the Indenture; Waiver of Covenants
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of greater than 50% in aggregate
principal amount of the Notes then outstanding;
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provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Note affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Note or reduce the principal amount thereof, premium, if any,
or the rate of interest thereon, or change the coin or currency in which any
Note or any premium or the interest thereon is payable or impair the right to
institute suit for the enforcement of any such payment after the Stated Maturity
thereof; (ii) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose Holders is required for any such amendment or
modification, or the consent of whose Holders is required for any waiver; (iii)
modify any of the provisions relating to supplemental indentures requiring the
consent of Holders or relating to the waiver of past defaults or relating to the
waiver of certain covenants, except to increase the percentage in principal
amount of outstanding Notes required for such action or to provide that certain
other provisions of the Indenture may not be modified or waived without the
consent of the Holder of each Note affected thereby; or (iv) waive a default in
payment with respect to any Note (other than a default in payment that is due
solely because of acceleration of the maturity of the Notes).
Notwithstanding the foregoing, without the consent of any Holders of the
Notes, the Company and the Trustee may modify or amend the Indenture (i) to
evidence the succession of another Person to the Company and the assumption by
any such successor of the covenants of the Company in the Indenture and in the
Notes in accordance with the "Merger and Consolidation" provisions of the
Indenture; (ii) to add any additional Events of Default, to add to the covenants
of the Company for the benefit of the Holders of the Notes, or to surrender any
right or power herein conferred upon the Company in the Indenture or in the
Notes; (iii) to cure any ambiguity, to correct or supplement any provision in
the Indenture which may be defective or inconsistent with any other provision in
the Indenture or in the Notes, provided that any such action shall not adversely
affect in any material respect the interests of any Holder of any Note; (iv) to
secure the Notes or add a guarantor under the Indenture pursuant to the
provisions of the covenant on "Limitations on Liens and Guarantees" described
above; (v) to evidence and provide the acceptance of the appointment of a
successor Trustee under the Indenture; or (vi) to make any other provisions with
respect to matters or questions arising under the Indenture or the Notes,
provided that such provisions shall not adversely affect in any material respect
the interests of any Holder of any Note.
The Holders of greater than 50% in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Events of Default
An Event of Default is defined in the Indenture to include:
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(i) failure by the Company to pay interest on any Note when
due and payable, if such failure continues for a period of
30 days;
(ii) failure by the Company to pay the principal on any Note
when due and payable at maturity or upon redemption,
acceleration or otherwise;
(iii) failure by the Company to comply with any other agreement
or covenant contained in the Indenture if such failure
continues for a period of 30 days after notice to the
Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the
Notes then outstanding;
(iv) indebtedness of the Company or any Subsidiary of the
Company is not paid within any applicable grace period
after final maturity or in the event that final maturity
is accelerated because of a default and, in either case,
the total amount of such indebtedness unpaid or
accelerated is equal to or greater than 5% of the
Company's Consolidated Net Worth at the quarter end
preceding the end of such grace period or such
acceleration;
(v) occurrence of certain events of bankruptcy or insolvency
of the Company or any Significant Subsidiary; and
(vi) existence of one or more judgments against the Company or
any Subsidiary which remain undischarged 60 days after all
rights to directly review such judgment, whether by appeal
or writ, have been exhausted or have expired which are in
excess, either individually or in the aggregate, of 5% of
the Company's Consolidated Net Worth as of the quarter end
preceding the end of such 60-day period.
The Company has agreed in the Indenture to file annually with the Trustee a
statement regarding compliance by the Company with the terms of the Indenture
and specifying any defaults of which the signers may have knowledge.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of not less than 25% in principal amount of the Notes then outstanding may
declare all the Notes to be immediately due and payable by notice to the Company
(and to the Trustee if given by the Holders). Under certain circumstances, the
Holders of a majority in principal amount of the Notes then outstanding may
rescind such a declaration.
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Provision of Reports
The Company will furnish to the Holders of Notes, upon request, whether or
not required by the rules and regulations of the Commission, (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Form 10-Q and Form 10-K if the Company was
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its Subsidiaries, and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants, and (ii) all reports that would be required
to be filed with the Commission on Form 8-K if the Company were required to file
such reports.
Defeasance or Covenant Defeasance of the Indenture
The Company may, at its option and at any time, elect to have its
obligations and the obligations of any of its Subsidiaries with respect to the
outstanding Notes discharged ("defeasance"). Such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due and certain
provisions of the Indenture with respect to the registration and transfer of the
Notes. In addition, the Company may, at its option and at any time, elect to
have its obligations and the obligations of any of its Subsidiaries with respect
to certain covenants described in the Indenture released ("covenant defeasance")
and thereafter any failure to comply with such covenants shall not constitute a
Default or an Event of Default. In the event of a covenant defeasance, certain
other events (not including prepayment, bankruptcy, receivership or insolvency
events) described under "Events of Default" will no longer constitute a Default
or an Event of Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of Notes, cash in United States Dollars, U.S. Government Obligations
(as defined in the Indenture), or a combination thereof (collectively, the
"trust fund"), in such amounts as will be sufficient (without considering any
reinvestment of amounts earned on such U.S. Government Obligations), in the
opinion of a nationally recognized firm of independent public accountants, to
pay and discharge interest on the outstanding Notes as it becomes due and to pay
and discharge the principal of and premium, if any, on the outstanding Notes at
redemption or maturity; (ii) in the case of defeasance, the Company must deliver
to the Trustee an opinion of independent counsel in the United States stating
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
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has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel in the United States
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
had not occurred; (iii) in the case of covenant defeasance, the Company must
deliver to the Trustee an opinion of independent counsel in the United States to
the effect that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such covenant
defeasance had not occurred; (iv) no Default or Event of Default may have
occurred and be continuing on the date of such deposit and after giving effect
thereto; (v) such defeasance or covenant defeasance may not cause the Trustee
for the Notes to have a conflicting interest with respect to any securities of
the Company; (vi) such defeasance or covenant defeasance may not result in a
breach or violation of, or constitute a Default under, the Indenture or any
material agreement or instrument to which the Company is a party or by which it
is bound; (vii) the Company must deliver to the Trustee an opinion of
independent counsel in the United States to the effect that the trust fund will
not be subject to the effect of any applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization or similar laws affecting
creditors' rights generally (including, without limitation, fraudulent and
avoidable transfers); (viii) the Company must deliver to the Trustee an
officers' certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of the Notes over the other creditors of
the Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company; (ix) no event or condition may exist that would
prevent the Company from making payments of the principal of, premium, if any,
and interest on the Notes, on the date of such deposit; and (x) the Company must
deliver to the Trustee an officers' certificate and an opinion of independent
counsel in the United States, each stating that all conditions precedent
relating to either the defeasance or the covenant defeasance, as the case may
be, have been complied with.
Satisfaction and Discharge
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of any Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable, or will become due and
payable or are to be called for redemption within one year, and the Company has
irrevocably deposited or caused to be deposited with the
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Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, and premium, if any, and interest on the Notes
to the date of deposit together with irrevocable instructions to the Trustee
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has paid
all other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel
each stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
Trustee
The Bank of New York, the Trustee under the Indenture, may from time to
time enter into ordinary correspondent and other banking relationships with the
Company. The address of the principal corporate trust office of the Trustee is
101 Barclay Street - 21W, New York, New York 10286.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary of or is merged with or into any other
Person or (ii) assumed in connection with the acquisition of assets from such
Person, in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of such other Person or such
acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of
the related acquisition of assets from such Person or the date such Person
becomes a Subsidiary of or is merged with or into such other Person.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with such specified Person and any legal or beneficial owner,
directly or indirectly, of 20% or more of the Voting Stock of such specified
Person. Notwithstanding the foregoing, no Securitization Entity shall be deemed
an Affiliate of the Company.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Capital Lease Obligation" of any Person means any obligations of such
Person under any capital lease for real or personal property
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which, in accordance with GAAP, is required to be recorded as a capitalized
lease obligation; and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents or interests
in (however designated) capital stock in such Person, including, with respect to
a corporation, common stock, Preferred Stock and other corporate stock and, with
respect to a partnership, partnership interests, whether general or limited, and
any rights (other than debt securities convertible into corporate stock,
partnership interests or other capital stock), warrants or options exchangeable
for or convertible into such corporate stock, partnership interests or other
capital stock.
"Change of Control Event" means an event or series of events by
which
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than
the Existing Management Group, is or becomes after the
date of issuance of the Notes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act
as in effect on the date of the Indenture), of more than
40% of the total voting power of all Voting Stock of the
Company then outstanding;
(b) (1) another corporation merges into the Company
or the Company consolidates with or merges into
any other corporation, or
(2) the Company conveys, transfers or leases all or
substantially all its assets to any person or
group, in one transaction or a series of
transactions other than any conveyance, transfer
or lease between the Company and a Wholly-Owned
Subsidiary of the Company, and, in the case of
each of clause (1) and clause (2), with the
effect that a person or group, other than the
Existing Management Group, is or becomes the
beneficial owner of more than 40% of the total
voting power of all Voting Stock of the surviving
or transferee corporation of such transaction or
series of transactions;
(c) during any period of two consecutive years, individuals
who at the beginning of such period constituted the
Company's Board of Directors, or whose nomination for
election by the Company's shareholders was approved by a
vote of a majority of the directors then still in office
who were either directors at the beginning of such period
or whose election or nomination for election was
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previously so approved, cease for any reason to
constitute a majority of the directors then in office; or
(d) the shareholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the
Company.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense of such Person for such period on a consolidated basis and otherwise
determined in accordance with GAAP.
"Consolidated Net Assets" of any Person as of any date means the total
amount of assets of such Person and its Subsidiaries (less applicable reserves)
on a consolidated basis at the end of the fiscal quarter immediately preceding
such date for which financial information is available, as determined in
accordance with GAAP.
"Consolidated EBITDA" means, with respect to any Person for any period,
the Consolidated Net Income (Loss) of such Person for such period plus (a)
provision for taxes based on income or profits of such Person for such period
deducted in computing Consolidated Net Income (Loss) plus (b) Consolidated
Interest Expense of such Person for such period, plus (c) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income (Loss), plus (d) without duplication, any other non-cash
charges reducing Consolidated Net Income (Loss) of such Person for such period
less (e) without duplication, non-cash items increasing Consolidated Net Income
(Loss) of such Person for such period in each case, on a consolidated basis for
such Person in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the sum
of: (a) consolidated interest expense of such Person for such period, other than
interest expense on Permitted Acquisition Indebtedness and Permitted Repurchase
Facilities, whether paid or accrued (except to the extent accrued in a prior
period), to the extent such expense was deducted in computing Consolidated Net
Income (Loss) (including amortization of original issue discount, non-cash
interest payments and the interest component of Capitalized Lease Obligations,
excluding amortization of deferred financing fees) and (b) consolidated
capitalized interest of such Person for such period, whether paid or accrued, to
the extent such expense was deducted in computing Consolidated Net Income
(Loss).
"Consolidated Net Income (Loss)" of any Person means, for any period, the
consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income (loss), by excluding, without
duplication, (i) the portion of net income (or loss) of any other Person (other
than any of such Person's consolidated Subsidiaries) in which such Person or any
of its
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Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or its
consolidated Subsidiaries in cash by such other Person during such period, (ii)
net income (or loss) of any Person combined with such Person or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iii) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan and (iv) solely for the
purpose of determining Consolidated Net Income (Loss) in connection with the
calculation of Restricted Payments permitted to be made hereunder, the net
income of any consolidated Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders; provided that, upon the termination or
expiration of such dividend or distribution restrictions, the portion of net
income (or loss) of such consolidated Subsidiary allocable to such Person and
previously excluded shall be added to the Consolidated Net Income (Loss) of such
Person to the extent of the amount of dividends or other distributions available
to be paid to such Person in cash by such Subsidiary.
"Consolidated Net Worth" of any Person and its Subsidiaries mean as of the
date of determination all amounts that would be included under stockholders'
equity on a consolidated balance sheet of such Person and its Subsidiaries
determined in accordance with GAAP.
"Control" when used with respect to any specified Person means the power
to direct the management and policies of such Person directly or indirectly,
whether through ownership of voting securities (or pledge of voting securities
if the pledgee thereof may on the date of determination exercise or control the
exercise of the voting rights of the owner of such voting securities), by
contract or otherwise; and the terms "to Control," "Controlling" and
"Controlled" have meanings correlative to the foregoing.
"Credit Support" means credit support designed to enhance the likelihood
of payment on securities issued in connection with a securitization of loans or
other assets which are generally funded with the proceeds of such
securitization, including without limitation subordination of certain classes of
securities, insurance policies, representations and warranties, reserve funds,
liquidity reserves, lost- and missing- note reserves, letters of credit.
"Default" means an event or condition the occurrence of which would, with
the lapse of time or the giving of notice or both, become an Event of Default.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or
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exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part on, or prior to, or is
exchangeable for debt securities of the Company or its Subsidiaries prior to,
the final Stated Maturity of principal of the Notes; provided that only the
amount of such Capital Stock that is redeemable prior to the Stated Maturity of
principal of the Notes shall be deemed to be Disqualified Capital Stock.
"Disinterested Director" of any Person means, with respect to any
transaction or series of related transactions, a member of the board of
directors of such Person who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of related
transactions.
"Existing Management Group" means, a majority of the executive officers of
the Company as of the date of the Indenture (see "Management"), members of their
immediate families, certain trusts for their benefit, and legal representatives
of, or heirs, beneficiaries or legatees receiving Common Stock (or securities
convertible or exchangeable for Common Stock) under any such person's estate.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any asset or assets shall be determined by the Board of Directors of
the Company, acting in good faith, and shall be evidenced by a resolution of
such Board of Directors delivered to the Trustee.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) Consolidated Interest Expense of such Person for such period, and (ii)
the product of (a) all cash dividend payments on any series of Preferred Stock
or Disqualified Capital Stock of such Person or its Subsidiaries for such
period, and (b) a fraction, the numerator of which is one and the denominator of
which is one minus the then-current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case on a consolidated
basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles.
"Guaranteed Indebtedness" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the Holder of such Indebtedness against
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loss, (iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring that
such property be received or such services be rendered), (iv) to maintain
working capital or equity capital of the debtor, or otherwise to maintain the
net worth, solvency or other financial condition of the debtor, or (v) otherwise
to assure a creditor with respect to Indebtedness against loss; provided that
the term shall not include endorsements for collection of deposit, in either
case in the ordinary course of business.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement.
"Holders" means the registered holders of the Notes.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
and in connection with any agreement by such Person to purchase, redeem,
exchange, convert or otherwise acquire for value any Capital Stock of such
Person now or hereafter outstanding, (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, but excluding trade payables arising in the ordinary course of business,
(iv) all obligations under Interest Rate Agreements of such Person, (v) all
Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in
clauses (i) through (v) above of other Persons and all dividends payable by
other Persons, the payment of which is secured by (or for which the Holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligations being deemed to be the lesser of the value of such property or
asset or the amount of the obligations so secured), (vii) all guarantees by such
Person of Guaranteed Indebtedness, (viii) all Disqualified Capital Stock (valued
at the greater of book value and voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends) of such Person, and (ix) any
amendment, supplement, modification, deferral, renewal, extension, refunding or
refinancing or any liability of the types referred to in clauses (i) through
(viii) above. For purposes hereof, (x) the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date
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on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value is to be
determined in good faith by the board of directors (or any duly authorized
committee thereof) of the issuer of such Disqualified Capital Stock, and (y)
Indebtedness is deemed to be incurred pursuant to a revolving credit facility
each time an advance is made thereunder.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, repurchase agreement, futures contract or other financial
agreement or arrangement designed to protect the Company or any Subsidiary
against fluctuations in interest rates.
"Junior Indebtedness" means any Indebtedness of the Company subordinated in
right of payment of either principal, premium (if any) or interest thereon to
the New Notes.
"Leverage Ratio" as of any date of determination means the ratio of (i)
the aggregate amount of all Indebtedness and Disqualified Capital Stock of the
Company, excluding (a) Indebtedness and Guarantees thereof permitted to be
incurred pursuant to clauses (d)(1), (2), (3), (4), (6) and (7) of "Certain
Covenants--Limitation on Indebtedness," (b) Hedging Obligations permitted to be
incurred pursuant to clause (e)(11) of the covenant described under "Certain
Covenants--Limitation on Indebtedness" and (c) Junior Indebtedness of the
Company to (ii) the Consolidated Net Worth of the Company.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired.
"Liquid Assets" shall include: (i) cash; (ii) any of the following
instruments that have a remaining term to maturity not in excess of 90 days from
the determination date: (a) repurchase agreements on obligations of, or are
guaranteed as to timely receipt of principal and interest by, the United States
or any agency or instrumentality thereof when such obligations are backed by the
full faith and credit of the United States provided that the party agreeing to
repurchase such obligations is a primary dealer in United States government
securities, (b) federal funds and deposit accounts, including but not limited to
certificates of deposit, time deposits and bankers' acceptances of any United
States depository institution or trust company incorporated under the laws of
the United States or any state, provided that the debt of such depository
institution or trust company at the date of acquisition thereof has been rated
by Standard & Poor's Corporation in the highest short-term rating category or
has an equivalent rating from another nationally recognized rating agency, or
(c) commercial paper of any corporation incorporated under the laws of the
United States or any state thereof that on the date of acquisition is rated
investment grade by Standard & Poor's Corporation or has an
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equivalent rating from another nationally recognized rating agency; (iii) any
debt instrument which is an obligation of, or is guaranteed as to the receipt of
principal and interest by the United States, its agencies or any U.S. government
sponsored enterprise, or (iv) any mortgage-backed or mortgage- related security
issued by the United States, its agencies, or any United States government
sponsored enterprise which the payment of principal and interest from the
mortgages underlying such securities will be passed through to the Holder
thereof and which such security has a remaining weighted average maturity of 15
years or less. Notwithstanding the foregoing, Liquid Assets shall not include
any debt instruments, securities or collateralized mortgage obligations (real
estate mortgage investment conduits) that would be classified as a "High-Risk
Mortgage Security" pursuant to the policy statement adopted by the Federal
Financial Institutions Examination Counsel on February 10, 1992, as reflected in
Volume I of the Federal Reserve Report Service, Part 3-1562.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, or options, warrants or rights to purchase Capital Stock, or debt
securities or Capital Stock that have been converted into or exchanged for
Capital Stock, or any capital contribution in respect of Capital Stock, as
referred to under "Certain Covenants, Limitation on Restricted Payments," the
proceeds of such issuance or sale or capital contribution in the form of cash or
cash equivalents, including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed for, cash
or cash equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company), net of
attorney's fees, accountant's fees and brokerage, consulting, underwriting and
other fees and expenses actually incurred in connection with such issuance or
sale or capital contribution and net of taxes paid or payable by the Company as
a result thereof.
"Non-Recourse Indebtedness" is defined to mean, with respect to any
Person, Indebtedness of such Person for which (i) the sole recourse (excluding
certain exceptions relating to fraud, intentional misrepresentation, proceeds of
the assets, environmental liabilities and similar matters customary in
non-recourse indebtedness) for collection of principal and interest on such
Indebtedness is against the specific assets identified in the instruments
evidencing or securing such Indebtedness, (ii) such assets were acquired with
the proceeds of such Indebtedness or such Indebtedness was incurred concurrently
with the acquisition of such assets; and (iii) no other assets (other than
Credit Support) of such Person or of any other Person may be realized upon or in
collection of principal or interest on such Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment of principal, premium (if any) and interest
thereon to the Notes.
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"Permitted Acquisition Indebtedness" means any secured funding arrangement
with a financial institution or other lender to the extent (and only to the
extent) funding thereunder is used exclusively to finance or refinance the
purchase or origination of loans, real estate owned, equipment leases or other
assets by the Company or a Subsidiary, or to provide financing subsequent to
such purchase or origination.
"Permitted Liens" is defined to mean (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 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 or any Subsidiary, Liens
granted on such property or assets in favor of the Person from whom the Company
or such Subsidiary acquired such property or assets 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; (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 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 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 Subsidiary
thereof; (xii) Liens with respect to the property or assets of the Company or a
Subsidiary securing Indebtedness permitted to be
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incurred pursuant to clauses (d)(1), (2), (3), (4), (6) and (7) of "Certain
Covenants-- Limitations on Indebtedness," above; (xiii) Liens granted after the
Closing Date on any assets or Capital Stock of the Company or its Subsidiaries
created in favor of the Holders; (xiv) Liens with respect to the property or
assets of a Subsidiary granted by such Subsidiary to the Company to secure
Indebtedness owing to the Company; (xv) Liens securing Indebtedness which is
incurred to refinance Permitted Indebtedness, provided that such Liens
constitute Permitted Liens under this clause (xvi) Liens only to the extent that
they do not extend to or cover any property or assets of the Company or any
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (xvii) leases or subleases granted to others not materially
interfering with the ordinary course of business of the Company or any of its
Subsidiaries; (xviii) other Liens securing obligations not exceeding $1,000,000;
and (xix) Liens securing Hedging Obligations of the Company or such Subsidiary
so long as such Hedging Obligations relate to Indebtedness that is, and is
permitted under the Indenture to be, secured by a Lien on the same property
securing such Hedging Obligations.
"Permitted Payment" means, so long as no Default or Event of Default is
continuing,
(a) the purchase, redemption, defeasance or other acquisition
or retirement for value of any Capital Stock of the
Company or any Affiliate (other than a Wholly-Owned
Subsidiary) of the Company, Junior Indebtedness or Pari
Passu Indebtedness in exchange for (including any such
exchange pursuant to the exercise of a conversion right
or privilege where, in connection therewith, cash is paid
in lieu of the issuance of fractional shares or scrip),
or out of the Net Cash Proceeds or Fair Market Value of
property not constituting Net Cash Proceeds of, a
substantially concurrent issue and sale (other than to a
Subsidiary of the Company or to an employee benefit plan
of the Company or any of its Subsidiaries) of Qualified
Capital Stock of the Company; provided that the Net Cash
Proceeds or Fair Market Value of such property received
by the Company from the issuance of such shares of
Qualified Capital Stock, to the extent so utilized, shall
be excluded from clause (d)(iii) of the covenant
described under "Covenants -Limitation on Restricted
Payments" above; and
(b) the repurchase, redemption, defeasance or other
acquisition or retirement for value of any Junior
Indebtedness or Pari Passu Indebtedness in exchange for,
or out of the Net Cash Proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary of
the Company) of new Indebtedness by the Company (such a
transaction, a "refinancing"); provided, that any such
new Indebtedness of the Company (i) shall be in a
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principal amount that does not exceed an amount equal to
the sum of (A) the principal amount of the Indebtedness so
refinanced and accrued but unpaid interest thereon less
any discount from the face amount of such Indebtedness to
be refinanced expected to be deducted from the amount
payable to the holders of such Indebtedness in connection
with such refinancing, (B) the amount of any premium
expected to be paid in connection with such refinancing
pursuant to the terms of the Junior Indebtedness or Pari
Passu Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer,
privately negotiated repurchase or otherwise and (C) the
amount of legal, accounting, printing and other similar
expenses of the Company incurred in connection with such
refinancing; provided, further, that for purposes of this
clause (i), the principal amount of any Indebtedness shall
be deemed to mean the principal amount thereof or, if such
Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as
of the date of determination; (ii) (A) if such refinanced
Indebtedness has an Average Life to Stated Maturity
shorter than that of the Notes or a final Stated Maturity
earlier than the final Stated Maturity of the New Notes,
such new Indebtedness shall have an Average Life to Stated
Maturity no shorter than the Average Life to Stated
Maturity of such refinanced Indebtedness and a final
Stated Maturity no earlier than the final Stated Maturity
of such refinanced Indebtedness or (B) in all other cases
each Stated Maturity of principal (or any required
repurchase, redemption, defeasance or sinking fund
payments) of such new Indebtedness shall be after the
final Stated Maturity of principal of the New Notes; and
(iii) is (A) made expressly subordinated to or pari passu
with the New Notes to substantially the same extent as the
Indebtedness being refinanced or (B) expressly subordinate
to such refinanced Indebtedness.
"Permitted Repurchase Facilities" includes purchase and sale facilities
pursuant to which the Company or a Subsidiary sells loans, real estate owned or
other financial assets to a financial institution or other entity and agrees to
repurchase such loans, real estate owned or financial assets.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
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"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary liquidation or dissolution of such Person, over Capital Stock of any
other class in such Person.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the New Notes or the
Indenture for which financial information is available.
"Restricted Payment" means
(a) the declaration, payment or setting apart of any funds
for the payment of any dividend on, or making of any
distribution to holders of, the Capital Stock of the
Company or any Subsidiary of the Company (other than (i)
dividends or distributions in Qualified Capital Stock of
the Company and (ii) dividends or distributions payable
on or in respect of any class or series of Capital Stock
of a Subsidiary of the Company as long as the Company
receives at least its pro rata share of such dividends or
distributions in accordance with its ownership interests
in such class or series of Capital Stock);
(b) the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, of any
Capital Stock of the Company or any Affiliate of the
Company (other than a Wholly-Owned Subsidiary, and other
than the purchase from a non-Affiliate of the Company of
Capital Stock of any joint venture or other Person which
is an Affiliate of the Company solely because of the
Company's direct or indirect ownership of 20% or more of
the Voting Stock of such joint venture or other Person)
except such as shall constitute a Permitted Payment; or
(c) the making of any principal payments on, or repurchase,
redemption, defeasance, retirement or other acquisition
for value, directly or indirectly, of any Junior
Indebtedness or Pari Passu Indebtedness, prior to any
Stated Maturity of principal or scheduled redemption or
defeasance of, or any scheduled sinking fund payment on,
such Junior Indebtedness or Pari Passu Indebtedness,
except such as shall constitute a Permitted Payment.
"Securitization Entity" means any pooling arrangement or entity formed or
originated for the purpose of holding, and/or issuing securities representing
interests in, one or more pools of mortgages,
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leases, credit card receivables, home equity loan receivables, automobile loans,
leases or installment sales contracts, other consumer receivables, real estate
owned or other financial assets of the Company or any Subsidiary, and shall
include, without limitation, any partnership, limited liability company,
liquidating trust, grantor trust, owner trust, real estate mortgage investment
conduit, real estate investment trust or collateralized bond obligation.
"Significant Subsidiary" means any Subsidiary of the Company which
accounted for 15% or more of the Consolidated Net Assets of the Company and its
Subsidiaries as of the end of the fiscal quarter preceding the date of
determination for which financial information is available or Consolidated
EBITDA of the Company and its Subsidiaries for the Reference Period.
"Stated Maturity" when used with respect to any Indebtedness (including,
without limitation, the New Notes) means the dates specified in the instrument
governing such Indebtedness as the fixed dates on which any principal amount of
such Indebtedness is due and payable (including, without limitation, by reason
of any required redemption, purchase, defeasance or sinking fund payment) and,
when used with respect to any installment of interest on Indebtedness, means the
date on which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of Voting Stock thereof is at the time owned or Controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person or a combination thereof.
"Unsecured Debt Coverage Ratio" means, with respect to any Person for any
period, the ratio of Consolidated EBITDA of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Company
incurs, assumes, guarantees or redeems any Indebtedness (including any
Indebtedness which constitutes Acquired Indebtedness) subsequent to the
commencement of the period for which the Unsecured Debt Coverage Ratio is being
calculated but prior to the event for which the calculation of the Unsecured
Debt Coverage Ratio is made (the "Calculation Date"), then the Unsecured Debt
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, as if the same had occurred
at the beginning of the applicable four-quarter period, including an assumption
of investment returns at the rate equal to the higher of the six-month Treasury
bill rate or six-month LIBOR at the beginning of such four-quarter period. For
purposes of making the computation referred to above, investments in the equity
of, or other acquisitions or dispositions, which constitute all or substantially
all of an operating unit of a business and discontinued operations (as
determined in accordance with GAAP) that have been made by the Company or any of
its Subsidiaries, including all mergers, consolidations and dispositions, during
the four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall
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be calculated on a pro forma basis assuming that all such investments,
acquisitions, dispositions, discontinued operations, mergers and consolidations
(and the reduction of any associated fixed charge obligations and the change in
Consolidated EBITDA resulting therefrom) had occurred on the first day of the
four-quarter period. If since the beginning of such period any Person (that
subsequently became a Subsidiary or was merged with or into the Company or any
Subsidiary since the beginning of such period) shall have made any investment in
the equity of, or other acquisition or disposition, which constitutes all or
substantially all of an operating unit of a business, discontinued operation,
merger or consolidation that would have required adjustment pursuant to this
definition, then the Unsecured Debt Coverage Ratio shall be calculated giving
pro forma effect thereto for such period as if such investment, acquisition,
disposition, discontinued operation, merger or consolidation had occurred at the
beginning of the applicable four-quarter period. For purposes of this
definition, whenever pro forma effect is to be given to a transaction, the pro
forma calculations shall be made in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period. Interest on a Capital Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capital Lease Obligation in accordance with GAAP.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate.
"Voting Stock" means Capital Stock of the class or classes of which the
holders have (i) in respect of a corporation, the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of such corporation (irrespective of whether or not at the
time Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency) or (ii) in respect of a
partnership, the general voting power under ordinary circumstances to elect the
board of directors or other governing board of such partnership or of the Person
which is a general partner of such partnership.
"Wholly-Owned Subsidiary" means a Subsidiary all of the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly-Owned Subsidiary.
DESCRIPTION OF OLD NOTES
The terms of the Old Notes are identical in all material respects to the
New Notes, except that (i) the Old Notes have not been
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registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon the consummation of this
Exchange Offer, except under limited circumstances); and (ii) the New Notes will
not provide for any increase in the Interest Rate thereon. The Old Notes provide
that, in the event that either (i) the Registration Statement is not filed with
the Commission on or prior to November 15, 1997, (ii) the Registration Statement
is not declared effective on or prior to December 30, 1997 or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement with respect to the
Old Notes is not declared effective on or prior to February 15, 1998, the
interest rate borne by the Old Notes shall be increased by one-half of one
percent per annum following November 15, 1997 in the case of clause (i) above,
following December 30, 1997 in the case of clause (ii) above, or following
February 15, 1998 in the case of clause (iii) above, which rate will be
increased by an additional one-half of one percent per annum for each 90-day
period that such additional interest continues to accrue. The aggregate amount
of such increase from the original interest rate pursuant to these provisions
will in no event exceed one percent per annum. Upon (x) the filing of the
Registration Statement for the Exchange Offer after November 15, 1997, (y) the
effectiveness of the Registration Statement after December 30, 1998 or (z) the
day before the consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, after February 15, 1998, the
interest rate borne by the Old Notes from the date of consummation or
effectiveness, as the case may be, will be reduced to the original interest rate
if the Company is otherwise in compliance with such requirements; provided that
if after any such reduction in interest rate, a different event specified in
clause (i), (ii) or (iii) above occurs, the interest rate may again be increased
and thereafter reduced pursuant to the foregoing provisions. The New Notes are
not, and upon consummation of the Exchange Offer the Old Notes will not be,
entitled to any such additional interest. See, "Risk Factors -- Certain
Consequences of a Failure to Exchange Old Notes" and "Description of the New
Notes."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the exchange of the Old Notes for the New Notes. This summary does not
address the tax consequences to a person that may be subject to special
treatment under the United States federal income tax law, such as banks,
insurance companies, thrift institutions, regulated investment companies, real
estate investment trusts, tax-exempt organizations, dealers in securities or
currencies, persons that hold the New Notes as part of a position in a
"straddle" or as part of a "hedging, "conversion" or other integrated investment
transaction for federal income tax purposes, persons whose functional currency
is not the United States dollar or persons that do not hold the New Notes as
capital assets.
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The statements of law or legal conclusions set forth in this summary
constitute the opinion of Ledgewood Law Firm, P.C. ("Ledgewood"), tax counsel to
the Company. This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could cause the tax consequences to vary substantially from the consequences
described below, possibly adversely affecting a beneficial owner of the New
Notes. The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the federal income tax
treatment of the exchange of the Old Notes for the New Notes may differ from the
treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE EXCHANGE OF THE OLD NOTES FOR THE NEW NOTES, AS WELL AS THE EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS.
Exchange of Notes
The exchange of Old Notes for New Notes will not be a taxable event to
beneficial owners of the Old Notes for federal income tax purposes. The exchange
of Old Notes for New Notes pursuant to the Exchange Offer will not be treated as
an "exchange" for federal income tax purposes because the New Notes will not
differ materially in kind or extent from the Old Notes and because the exchange
will occur by operation of the terms of the Old Notes. Accordingly, a Holder
will have the same adjusted tax basis and holding period in the New Notes as the
Holder had in the Old Notes immediately before the exchange.
Sales or Redemption of the New Notes
Gain or loss will be recognized by a Holder on a sale of the New Notes
(including a redemption for cash) in an amount equal to the difference between
the amount realized and the Holder's adjusted tax basis in the New Notes (which
will equal the Holder's adjusted tax basis in the Old Notes) sold or so
redeemed. Gain or loss recognized by a Holder on New Notes held for more than
eighteen months (which holding period will include the time during which the
Holder held the Old Notes) will generally be taxable as long-term capital gain
or loss generally subject to a maximum federal income tax rate of 20%. New Notes
held for between twelve and eighteen months will generally be subject to a
maximum federal income tax rate of 28%.
A Holder that disposes of New Notes between record dates for payments of
interest (and consequently does not receive interest from the Company for the
period prior to such disposition) will nevertheless be required to include in
income as ordinary income accrued but unpaid interest on the New Notes through
the date of disposition.
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A Holder will recognize a capital loss on the disposition of New Notes to
the extent the selling price (which may not fully reflect the value of accrued
but unpaid interest) is less than the Holder's adjusted tax basis in the New
Notes (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for federal income tax purposes.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by the
Company or any of its paying agents to any Holder who or which is a United
States Alien Holder will not be subject to United Stated federal withholding
tax; provided, that (a) the Holder does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the Holder is not a controlled foreign corporation
that is related to the Company through stock ownership and (c) either (A) the
Holder certifies to the Company under penalties of perjury, that it is not a
Untied States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") certifies to the Company, under penalties of perjury, that such
statement has been received from the Holder by it or by a financial Institution
holding such security for the Holder and furnishes the Company with a copy
thereof; and (ii) a United States Alien Holder of a New Note will not be subject
to United States federal withholding tax on any gain realized upon the sale or
other disposition of a New Note.
New Treasury regulations adopted on October 6, 1997 (the "New Regulations")
provide alternative methods for satisfying the certification requirement
described in clause (i)(c) above. The New Regulations also require, in the case
of New Notes held by a foreign partnership, that (x) the certification described
in clause (i)(c) above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule would apply in
the case of tiered partnerships. The New Regulations are to be effective for
payments made after December 31, 1998.
Backup Withholding
Payments made on, and proceeds from the sale of, New Notes may be subject
to a "backup" withholding tax of 31% unless the Holder
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complies with certain certification requirements. Any withheld amounts will be
allowed as a credit against the Holder's United States federal income tax,
provided the required information is provided to the Internal Revenue Service on
a timely basis.
ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on those employee benefit plans to which it applies
("Plans") and on those persons who are fiduciaries with respect to such Plans.
Assuming the Old Notes were permitted investments for a Plan, the exchange of
the Old Notes for the New Notes will have no adverse consequences.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes if such Old Notes
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such New Notes for a period ending 180 days after the Expiration Date (subject
to extension under certain limited circumstances described herein) or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "The Exchange Offer--Resales of New Notes." The Company will
not receive any cash from proceeds from the issuance of the New Notes offered
hereby. New Notes received by broker-dealers for their own accounts in
connection with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to
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admit that it is an "underwriter" within the meaning of the Securities Act.
VALIDITY OF THE NEW NOTES
Certain matters of Delaware law relating to the validity of the New Notes
and the enforceability of the Indenture and certain matters relating to federal
income taxation will be passed upon by Ledgewood Law Firm, P.C., counsel to the
Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of the Company for the year ended
September 30, 1996 have been so incorporated in reliance on the report of Grant
Thornton LLP, independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
the Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal benefit. In
addition, the Company's By-laws provide for indemnification of the Company's
officers and directors to the fullest extent permitted under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, or otherwise, the Company has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
The Company maintains directors' and officers' liability insurance against
any actual or alleged error, misstatement, misleading statement, act, omission,
neglect or breach of duty by any director or officer, excluding certain matters
including fraudulent, dishonest or criminal acts or self-dealing.
Item 21. Exhibits and Financial Statement Schedules.
a. Exhibits.
3. (a)* Articles of Incorporation of registrant.
(b)* By-Laws of registrant.
5. Opinion of Ledgewood Law Firm, P.C., as to the
legality of the securities being registered
(including consent).
8. Opinion of Ledgewood Law Firm, P.C., as to certain
tax matters (including consent).
10. (a) 12% Senior Note due 2004
(b) Trust Indenture Relating to Senior Notes
(c) Registration Rights Agreement
(d)* Employment Agreement between registrant and
Edward E. Cohen.
(e)* Contribution Agreement between Resource
Leasing, Inc. and Abraham Bernstein.
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(f)* Employment Agreement between Fidelity Leasing,
Inc. and Abraham Bernstein.
(g)* Employment Agreement between registrant and
Daniel G. Cohen.
(h)* 1984 Key Employee Stock Option Plan
(i)* 1989 Employee Stock Ownership Plan.
(j)* 1989 Key Employee Stock Option Plan.
(k)* 1997 Employee Stock Ownership Plan.
(l)* 1997 Stock Option Plan for Directors.
(m)* Fidelity Mortgage Funding, Inc. 1997 Key
Employee Stock Option Plan.
(n)* Grant of Incentive Stock Option Pursuant to the
Fidelity Mortgage Funding, Inc. 1997 Key
Employee Stock Option Plan.
11. *Statement re: computation of per share earnings.
21. *Subsidiaries of the registrant.
23. (a) Consent of Grant Thornton LLP.
(b) Consents of Ledgewood Law Firm, P.C. (included
in Exhibits 5 and 8).
24. Power of Attorney (included as part of signature
pages to this registration statement).
- --------------------
* Exhibit 3(a) appears as an exhibit to registrant's Annual Report on Form 10-K
("10-K Report") for its 1983 fiscal year and in its definitive proxy statement
for its September 9, 1996 Special Meeting of Shareholders; Exhibit 3(b) appears
as an exhibit to registrant's 10-K Report for its 1984 fiscal year; Exhibits
10(d), 10(g) and 10(m) appear as exhibits to registrant's 10-Q Report for the
quarter ended March 31, 1997; Exhibits 10(e) and 10(f) appear as exhibits to
registrant's 10-K Report for its 1996 fiscal year; Exhibit 10(h) appears as an
exhibit to registrant's 10-K Report for its 1984 fiscal year; Exhibits 10(i),
10(j), 10(k) and 10(l) appear as exhibits to registrant's 10-K Report for its
1995 fiscal year; Exhibit 10(m) appears as an exhibit to registrant's 10-K
Report for its 1989 fiscal year; Exhibits 11 and 21 appear as exhibits to
registrant's November, 1996 registration statement on Form S-1.
Item 22. Undertakings.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
-87-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania, on November 13, 1997.
RESOURCE AMERICA, INC.
By: /s/ Edward E. Cohen
-----------------------------
Edward E. Cohen, Chairman of
the Board of Directors, Chief
Executive Officer and
President
POWER OF ATTORNEY
Each person whose signature appears below in so signing also makes,
constitutes and appoints Edward E. Cohen and Michael L. Staines, and each of
them acting alone, his true and lawful attorney-in-fact, with full power of
substitution, for him in any and all capacities to execute and cause to be filed
with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this registration statement with exhibits thereto
and other documents in connection therewith, and hereby ratifies and confirms
all that said attorney-in-fact or said attorney-in-fact's substitute or
substitutes may do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Edward E. Cohen Date: November 13, 1997
- ---------------------------------
EDWARD E. COHEN, Chairman of the
Board of Directors, Chief
Executive Officer, President and
Director
(Chief Executive Officer)
-88-
<PAGE>
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
/s/ Carlos C. Campbell Date: November 13, 1997
- ---------------------------------
CARLOS C. CAMPBELL, Director
/s/ Daniel G. Cohen Date: November 13, 1997
- ---------------------------------
DANIEL G. COHEN, Executive Vice
President and Director
/s/ Andrew M. Lubin Date: November 13, 1997
- ---------------------------------
ANDREW M. LUBIN, Director
/s/ Scott F. Schaeffer Date: November 13, 1997
- ---------------------------------
SCOTT F. SCHAEFFER, Executive Vice
President and Director
/s/ Alan D. Schrieber Date: November 13, 1997
- ---------------------------------
ALAN D. SCHREIBER, M.D., Director
/s/ Michael L. Staines Date: November 13, 1997
- ---------------------------------
MICHAEL L. STAINES, Senior Vice
President, Secretary and
Director
/s/ John S. White Date: November 13, 1997
- ---------------------------------
JOHN S. WHITE, Director
/s/ Steven Kessler Date: November 13, 1997
- ---------------------------------
STEVEN J. KESSLER, Senior Vice
President-Finance and Chief
Financial Officer
/s/ Nancy J. McGurk Date: November 13, 1997
- ---------------------------------
NANCY J. MCGURK, Vice President-
Finance
(Chief Accounting Officer)
<PAGE>
LEDGEWOOD LAW FIRM
A PROFESSIONAL CORPORATION
1521 LOCUST STREET
PHILADELPHIA, PENNSYLVANIA 19102
November 12, 1997
Resource America, Inc.
1521 Locust Street
Philadelphia, PA 19102
Gentlemen/Ladies:
We have acted as counsel to Resource America, Inc. (the "Company") in
connection with the preparation and filing by the Company of a registration
statement (the "Registration Statement") on Form S-4 under the Securities Act of
1933, as amended (the "Act"), with respect to the exchange offering of 12%
Senior Notes Due 2004 (the "Notes"). In connection therewith, you have requested
our opinion as to certain matters referred to below.
In our capacity as such counsel, we have familiarized ourselves with
the actions taken by the Company in connection with the registration of the
Notes. We have examined the originals or certified copies of such records,
agreements, certificates of public officials and others, and such other
documents, including the Registration Statement, as we have deemed relevant and
necessary as a basis for the opinions hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures on original
documents and the authenticity of all documents submitted to us as originals,
the conformity to original documents of all copies submitted to us as conformed
or photostatic copies, and the authenticity of the originals of such latter
documents. We are attorneys admitted to practice in the Commonwealth of
Pennsylvania and, accordingly, we express no opinion with respect to matters
governed by the laws of any jurisdiction other than the Commonwealth of
Pennsylvania, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation which has been duly formed and is
validly subsisting under the laws of the State of Delaware.
2. When issued, the Notes will be duly authorized, validly issued,
fully paid, non-assessable and a binding obligation of the Company.
We consent to the references to this opinion and to Ledgewood Law Firm,
P.C. in the Prospectus included as part of the Registration Statement, and to
the inclusion of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Ledgewood Law Firm, P.C.
LEDGEWOOD LAW FIRM, P.C.
<PAGE>
LEDGEWOOD LAW FIRM
A PROFESSIONAL CORPORATION
1521 LOCUST STREET
PHILADELPHIA, PENNSYLVANIA 19102
November 12, 1997
Resource America, Inc.
1521 Locust Street - Suite 400
Philadelphia, PA 19102
Ladies and Gentlemen:
We have acted as counsel to Resource America, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a Form S-4
registration statement (the "Registration Statement") filed with the Securities
and Exchange Commission with respect to the offer by the Company (the
"Offering") to exchange 12% Senior Notes Due 2004 (the "New Notes") which have
been registered under the Securities Act of 1933, for any and all of its
currently outstanding 12% Senior Notes due 2004 (the "Old Notes"). You have
requested our opinion requiring certain U.S. federal income tax matters in
connection with the Offering.
In giving this opinion letter, we have examined the following:
1. the Company's Articles of Incorporation;
2. the Company's Bylaws;
3. the Registration Statement, including the prospectus contained as
part of the Registration Statement (the "Prospectus"); and
4. such other documents as we have deemed necessary or appropriate for
purposes of this opinion.
Based on the documents set forth above, we are of the opinion that the
description of the law and the legal conclusions contained in the Prospectus
under the caption "Certain Federal Income Tax Consequences" are correct in all
material aspects, and the discussion thereunder fairly summarizes the federal
income tax considerations (and ERISA considerations) that are likely to be
material to a person holding Old Notes who is considering exchanging them for
New Notes.
The forgoing opinions are based on current provisions of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations thereunder,
published administrative interpretations thereof and published court decisions.
No assurance can be given that the applicable law will not be amended or that
regulations will not be issued and that any such amendment or regulations or the
legal authority will not affect our opinion or the position of the Internal
Revenue Service.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Ledgewood Law Firm,
P.C. under the caption "Certain
<PAGE>
Resource America, Inc.
November 12, 1997
Page 2
Federal Income Tax Consequences" in the Prospectus. In giving this consent, we
do not admit that we are in the category of persons whose consent is required by
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission.
The foregoing opinions are limited to the U.S. federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to update
the opinions expressed herein after the date of this letter. This opinion letter
is solely for the information and use of the addressee, and it may not be
distributed, relied upon for any purpose by any other person, quoted in whole or
in part or otherwise reproduced in any document, or filed with any governmental
agency without our express written consent.
Very truly yours,
/s/ Ledgewood Law Firm, P.C.
----------------------------
LEDGEWOOD, LAW FIRM, P.C.
<PAGE>
RESOURCE AMERICA, INC.
12% Senior Notes Due 2004
No____________ $___________
CUSIP No. ____________
Resource America, Inc., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
Successor Company under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ____________________, or registered assigns,
the principal sum of ___________ Dollars on ______________, 2004, and to pay
interest thereon from July 22, 1997 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually in
arrears on February 1 and August 1 in each year, commencing February 1, 1998, at
the rate of 12% per annum, plus Additional Interest, if any, until the principal
hereof is paid or made available for payment, and at the rate of 1% over the
rate set forth above per annum on any overdue principal and (to the extent that
the payment of such interest shall be legally enforceable) on any overdue
installment of interest. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Senior Note (or one or more Predecessor
Senior Notes) is registered at the close of business on the Regular Record Date
for such interest, which shall be January 15 or July 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest (including any Additional Interest) not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Senior Note (or one or more Predecessor Senior Notes) is registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holders of Senior
Notes not less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Senior Notes may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture. Interest on the Senior Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
The principal of, and premium, if any, and interest including
Additional Interest, if any, on the Senior Notes shall be payable at the
principal office of the Company in Philadelphia, Pennsylvania or at the office
of the Paying Agent as may be established by the Company and the Trustee (herein
called the "Place of Payment"; initially the Place of Payment shall be the
principal corporate trust office of the Trustee in New York, New York). All such
payments shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company, payment of interest
may be made (subject to collection) by check mailed to the address of the Person
entitled thereto at such address as shall appear on the Note Register or by wire
transfer in immediately available funds to the accounts designated by the Person
entitled thereto in writing in form satisfactory to the Trustee at least fifteen
(15) days prior to the date of such payment.
<PAGE>
Reference is hereby made to the further provisions of this Senior 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.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Senior
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
RESOURCE AMERICA, INC.
By:____________________________
Attest:
____________________________
<PAGE>
Form of Reverse of Senior Note.
This Senior Note is one of a duly authorized issue of the Company
(herein called the "Senior Notes"), issued under an Indenture, dated as of
July 22, 1997 (herein called the "Indenture"), between the Company and The
Bank of New York as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Senior Notes and of the terms
upon which the Senior Notes are, and are to be, authenticated and delivered.
This Senior Note is one of the Senior Notes designated on the face hereof,
limited in aggregate principal amount up to $75,000,000.
The Senior Notes may not be redeemed prior to August 1, 2002 except
as set forth herein. On or after such date, the Senior Notes may be redeemed
upon not less than 30 days' and not more than 60 days' notice by mail, at any
time on or after August 1, 2002, as a whole or in part, at the election of
the Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed during the 12-month period beginning August 1,
of the years indicated,
Redemption
Year Price
---- -----------
2002 106%
2003 103%
together in the case of any such redemption with accrued and unpaid interest
(including any Additional Interest) to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Senior Notes, or one or more Predecessor
Senior Notes, of record at the close of business on the relevant Regular Record
Dates referred to on the face hereof, all as provided in the Indenture.
In the event of redemption of this Senior Note in part only, a new
Senior Note or Senior Notes of like tenor for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
Upon a Change of Control Event, the Holder of this Senior Note will
have the right to cause the Company to repurchase all or any part of this Senior
Note at a repurchase price equal to 101% of the principal amount of this Senior
Note plus accrued interest (including any Additional Interest) to the date of
purchase (subject to the right of the Holders on the relevant Regular Record
Date to receive interest due on the relevant Interest Payment Date) as provided
in, and subject to the terms of, the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness evidenced by this Senior Note and (b) certain restrictive
covenants, in each case upon compliance by the Company with certain conditions
set forth therein, which provisions apply to this Senior Note.
<PAGE>
If an Event of Default with respect to Senior Notes shall occur and be
continuing, the principal of the Senior Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Senior Notes at any time by the
Company and the Trustee with the consent of the Holders of a majority in
principal amount of the Senior Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Senior Notes at the time Outstanding, on behalf of the Holders of
all Senior Notes, to waive certain past defaults under the Indenture and their
consequences. Any such consent or waiver shall be conclusive and binding upon
the Holder of this Senior Note and upon all future Holders of this Senior Note
and of any Senior Note issued upon the registration of transfer hereof or in
exchange therefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Senior Note.
No reference herein to the Indenture and no provision of this Senior
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium and
interest (including any Additional Interest) on this Senior Note at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Senior Note is registrable in the Senior Note
Register, upon surrender of this Senior Note for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest (including any Additional Interest) on this Senior Note are
payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Senior Note Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Senior Notes of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Senior Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Senior Notes are
exchangeable for a like aggregate principal amount of Senior Notes of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Senior Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Senior Note is registered as the owner
hereof for all purposes, whether or not this Senior Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
<PAGE>
All terms used in this Senior Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and the Senior Notes will be governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required.
<PAGE>
RESOURCE AMERICA, INC.
TO
THE BANK OF NEW YORK, Trustee
12% SENIOR NOTES DUE 2004
---------------------------
INDENTURE
Dated as of July 22, 1997
---------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE Definitions and Other Provisions of General Application........................................... 1
Section 1.1 Definitions.............................................................................. 1
Section 1.2 Compliance Certificates and Opinions..................................................... 19
Section 1.3 Form of Documents Delivered to Trustee................................................... 20
Section 1.4 Acts of Holders, Record Dates............................................................ 20
Section 1.5 Notices, Etc., to Trustee and Company.................................................... 22
Section 1.6 Notice to Holders; Waiver................................................................ 22
Section 1.7 Conflict with Trust Indenture Act........................................................ 23
Section 1.8 Effect of Headings and Table of Contents................................................. 23
Section 1.9 Successors and Assigns................................................................... 23
Section 1.10 Separability Clause..................................................................... 23
Section 1.11 Benefits of Indenture.................................................................... 23
Section 1.12 Governing Law; Choice of Forum.......................................................... 23
Section 1.13 Legal Holidays.......................................................................... 25
ARTICLE TWO Senior Note Forms................................................................................. 25
Section 2.1 Forms Generally.......................................................................... 25
Section 2.2 Form of Face of Senior Note.............................................................. 25
Section 2.3 Form of Reverse of Senior Note........................................................... 27
Section 2.4 Form of Legend for Global Senior Notes................................................... 29
Section 2.5 Legending of the Securities; Restrictions on Transfers................................... 30
Section 2.6 Form of Trustee's Certificate of Authentication.......................................... 30
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
Section 2.7 Form of Assignment and Election to Purchase.............................................. 30
ARTICLE THREE The Senior Notes............................................................................... 31
Section 3.1 Global Senior Note; Depositary............................................................ 31
Section 3.2 Amount.................................................................................... 31
Section 3.3 Denominations............................................................................. 31
Section 3.4 Execution, Authentication, Delivery and Dating............................................ 32
Section 3.5 Temporary Notes........................................................................... 32
Section 3.6 Registration; Registration of Transfer and Exchange....................................... 33
Section 3.7 Mutilated, Destroyed, Lost and Stolen Notes............................................... 34
Section 3.8 Payment of Interest; Interest Rights Preserved............................................ 34
Section 3.9 Persons Deemed Owners..................................................................... 36
Section 3.10 Cancellation............................................................................. 36
Section 3.11 Computation of Interest.................................................................. 36
Section 3.12 CUSIP Numbers............................................................................ 36
ARTICLE FOUR Book-Entry Provisions for Global Senior Notes.................................................... 37
Section 4.1 Applicability of Article.................................................................. 37
Section 4.2 Book-Entry Provisions For Global Senior Note.............................................. 37
ARTICLE FIVE Remedies......................................................................................... 39
Section 5.1 Events of Default........................................................................ 39
Section 5.2 Acceleration of Maturity; Rescission and Annulment....................................... 40
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.......................... 41
Section 5.4 Trustee May File Proofs of Claim......................................................... 42
Section 5.5 Trustee May Enforce Claims Without Possession of Senior Notes............................ 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 5.6 Application of Money Collected........................................................... 43
Section 5.7 Limitation on Suits...................................................................... 43
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest............................................................... 44
Section 5.9 Restoration of Rights and Remedies....................................................... 44
Section 5.10 Rights and Remedies Cumulative.......................................................... 44
Section 5.11 Delay or Omission Not Waiver............................................................ 44
Section 5.12 Control by Holders...................................................................... 44
Section 5.13 Waiver of Past Defaults................................................................. 45
Section 5.14 Undertaking for Costs................................................................... 45
Section 5.15 Waiver of Usury, Stay or Extension Laws................................................. 46
ARTICLE SIX The Trustee...................................................................................... 46
Section 6.1 Certain Duties and Responsibilities...................................................... 46
Section 6.2 Notice of Defaults....................................................................... 47
Section 6.3 Certain Rights of Trustee................................................................ 47
Section 6.4 Not Responsible for Recitals or Issuance of Senior Notes.................................. 48
Section 6.5 May Hold Senior Notes..................................................................... 48
Section 6.6 Money Held in Trust....................................................................... 48
Section 6.7 Compensation and Reimbursement............................................................ 49
Section 6.8 Disqualification; Conflicting Interests................................................... 49
Section 6.9 Corporate Trustee Required; Eligibility................................................... 49
Section 6.10 Resignation and Removal; Appointment of Successor........................................ 50
Section 6.11 Acceptance of Appointment by Successor................................................... 51
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.............................. 52
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 6.13 Preferential Collection of Claims Against Company........................................ 52
Section 6.14 Appointment of Authenticating Agent...................................................... 52
ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company............................................. 54
Section 7.1 Company to Furnish Trustee Names and Addresses of
Holders; Trustee to Furnish Senior Note Register..................................... 54
Section 7.2 Preservation of Information; Communications to Holders.................................... 55
Section 7.3 Reports by Trustee........................................................................ 55
ARTICLE EIGHT Amendments, Supplements and Waivers............................................................ 56
Section 8.1 Supplemental Indentures Without Consent of Holders........................................ 56
Section 8.2 Supplemental Indentures with Consent of Holders........................................... 57
Section 8.3 Execution of Supplemental Indentures...................................................... 58
Section 8.4 Effect of Supplemental Indentures......................................................... 58
Section 8.5 Conformity with Trust Indenture Act....................................................... 58
Section 8.6 Reference in Senior Notes to Supplemental Indentures...................................... 58
Section 8.7 Notice of Supplemental Indenture.......................................................... 58
ARTICLE NINE Covenants........................................................................................ 59
Section 9.1 Payment of Principal, Premium and Interest............................................... 59
Section 9.2 Maintenance of Office or Agency.......................................................... 59
Section 9.3 Money for Senior Notes Payments to Be Held in Trust...................................... 59
Section 9.4 Statement by Officers as to Default...................................................... 61
Section 9.5 Payment of Taxes and Other Claims........................................................ 61
Section 9.6 Maintenance of Properties................................................................ 61
Section 9.7 Corporate Existence; Keeping of Books.................................................... 62
Section 9.8 Insurance................................................................................ 62
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 9.9 Net Worth Maintenance.................................................................... 62
Section 9.10 Limitations on Indebtedness.............................................................. 62
Section 9.11 Liquidity Maintenance.................................................................... 64
Section 9.12 Limitations on Restricted Payments....................................................... 65
Section 9.13 Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries............................................................. 66
Section 9.14 Limitations on Transactions with Affiliates.............................................. 67
Section 9.15 Limitations on Liens and Guarantees...................................................... 68
Section 9.16 Offer to Purchase upon a Change of Control Event......................................... 68
Section 9.17 Payments for Consent..................................................................... 70
Section 9.18 Waiver of Certain Covenants.............................................................. 70
ARTICLE TEN Merger, Consolidation and Transfer of Assets..................................................... 71
Section 10.1 Merger, Consolidation or Transfer of Assets of the Company............................... 71
Section 10.2 Successor Substituted.................................................................... 71
Section 10.3 Senior Notes to Be Secured in Certain Events............................................. 72
ARTICLE ELEVEN Redemption of Senior Notes.................................................................... 72
Section 11.1 Applicability of Article................................................................ 72
Section 11.2 Optional Redemption..................................................................... 72
Section 11.3 Election to Redeem; Selection by Trustee of Senior Notes
to Be Redeemed.................................................................... 72
Section 11.4 Notice of Redemption.................................................................... 73
Section 11.5 Deposit of Redemption Price............................................................. 74
Section 11.6 Senior Notes Payable on Redemption Date................................................. 74
Section 11.7 Senior Notes Redeemed in Part........................................................... 74
ARTICLE TWELVE Defeasance and Covenant Defeasance............................................................ 75
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 12.1 Option to Effect Legal Defeasance or Covenant Defeasance................................. 75
Section 12.2 Legal Defeasance and Discharge........................................................... 75
Section 12.3 Covenant Defeasance....................................................................... 75
Section 12.4 Conditions to Legal or Covenant Defeasance............................................... 76
Section 12.5 Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions...................................... 77
Section 12.6 Reinstatement............................................................................ 78
ARTICLE THIRTEEN Miscellaneous................................................................................ 78
Section 13.1. No Recourse Against Others.............................................................. 78
Section 13.2. Execution in Counterparts............................................................... 78
</TABLE>
vi
<PAGE>
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF JULY 22, 1997
TIA Section Indenture Section
310(a)(1) 6.9
(a)(2) 6.9
(a)(3) Not Applicable
(a)(4) Not Applicable
(a)(5) 6.9
(b) 1.5, 6.8, 6.9, 6.10, 6.11
(c) Not Applicable
311(a) 6.13
(b) 6.13
(c) Not Applicable
312(a) 7.1, 7.2
(b) 7.2
(c) 7.2
313(a) 7.3
(b)(1) Not Applicable
(b)(2) 7.3
(c) 1.6, 7.3
(d) 7.3
314(a) 1.5, 1.6, 7.4
(b) Not Applicable
(c)(1) 1.2
(c)(2) 1.2
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.2
(f) Not Applicable
315(a) 6.1
(b) 1.6, 6.2
(c) 6.1
(d) 6.1
(e) 5.14
316(a)(last sentence) 1.1 (definition of "Outstanding")
316(a)(1)(A) 5.12
(a)(1)(B) 5.13
(a)(2) Not Applicable
(b) 5.7, 5.8
(c) 1.4
317(a)(1) 5.3
(a)(2) 5.4
(b) 6.6, 9.3
318(a) 1.7
(b) 6.6, 9.3
(c) 1.7
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INDENTURE, dated as of July 22, 1997, between RESOURCE AMERICA, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 1521 Locust
Street, Philadelphia, Pennsylvania 19102, and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
A. The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $75,000,000 in principal amount
of its unsecured 12% Senior Notes due 2004, whether Original Senior Notes (as
defined below) or Series B Senior Notes (as defined below), to be issued as in
this Indenture provided.
B. All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Senior
Notes (as defined below) by the Holders thereof, it is mutually agreed, for the
equal and proportionate benefit of all Holders of the Senior Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have
the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision;
(5) the word "including" is not limiting;
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(6) references in this Indenture to any agreement, other document
or law "as amended" or "as amended from time to time," or to
"amendments" of any document or law, shall include any
amendments, supplements, replacements, renewals or other
modifications from time to time, provided in the case of
modifications to documents, such modifications are permissible
under this Indenture; and
(7) references in this Indenture to any law include regulations
promulgated thereunder from time to time.
"Accredited Investor" means an accredited investor within the meaning
of Rule 501(a) of Regulation D under the Securities Act.
"Acquired Indebtedness" means Indebtedness of a person (i) existing at
the time such Person becomes a Subsidiary of or is merged with or into any other
Person or (ii) assumed in connection with the acquisition of assets from such
Person, in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of such other Person or such
acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of
the related acquisition of assets from such Person or the date such Person
becomes a Subsidiary of or is merged with or into such other Person.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Additional Interest" means any Registration Penalty and the interest,
if any, that shall accrue on any interest on the Senior Notes the payment of
which has not been made on the applicable Interest Payment Date and which shall
accrue at the rate per annum specified or determined as specified in such Senior
Note.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such specified Person and any legal or beneficial
owner, directly or indirectly, of 20% or more of the Voting Stock of such
specified Person. Notwithstanding the foregoing, no Securitization Entity shall
be deemed an Affiliate of the Company.
"Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and ordinances of
any Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, judgments, awards and decrees of any Governmental Authority.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Senior
Notes.
"Authorized Officer" means any officer of the Company designated by a
Board Resolution to take certain actions as specified in this Indenture.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal
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payment of such Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Board of Directors" means the board of directors or any duly
authorized committee of that board. Unless otherwise indicated, "Board of
Directors" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company, or by action of an Authorized Officer
designated as such pursuant to a resolution of the Board of Directors of the
Company, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of any Person means any obligations of such
Person under any capital lease for real or personal property which, in
accordance with GAAP, is required to be recorded as a capitalized lease
obligation; and, for the purpose of this Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents or
interests in (however designated) capital stock in such Person, including, with
respect to a corporation, common stock, Preferred Stock and other corporate
stock and, with respect to a partnership, partnership interests, whether general
or limited, and any rights (other than debt securities convertible into
corporate stock, partnership interests or other capital stock), warrants or
options exchangeable for or convertible into such corporate stock, partnership
interests or other capital stock.
"Change of Control Event" means an event or series of events by which
(a) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than the
Management group, is or becomes after the date of issuance of
the Senior Notes the "beneficial owner" (as defined in Rules
13 d-3 and 13d-5 under the Exchange Act as in effect on the
date of the In-denture), of more than 40% of the total voting
power of all Voting Stock of the Company then outstanding;
(b) (1) another corporation merges into the Company or
the Company consolidates with or merges into any other
corporation, or
(2) the Company conveys, transfers or leases all or
substantially all its assets to any person or group, in one
transaction or a series of transactions other than any
conveyance, transfer or lease between the Company and a
Wholly-Owned Subsidiary of the Company, and in the case of
each of clause (1) and clause (2), with the effect that a
person or group, other than the Management group, is or
becomes the beneficial owner of more than 40% of the total
voting power of all Voting Stock of the surviving or
transferee corporation of such transaction or series of
transactions;
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(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board
of Directors, or whose nomination for election by the
Company's shareholders was approved by a vote of a majority of
the directors then still in office who were either 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 directors then in
office; or
(d) the shareholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company.
"Change of Control Purchase Date," "Change of Control Purchase Notice,"
"Change of Control Purchase Price" and "Change of Control Purchase Offer" are
defined in Section 9.17.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board or its President, and by its Chief Financial Officer, its
Controller or an Assistant Controller, and delivered to the Trustee.
"Consolidated Depreciation and Amortization Expense" means with respect
to any Person for any period, the total amount of depreciation and amortization
expense of such Person for such period on a consolidated basis and otherwise
determined in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any Person for any period,
the Consolidated Net Income (Loss) of such Person for such period plus (a)
provision for taxes based on income or profits of such Person for such period
deducted in computing Consolidated Net Income (Loss) plus (b) Consolidated
Interest Expense of such Person for such period, plus (c) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income (Loss), plus (d) without duplication, any other non-cash
charges reducing Consolidated Net Income (Loss) of such Person for such period
less (e) without duplication, non-cash items increasing Consolidated Net Income
(Loss) of such Person for such period in each case, on a consolidated basis for
such Person in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the
sum of: (a) consolidated interest expense of such Person for such period, other
than the interest expense on Permitted Acquisition Indebtedness and Permitted
Repurchase Facilities, whether paid or accrued (except to the extent accrued in
a prior period), to the extent such expense was deducted in computing
Consolidated Net Income (Loss) (including amortization of original issue
discount, non-cash interest payments and the interest component of Capital Lease
Obligations, excluding amortization of deferred financing fees) and (b)
consolidated capitalized interest of such Person for such period, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income (Loss).
4
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"Consolidated Net Assets" of any Person as of any date means the total
amount of assets of such Person and its Subsidiaries (less applicable reserves)
on a consolidated basis at the end of the fiscal quarter immediately preceding
such date for which financial information is available, as determined in
accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period,
the consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income (loss), by excluding, without
duplication, (i) the portion of net income (or loss) of any other Person (other
than any of such Person's consolidated Subsidiaries) in which such Person or any
of its Subsidiaries has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or its
consolidated Subsidiaries in cash by such other Person during such period, (ii)
net income (or loss) of any Person combined with such Person or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iii) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan and (iv) solely for the
purpose of determining Consolidated Net Income (Loss) in connection with the
calculation of Restricted Payments permitted to be made hereunder, the net
income of any consolidated Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders; provided that, upon the termination or
expiration of such dividend or distribution restrictions, the portion of net
income (or loss) of such consolidated Subsidiary allocable to such Person and
previously excluded shall be added to the Consolidated Net Income (Loss) of such
Person to the extent of the amount of dividends or other distributions available
to be paid to such Person in cash by such Subsidiary.
"Consolidated Net Worth" of any Person and its Subsidiaries mean as of
the date of determination all amounts that would be included under stockholders'
equity on a consolidated balance sheet of such Person and its Subsidiaries
determined in accordance with GAAP.
"Control" when used with respect to any specified Person means the
power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities (or pledge of voting
securities if the pledgee thereof may on the date of determination exercise or
control the exercise of the voting rights of the owner of such voting
securities), by contract or otherwise; and the terms "to Control," "Controlling"
and "Controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is located at 101 Barclay
Street, Floor 21 West, New York, New York 10286.
"Covenant Defeasance" has the meaning specified in Section 12.3.
"Credit Support" means credit support designed to enhance the
likelihood of payment on securities issued in connection with a securitization
of loans or other assets which are generally funded with the proceeds of such
securitization, including without limitation subordination of certain classes of
securities, insurance policies, representations and warranties, reserve funds,
liquidity reserves, lost- and missing- note reserves and letters of credit.
5
<PAGE>
"Default" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Depositary" has the meaning specified in Section 3.1.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part on, or prior to, or is
exchangeable for debt securities of the Company or its Subsidiaries prior to,
the final Stated Maturity of principal of the Senior Notes; provided that only
the amount of such Capital Stock that is redeemable prior to the Stated Maturity
of principal of the Senior Notes shall be deemed to be Disqualified Capital
Stock.
"Disinterested Director" of any Person means, with respect to any
transaction or series of related transactions, a member of the board of
directors of such Person who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of related
transactions.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company and the Guarantors to
exchange the Series B Senior Notes for the Original Senior Notes made pursuant
to the Senior Notes Registration Rights Agreement.
"Existing Management Group" means a majority of the executive officers
of the Company as of the date of the Indenture as set forth in the Placement
Memorandum, members of their immediate families, certain trusts for their
benefit and legal representatives of, or heirs, beneficiaries or legatees
receiving Common Stock (or securities convertible or exchangeable for Common
Stock) under any such person's estate.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any asset or assets shall be determined by the Board of Directors of
the Company, acting in good faith, and shall be evidenced by a Board Resolution.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (i) Consolidated Interest Expense of such Person for such period, and
(ii) the product of (A) all cash dividend payments on any series of Preferred
Stock or Disqualified Capital Stock of such Person or its Subsidiaries for such
period, and (B) a fraction, the numerator of which is one and the denominator of
which is one minus the then-current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case on a consolidated
basis and in accordance with GAAP.
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"GAAP" means generally accepted accounting principles as in effect on
the date of computation.
"Global Senior Note" means a Senior Note bearing the legend prescribed
in Section 2.4 evidencing all or part of the Senior Notes, authenticated and
delivered to the Depositary or its nominee, and registered in the name of such
Depositary or nominee.
"Global Senior Note holder" has the meaning specified in Section 3.1.
"Governmental Approval" means an authorization, consent, approval,
permit, license, registration or filing with any Governmental Authority.
"Governmental Authority" with respect to any Person, means any nation
(including an Indian nation), any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
government authority, agency, department, board, commission or instrumentality
of the United States, any state of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of competent jurisdiction
in each case, having jurisdiction or authority over such Person.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose 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, however, 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.
"Guarantor" means any person Guaranteeing any obligation.
"Guaranteed Indebtedness" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor, or (v) otherwise to assure a
creditor with respect to Indebtedness against loss; provided that the term shall
not include endorsements for collection of deposit, in either case in the
ordinary course of business.
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"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holders" or "Senior Note Holders" means the Person in whose name a
Senior Note is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under letter of credit
facilities, and in connection with any agreement by such Person to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person now or hereafter outstanding, (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, but excluding trade payables arising in the ordinary course of business,
(iv) all obligations under Interest Rate Agreements of such Person, (v) all
Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in
clauses (i) through (v) above of other Persons and all dividends payable by
other Persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligations being deemed to be the lesser of the value of such property or
asset or the amount of the obligations so secured), (vii) all guarantees by such
Person of Guaranteed Indebtedness, (viii) all Disqualified Capital Stock (valued
at the greater of book value and voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends) of such Person, and (ix) any
amendment, supplement, modification, deferral, renewal, extension, refunding or
refinancing or any liability of the types referred to in clauses (i) through
(viii) above. For purposes hereof, (x) the "maximum fixed repurchase price" of
any Disqualified Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value is to be determined in good faith by the
board of directors (or any duly authorized committee thereof) of the issuer of
such Disqualified Capital Stock, and (y) Indebtedness is deemed to be incurred
pursuant to a revolving credit facility each time an advance is made thereunder.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into
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pursuant to the applicable provisions hereof, including, for all purposes of
this instrument, and any such supplemental indenture, the provisions of the
Trust Indenture Act that are deemed to be a part of and govern this instrument
and any such supplemental indenture, respectively.
"Interest Payment Date" means the date on which any installment of
interest (including any Additional Interest) on the Senior Notes becomes due and
payable, as provided in Section 2.2.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, repurchase agreement, futures contract or other
financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in interest rates.
"Issue Date" means the date on which the Original Senior Notes are
originally issued.
"Junior Indebtedness" means any Indebtedness of the Company
subordinated in right of payment of either principal, premium (if any) or
interest (including any Additional Interest) thereon to the Senior Notes.
"Legal Defeasance" has the meaning specified in Section 12.2.
"Legal Holiday" means any Saturday, Sunday or other day on which banks
in the States of New York or Pennsylvania are authorized or obligated by law or
executive order to be closed for business.
"Leverage Ratio" as of any date of determination means the ratio of (i)
the aggregate amount of all Indebtedness and Disqualified Capital Stock of the
Company, excluding (A) Indebtedness and Guarantees thereof permitted to be
incurred pursuant to Section 9.10 (f) (1), (2), (3), (4), (6) and (7) hereof;
(B) Hedging Obligations permitted to be incurred pursuant to Section 9.10
(f)(11) hereof; and (C) Junior Indebtedness of the Company to (ii) the
Consolidated Net Worth of the Company.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Liquid Assets" shall include: (i) cash; (ii) any of the following
instruments that have a remaining term to maturity not in excess of 90 days from
the determination date: (a) repurchase agreements on obligations of, or are
guaranteed as to timely receipt of principal and interest by, the United States
or any agency or instrumentality thereof when such obligations are backed by the
full faith and credit of the United States provided that the party agreeing to
repurchase such obligations is a primary dealer in U.S. government securities,
(b) federal funds and deposit accounts, including but not limited to
certificates of deposit, time deposits and bankers' acceptances of any U.S.
depository institution or trust company incorporated under the laws of the
United States or any state, provided that the debt of such depository
institution or trust company at the date of acquisition thereof has been rated
by Standard & Poor's Corporation in the highest short-term rating category or
has an equivalent rating from another nationally recognized rating agency, or
(c) commercial paper of any corporation incorporated under the laws of the
United States or any state thereof that on the date of acquisition is rated
investment grade by Standard & Poor's Corporation or has an equivalent rating
from another nationally recognized
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rating agency; (iii) any debt instrument which is an obligation of, or is
guaranteed as to the receipt of principal and interest by the United States, its
agencies or any U.S. government sponsored enterprise, or (iv) any
mortgage-backed or mortgage-related security issued by the United States, its
agencies, or any U.S. government sponsored enterprise which the payment of
principal and interest from the mortgages underlying such securities will be
passed through to the holder thereof and which such security has a remaining
weighted average maturity of 15 years or less. Notwithstanding the foregoing,
Liquid Assets shall not include any debt instruments, securities or
collateralized mortgage obligations (real estate mortgage investment conduits)
that would be classified as a "High-Risk Mortgage Security" pursuant to the
policy statement adopted by the Federal Financial Institutions Examination
Counsel on February 10, 1992, as reflected in Volume I of the Federal Reserve
Report Service, Part 3-1562.
"Maturity", when used with respect to any Senior Note, means the date
on which the principal of such Senior Note or with respect to any installment of
principal, when such installment of principal becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, upon repurchase or otherwise.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, or options, warrants or rights to purchase Capital Stock, or debt
securities or Capital Stock that have been converted into or exchanged for
Capital Stock, or any capital contribution in respect of Capital Stock, as
referred to under Section 9.13 hereof, the proceeds of such issuance or sale or
capital contribution in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations when received in the form of, or
stock or other assets when disposed for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Subsidiary of the Company), net of attorney's fees, accountant's fees and
brokerage, consulting, underwriting and other fees and expenses actually
incurred in connection with such issuance or sale or capital contribution and
net of taxes paid or payable by the Company as a result thereof.
"Non-Recourse Indebtedness" means, with respect to any Person,
Indebtedness of such Person for which (i) the sole recourse (excluding certain
exceptions relating to fraud, intentional misrepresentation, proceeds of the
assets, environmental liabilities and similar matters customary in non-recourse
indebtedness) for collection of principal and interest on such Indebtedness is
against the specific assets identified in the instruments evidencing or securing
such Indebtedness, (ii) such assets were acquired with the proceeds of such
Indebtedness or such Indebtedness was incurred concurrently with the acquisition
of such assets; and (iii) no other assets (other than Credit Support) of such
Person or of any other Person may be realized upon or in collection of principal
or interest on such Indebtedness.
"Offering" means the initial private placement of the Senior Notes by
the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer or the
President, and by the Chief Executive Officer, the President, the Chief
Financial Officer, the Controller or an Assistant Controller, of the Company
(provided that no one person signs twice on behalf of the Company), and
delivered to the Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 9.4 shall be the principal executive, financial or
accounting officer of the Company. Unless otherwise indicted, "Officers'
Certificate" means an Officers' Certificate of the Company.
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"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
"Original Senior Notes" means the 12% Senior Notes due 2004, as amended
or supplemented from time to time in accordance with the terms hereof, issued
under this Indenture on the Issue Date.
"Outstanding", when used with respect to Senior Notes, means, as of the
date of determination, all Senior Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Senior Notes theretofore canceled by the Trustee
or delivered to the Trustee for cancellation;
(ii) Senior Notes for whose payment or redemption
money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company)
in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the
Holders of such Senior Notes; provided that, if such Senior
Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Senior Notes paid pursuant to Section 3.7 or in
exchange for or in lieu of which other Senior Notes have been
authenticated and delivered pursuant to this Indenture, other
than any such Senior Notes in respect of which there shall
have been presented to the Trustee proof satisfactory to it
that such Senior Notes are held by a bona fide purchaser in
whose hands such Senior Notes are valid obligations of the
Company provided, however, that in determining whether the
Holders of the requisite principal amount of the Outstanding
Senior Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, (i) Senior
Notes owned by the Company or any other obligor on the Senior
Notes or any Affiliate of the Company 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 Senior Notes which a Responsible
Officer of the Trustee actually knows to be so owned shall be
so disregarded. Senior Notes 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 Senior Notes and that the
pledgee is not the Company or any other obligor on the Senior
Notes or any Affiliate of the Company.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment of principal, premium (if any) and interest
(including any Additional Interest) thereon to the Senior Notes.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest (including any Additional
Interest) on any Notes on behalf of the Company or, if the Company is acting as
its own Paying Agent, the Company. Initially, the Paying Agent shall be the
Trustee.
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"Permitted Acquisition Indebtedness" means any secured funding
arrangement with a financial institution or other lender to the extent (and only
to the extent) funding thereunder is used exclusively to finance or refinance
the purchase or origination of loans, real estate owned, equipment leases or
other assets by the Company or a Subsidiary or to provide related financing
subsequent to such purchase or origination.
"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 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 or any Subsidiary, Liens
granted on such property or assets in favor of the Person from whom the Company
or such Subsidiary acquired such property or assets 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; (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 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 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 Subsidiary
thereof, (xii) Liens with respect to the property or assets of the Company or a
Subsidiary securing Indebtedness permitted to be incurred pursuant to Section
9.10 (e)(1), (2), (3), (4), (6) and (7) hereof; (xiii) Liens granted after the
Issue Date on any assets or Capital Stock of the Company or its Subsidiaries
created in favor of the Holders; (xiv) Liens with respect to the property or
assets of a Subsidiary granted by such Subsidiary to the Company to secure
Indebtedness owing to the Company; (xv) Liens securing Indebtedness which is
incurred to refinance Permitted Indebtedness, 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
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (xvi) leases or subleases granted to others not materially
interfering with the ordinary course of business of the Company or any of its
Subsidiaries; (xvii) other Liens securing obligations not exceeding $1,000,000
in the aggregate; and (xviii) Liens securing Hedging Obligations of the Company
or such Subsidiary so long as
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such Hedging Obligations relate to Indebtedness that is, and is permitted under
this Indenture to be, secured by a Lien on the same property securing such
Hedging Obligations.
"Permitted Payment" means, so long as no Default or Event of Default is
continuing,
(a) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Capital Stock of the Company or any
Affiliate (other than a Wholly-Owned Subsidiary) of the Company,
Junior Indebtedness or Pari Passu Indebtedness in exchange for
(including any such exchange pursuant to the exercise of a
conversion right or privilege where, in connection therewith,
cash is paid in lieu of the issuance of fractional shares or
scrip), or out of the Net Cash Proceeds or Fair Market Value of
property not constituting Net Cash Proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary of the
Company or to an employee benefit plan of the Company or any of
its Subsidiaries) of Qualified Capital Stock of the Company;
provided that the Net Cash Proceeds or Fair Market Value of such
property received by the Company from the issuance of such shares
of Qualified Capital Stock, to the extent so utilized, shall be
excluded from clause (c)(iii) of Section 9.13 hereof; and
(b) the repurchase, redemption, defeasance or other acquisition or
retirement for value of any Junior Indebtedness or Pari Passu
Indebtedness in exchange for, or out of the Net Cash Proceeds of,
a substantially concurrent issue and sale (other than to a
Subsidiary of the Company) of new Indebtedness by the Company
(such a transaction, a "refinancing"); provided, that any such
new Indebtedness of the Company (i) shall be in a principal
amount that does not exceed an amount equal to the sum of (A) the
principal amount of the Indebtedness so refinanced and accrued
but unpaid interest thereon less any discount from the face
amount of such Indebtedness to be refinanced expected to be
deducted from the amount payable to the holders of such
Indebtedness in connection with such refinancing, (B) the amount
of any premium expected to be paid in connection with such
refinancing pursuant to the terms of the Junior Indebtedness or
Pari Passu Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer, privately negotiated
repurchase or otherwise and (C) the amount of legal, accounting,
printing and other similar expenses of the Company incurred in
connection with such refinancing; provided, further, that for
purposes of this clause (i), the principal amount of any
Indebtedness shall be deemed to mean the principal amount thereof
or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date of
determination; (ii) (A) if such refinanced Indebtedness has an
Average Life to Stated Maturity shorter than that of the Senior
Notes or a final Stated Maturity earlier than the final Stated
Maturity of the Senior Notes, such new Indebtedness shall have an
Average Life to Stated Maturity no shorter than the Average Life
to Stated Maturity of such refinanced Indebtedness and a final
Stated Maturity no earlier than the final Stated Maturity of such
refinanced Indebtedness or (B) in all other cases each Stated
Maturity of principal (or any required repurchase, redemption,
defeasance or sinking fund payments) of such new Indebtedness
shall be after the final Stated Maturity of principal of the
Senior Notes; and (iii) is (A) made expressly subordinated to or
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pari passu with the Senior Notes to substantially the same
extent as the Indebtedness being refinanced or (B) expressly
subordinate to such refinanced Indebtedness.
"Permitted Repurchase Facilities" includes purchase and sale facilities
pursuant to which the Company or a Subsidiary sells loans, real estate owned or
other financial assets to a financial institution or other entity and agrees to
repurchase such loans, real estate owned or financial assets.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Place of Payment" means the principal office of the Company in
Philadelphia, Pennsylvania, or the office of the Paying Agent as may be
established by the Company and the Trustee.
"Placement Memorandum" means the Company's Offering Memorandum, dated
July 16, 1997, as supplemented prior to the Issue Date, pursuant to which the
Original Senior Notes were initially offered.
"Predecessor Senior Note" of any particular Senior Note means every
previous Senior Note evidencing all or a portion of the same debt as that
evidenced by such particular Senior Note; and, for the purposes of this
definition, any Senior Note authenticated and delivered under Section 3.7 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Senior Note
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Senior Note.
"Preferred Stock" means, with respect to any Person, any Capital Stock
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary liquidation or dissolution of such Person, over Capital Stock of
any other class in such Person.
"Purchase Agreement" means the Purchase Agreement, dated July 22, 1997,
among the Company, and the initial purchasers of the Original Senior Notes, as
such may be amended or modified from time to time.
"Qualified Capital Stock" of any Person means any and all Capital Stock
of such Person other than Disqualified Capital Stock.
"Redemption Date", when used with respect to any Senior Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Senior Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Senior Notes or
this Indenture for which financial information is available.
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"Registrar" means the Trustee or its nominee.
"Registration Penalty" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Senior Notes Registration
Rights Agreement, dated as of July 22, 1997, by and among the Company and
Friedman, Billings, Ramsey & Co., Inc., as such may be amended or modified from
time to time.
"Regular Record Date" for the interest (including any Additional
Interest) payable on any Interest Payment Date on the Senior Notes means January
15 or July 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee shall mean
any officer within the corporate trust department (or any successor group of the
Trustee) including any vice president, assistant vice president, assistant
secretary, assistant treasurer or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred at the Trustee's Corporate Trust Office
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means
(a) the declaration, payment or setting apart of any funds for the
payment of any dividend on, or making of any distribution to
holders of, the Capital Stock of the Company or any Subsidiary of
the Company (other than (i) dividends or distributions in
Qualified Capital Stock of the Company and (ii) dividends or
distributions payable on or in respect of any class or series of
Capital Stock of a Subsidiary of the Company as long as the
Company receives at least its pro rata share of such dividends or
distributions in accordance with its ownership interests in such
class or series of Capital Stock);
(b) the purchase, redemption or other acquisition or retirement for
value, directly or indirectly, of any Capital Stock of the
Company or any Affiliate of the Company (other than a
Wholly-Owned Subsidiary, and other than the purchase from a
non-Affiliate of the Company of Capital Stock of any joint
venture or other Person which is an Affiliate of the Company
solely because of the Company's direct or indirect ownership of
20% or more of the Voting Stock of such joint venture or other
Person), except such as shall constitute a Permitted Payment; or
(c) the making of any principal payments on, or repurchase,
redemption, defeasance, retirement or other acquisition for
value, directly or indirectly, of any Junior Indebtedness or Pari
Passu Indebtedness, prior to any Stated Maturity of principal or
scheduled redemption or defeasance of, or any scheduled sinking
fund payment on, such Junior Indebtedness or Pari Passu
Indebtedness, except such as shall constitute a Permitted
Payment.
"Restricted Security" means a Security, unless or until it has been (i)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering
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it or (ii) distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act; provided that in no case
shall a Series B Senior Note issued in accordance with this Indenture and the
terms and provisions of the Senior Notes Registration Rights Agreement be a
Restricted Security.
"SEC" means the Securities and Exchange Commission.
"Securities" or "Senior Notes" means, prior to the Exchange Offer, the
Original Senior Notes, and after the Exchange Offer, the Original Senior Notes
(if any) and the Series B Senior Notes, in each case as amended or modified from
time to time in accordance with the terms hereof, issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means any pooling arrangement or entity formed
or originated for the purpose of holding, and/or issuing securities representing
interests in, one or more pools of mortgages, leases, credit card receivables,
home equity loan receivables, automobile loans, leases or installment sales
contracts, other consumer receivables, real estate owned or other financial
assets of the Company or any Subsidiary, and shall include, without limitation,
any partnership, limited liability company, liquidating trust, grantor trust,
owner trust, real estate mortgage investment conduit, real estate investment
trust or collateralized bond obligation.
"Senior Note Register" has the meaning specified in Section 3.6.
"Senior Notes": (See "Securities").
"Senior Notes Registration Rights Agreement": (See " Registration
Rights Agreement")
"Series B Senior Notes" means the Series B 12% Senior Notes due 2004,
to be issued pursuant to this Indenture in connection with the offer to exchange
Series B Senior Notes for Original Senior Notes that may be made by the Company
pursuant to the Senior Notes Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary of the Company which
accounted for 5% or more of the Consolidated Net Assets of the Company and its
Subsidiaries as of the end of the fiscal quarter preceding the date of
determination for which financial information is available or Consolidated
EBITDA of the Company and its Subsidiaries for the Reference Period.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.8.
"Stated Maturity" when used with respect to any Indebtedness
(including, without limitation, the Senior Notes) means the dates specified in
the instrument governing such Indebtedness as the fixed dates on which any
principal amount of such Indebtedness is due and payable (including, without
limitation, by reason of any required redemption, purchase, defeasance or
sinking fund payment) and, when used with respect to any installment of interest
on Indebtedness, means the date on which such installment is due and payable.
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"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of Voting Stock thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person or a combination thereof.
"Successor Company" has the meaning specified in Section 10.1.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Senior Notes shall mean the Trustee with respect to the Senior
Notes.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Unsecured Debt Coverage Ratio" means, with respect to any Person for
any period, the ratio of Consolidated EBITDA of such Person for such period to
the Fixed Charges of such Person for such period. In the event that the Company
incurs, assumes, guarantees or redeems any Indebtedness (including any
Indebtedness which constitutes Acquired Indebtedness) subsequent to the
commencement of the period for which the Unsecured Debt Coverage Ratio is being
calculated but prior to the event for which the calculation of the Unsecured
Debt Coverage Ratio is made (the "Calculation Date"), then the Unsecured Debt
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, as if the same had occurred
at the beginning of the applicable four-quarter period, including an assumption
of investment returns at the rate equal to the higher of the six-month Treasury
bill rate or six-month LIBOR at the beginning of such four-quarter period. For
purposes of making the computation referred to above, investments in the equity
of, or other acquisitions or dispositions, which constitute all or substantially
all of an operating unit of a business and discontinued operations (as
determined in accordance with GAAP) that have been made by the Company or any of
its Subsidiaries, including all mergers, consolidations and dispositions, during
the four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be calculated on a pro forma basis
assuming that all such investments, acquisitions, dispositions, discontinued
operations, mergers and consolidations (and the reduction of any associated
fixed charge obligations and the change in Consolidated EBITDA resulting
therefrom) had occurred on the first day of the four-quarter period. If since
the beginning of such period any Person (that subsequently became a Subsidiary
or was merged with or into the Company or any Subsidiary since the beginning of
such period) shall have made any investment in the equity of, or other
acquisition or disposition, which constitutes all or substantially all of an
operating unit of a business, discontinued operation, merger or consolidation
that would have required adjustment pursuant to this definition, then the
Unsecured Debt Coverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such investment, acquisition, disposition,
discontinued operation, merger or consolidation had occurred at the beginning of
the applicable four-quarter period. For purposes of this definition, whenever
pro forma effect is to be given to a transaction, the pro forma calculations
shall be made in good faith by a responsible financial or accounting officer of
the Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness
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shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period. Interest on a Capital Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capital Lease Obligation in accordance with GAAP.
Interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a reoccurrence
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Company may designate.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president (but shall not include any assistant vice president),
whether or not designated by a number or a word or words added before or after
the title "vice president".
"Voting Stock" means Capital Stock of the class or classes of which the
holders have (i) in respect of a corporation, the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of such corporation (irrespective of whether or not at the
time Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency) or (ii) in respect of a
partnership, the general voting power under ordinary circumstances to elect the
board of directors or other governing board of such partnership or of the Person
which is a general partner of such partnership.
"Wholly-Owned Subsidiary" means a Subsidiary all of the Capital Stock
of which (other than directors' qualifying shares) is owned by the Company or
another Wholly-Owned Subsidiary.
SECTION 1.2 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by officers of the Company, or an Opinion
of Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth in this Indenture.
Every certificate or opinion (other than the Officers' Certificate
delivered under Section 9.4 hereof) with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating
thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or
investigation as is necessary to enable him to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION 1.3 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders, Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become
effective upon action by the requisite percentage of Holders when
such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act"
of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any
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purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including a
Depositary that is a Holder of a Global Senior Note, may make, give or take, by
a proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Senior Note may provide its proxy or
proxies to the beneficial owners of interest in any such Global Senior Note.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Senior Notes entitled to give or take
any request, demand, authorization, direction, notice, consent,
waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders of Senior Notes. If not
set by the Company prior to the first solicitation of a Holder of
Senior Notes made by any Person in respect of any such action,
or, in the case of any such vote, prior to such vote, the record
date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be
provided pursuant to Section 7.1) prior to such first
solicitation or vote, as the case may be. With regard to any
record date for action to be taken by the Holders Senior Notes,
only the Holders of Senior Notes on such date (or their duly
designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
(d) The ownership of Senior Notes shall be proved by the Senior Note
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Senior Note shall bind
every future Holder of the same Senior Note and the Holder of
every Senior Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such
action is made upon such Senior Note.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any action hereunder with regard to any particular
Senior Note may do so with regard to all or any part of the
principal amount of such Senior Note or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such
principal amount.
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SECTION 1.5 Notices, Etc., to Trustee and Company.
Except as otherwise expressly provided herein, any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid,
to the Company addressed to it at the address of the Company's
principal office specified in the first paragraph of this
instrument or at any other address previously furnished in
writing to the Trustee by the Company, Attention: Edward E.
Cohen, Chairman.
SECTION 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Senior Note Register, not
later than the latest date (if any), and not earlier than the earliest date (if
any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such 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 1.7 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 1.8 Effect of Headings and Table of Contents.
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The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10 Separability Clause.
In case any provision in this Indenture or in the Senior Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Senior Notes, express or implied,
shall give to any Person, other than (a) the parties hereto and their successors
hereunder and (b) the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.12 Governing Law; Choice of Forum.
(a) This Indenture and the Senior Notes will be governed by, and
construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of
law to the extent that the application of the law of another
jurisdiction would be required thereby.
(b) The Company hereby irrevocably submits to the jurisdiction of any
New York State Court sitting in the Borough of Manhattan in the
City of New York or any federal court sitting in the Borough of
Manhattan in the City of New York in respect of any suit, action
or proceeding arising out of or relating to this indenture and
the Senior Notes, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally,
jurisdiction of the aforesaid courts. The company irrevocably
waives, to the fullest extent it may effectively do so under
applicable law, any objection which it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought
in an inconvenient forum.
(c) The Company hereby irrevocably appoints [CT Corporation Systems]
(the "Process Agent," which has consented thereto) with offices
on the date hereof at [1633 Broadway, New York, New York 10019]
as Process Agent to receive for and on behalf of the Company
service of process in the County of New York relating to this
Indenture and the Senior Notes. SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING AGAINST THE COMPANY MAY BE
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MADE ON THE PROCESS AGENT BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR
UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK, AND THE
PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH
SERVICE FOR AND ON BEHALF OF THE COMPANY AND TO ADMIT SERVICE
WITH RESPECT THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL
BE DEEMED EFFECTIVE PERSONAL SERVICE ON THE COMPANY, SUFFICIENT
FOR PERSONAL JURISDICTION, 10 DAYS AFTER MAILING, AND SHALL BE
LEGAL AND BINDING UPON THE COMPANY FOR ALL PURPOSES,
NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES
OF SUCH LEGAL PROCESS TO THE COMPANY OR ANY FAILURE ON THE PART
OF THE COMPANY TO RECEIVE THE SAME. The Company confirms that it
has instructed the Process Agent to mail to the Company, upon
service of process being made on the Process Agent pursuant to
this Section, a copy of the summons and complaint or other legal
process served upon it, by registered mail, return receipt
requested, at the Company's address set forth in the first
paragraph of this instrument, or to such other address as the
Company may notify the Process Agent in writing. The Company
agrees that it will at all times maintain a process agent to
receive service of process in the County of New York on its
behalf with respect to this Indenture and the Senior Notes. If
for any reason the Process Agent or any successor thereto shall
no longer serve as such process agent or shall have changed its
address without notification thereof to the Trustee, the Company,
immediately after gaining knowledge thereof, irrevocably shall
appoint a substitute process agent acceptable to the Trustee in
the County of New York and advise the Trustee thereof or notify
the Trustee of the new address, respectively.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.
SECTION 1.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Senior Note shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Senior
Notes (other than a provision of the Senior Notes which specifically states that
such provision shall apply in lieu of this Section)) payment of interest
(including any Additional Interest) or principal (and premium, if any) need not
be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue with respect to such payment
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be.
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ARTICLE TWO
SENIOR NOTE FORMS
SECTION 2.1 Forms Generally.
The Senior Notes shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Senior Notes, as evidenced by their execution of the
Senior Notes.
The definitive Senior Notes shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Senior Notes, as
evidenced by their execution of such Senior Notes.
SECTION 2.2 Form of Face of Senior Note.
[If the Security is a Restricted Security, such as an Original Senior
Note, then insert -- THE NOTE EVIDENCED HEREBY 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 EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE OR UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN
EFFECT WITH RESPECT TO THIS NOTE. BY ITS ACQUISITION HEREBY (BUT SUBJECT TO
CERTAIN RIGHTS TO REQUIRE REGISTRATION OF THE NOTES), 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 "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501 UNDER THE SECURITIES ACT) ("ACCREDITED INVESTOR") (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT IN A TRANSACTION
NOT REQUIRING REGISTRATION UNDER THE SECURITIES ACT (A) TO RESOURCE AMERICA,
INC. OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE UNDER THE
INDENTURE RELATING TO THIS NOTE (THE "TRUSTEE") A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTION ON TRANSFER
OF THE NOTES EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT INCLUDING THE EXEMPTION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND, IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE. IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY OR THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH
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TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
[All Securities, including Series B Senior Notes, shall be in
substantially the following form] NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET
ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD
THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR
84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS
SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET
ENTITY AND IS NOT PURCHASING THIS SECURITY ON BEHALF OF OR WITH "PLAN ASSETS" OF
ANY PLAN OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23,
95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING.
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RESOURCE AMERICA, INC.
12% Senior Notes Due 2004
No____________ $___________
CUSIP No. ____________
Resource America, Inc., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
Successor Company under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ____________________, or registered assigns,
the principal sum of ___________ Dollars on August 1, 2004, and to pay
interest thereon from July 22, 1997 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 1 and August 1 in each year, commencing February 1, 1998,
at the rate of 12% per annum, plus Additional Interest, if any, until the
principal hereof is paid or made available for payment, and at the rate of 1%
over the rate set forth above per annum on any overdue principal and (to the
extent that the payment of such interest shall be legally enforceable) on any
overdue installment of interest. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Senior Note (or one or more
Predecessor Senior Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be January 15 or July 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest (including any Additional Interest) not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Senior Note (or one or more Predecessor Senior Notes) is registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holders of Senior
Notes not less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Senior Notes may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture. Interest on the Senior Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
The principal of, and premium, if any, and interest including
Additional Interest, if any, on the Senior Notes shall be payable at the
principal office of the Company in Philadelphia, Pennsylvania or at the office
of the Paying Agent as may be established by the Company and the Trustee (herein
called the "Place of Payment"; initially the Place of Payment shall be the
principal corporate trust office of the Trustee in New York, New York). All such
payments shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company, payment of interest
may be made (subject to collection) by check mailed to the address of the Person
entitled thereto at such address as shall appear on the Note Register or by wire
transfer in immediately available funds to the accounts designated by the Person
entitled thereto in writing in form satisfactory to the Trustee at least fifteen
(15) days prior to the date of such payment.
Reference is hereby made to the further provisions of this Senior 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.
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Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Senior
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
RESOURCE AMERICA, INC.
By: _____________________________
Attest:
_____________________________
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SECTION 2.3 Form of Reverse of Senior Note.
This Senior Note is one of a duly authorized issue of the Company
(herein called the "Senior Notes"), issued under an Indenture, dated as of
July 22, 1997 (herein called the "Indenture"), between the Company and The
Bank of New York as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Senior Notes and of the terms
upon which the Senior Notes are, and are to be, authenticated and delivered.
This Senior Note is one of the Senior Notes designated on the face hereof,
limited in aggregate principal amount up to $75,000,000.
The Senior Notes may not be redeemed prior to August 1, 2002 except
as set forth herein. On or after such date, the Senior Notes may be redeemed
upon not less than 30 days' and not more than 60 days' notice by mail, at any
time on or after August 1, 2002, as a whole or in part, at the election of
the Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed during the 12-month period beginning August 1,
of the years indicated,
Redemption
Year Price
---- -----------
2002 106%
2003 103%
together in the case of any such redemption with accrued and unpaid interest
(including any Additional Interest) to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Senior Notes, or one or more Predecessor
Senior Notes, of record at the close of business on the relevant Regular Record
Dates referred to on the face hereof, all as provided in the Indenture.
In the event of redemption of this Senior Note in part only, a new
Senior Note or Senior Notes of like tenor for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
Upon a Change of Control Event, the Holder of this Senior Note will
have the right to cause the Company to repurchase all or any part of this Senior
Note at a repurchase price equal to 101% of the principal amount of this Senior
Note plus accrued interest (including any Additional Interest) to the date of
purchase (subject to the right of the Holders on the relevant Regular Record
Date to receive interest due on the relevant Interest Payment Date) as provided
in, and subject to the terms of, the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness evidenced by this Senior Note and (b) certain restrictive
covenants, in each case upon compliance by the Company with certain conditions
set forth therein, which provisions apply to this Senior Note.
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If an Event of Default with respect to Senior Notes shall occur and be
continuing, the principal of the Senior Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Senior Notes at any time by the
Company and the Trustee with the consent of the Holders of a majority in
principal amount of the Senior Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Senior Notes at the time Outstanding, on behalf of the Holders of
all Senior Notes, to waive certain past defaults under the Indenture and their
consequences. Any such consent or waiver shall be conclusive and binding upon
the Holder of this Senior Note and upon all future Holders of this Senior Note
and of any Senior Note issued upon the registration of transfer hereof or in
exchange therefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Senior Note.
No reference herein to the Indenture and no provision of this Senior
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium and
interest (including any Additional Interest) on this Senior Note at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Senior Note is registrable in the Senior Note
Register, upon surrender of this Senior Note for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest (including any Additional Interest) on this Senior Note are
payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Senior Note Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Senior Notes of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Senior Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Senior Notes are
exchangeable for a like aggregate principal amount of Senior Notes of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Senior Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Senior Note is registered as the owner
hereof for all purposes, whether or not this Senior Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
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All terms used in this Senior Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and the Senior Notes will be governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required.
SECTION 2.4 Form of Legend for Global Senior Notes.
Any Global Senior Note authenticated and delivered hereunder shall bear
a legend in substantially the following form:
"This Senior Note is a Global Senior Note within the meaning
of the Indenture hereinafter referred to and is registered in the name
of a Depositary or a nominee thereof. This Senior Note may not be
transferred to, or registered or exchanged for Senior Notes registered
in the name of, any Person other than the Depositary or a nominee
thereof or a successor of such Depositary or a nominee of such
successor and no such transfer may be registered, except in the limited
circumstances described in the Indenture. Every Senior Note
authenticated and delivered upon registration of transfer of, or in
exchange for or in lieu of, this Senior Note shall be a Global Senior
Note subject to the foregoing, except in such limited circumstances."
SECTION 2.5 Legending of the Securities; Restrictions on Transfers.
Until such time as the same is no longer a Restricted Security, each
certificate evidencing the Securities (and all Securities issued in exchange
therefor or substitution thereof) shall bear a legend in substantially the form
set forth on the form of Senior Note set forth at Section 2.2. Prior to any
transfer or exchange of a legended Security for another Security, the Company
shall deliver an Officers' Certificate to the Trustee directing it to transfer
or exchange such Security for another legended or unlegended Security, subject
to compliance with any transfer restrictions.
SECTION 2.6 Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Senior Notes designated and referred to in the
within-mentioned Indenture.
The Bank of New York, as Trustee
Dated: ___________________ By: _______________________________
Authorized Signatory
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SECTION 2.7 Form of Assignment and Election to Purchase.
Each Senior Note shall include the following form of Assignment and
Option of Holder to Elect Purchase:
ASSIGNMENT
(To be executed by the registered Holder if such
Holder desires to transfer this Senior Note)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers
unto ________________________.
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF TRANSFEREE
__________________________________________________
(Please print name and address of transferee)
this Senior Note, together with all right, title and interest herein, and does
hereby irrevocably constitute and appoint ___________________ Attorney to
transfer this Senior Note on the Senior Note Register, with full power of
substitution.
Dated: __________________________________
Signature
of Holder: ____________________________
Signature
Guaranteed: ___________________________
NOTICE: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Senior Note in every particular, without
alteration or any change whatsoever.
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OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
[ ] In connection with the Change of Control Purchase Offer made pursuant
to Section 9.17 of the Indenture, the undersigned hereby elects to have
the entire principal amount
[ ] $ _______________ ($1,000 in principal amount or an integral multiple
thereof) principal amount of this Senior Note repurchased by the
Company. The undersigned hereby directs the Trustee or Paying Agent to
pay it an amount in cash equal to 101% of the principal amount
indicated in the preceding sentence plus accrued and unpaid interest on
such principal amount to the date of purchase.
Dated: __________________________________
Signature
of Holder: ____________________________
Signature
Guaranteed: ___________________________
NOTICE: The signature to the foregoing must correspond to the name as written
upon the face of this Senior Note in every particular, without
alteration or any change whatsoever.
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ARTICLE THREE
THE SENIOR NOTES
SECTION 3.1 Global Senior Note; Depositary.
Any Senior Notes issued in the form of one or more Global Senior Notes
will be deposited with The Depository Trust Company or any successor thereto
(the "Depositary"), or the Trustee on its behalf, and registered in the name of
the Depositary's nominee, as nominee of the Depositary (such nominee being
referred to herein as the "Global Senior Note Holder").
SECTION 3.2 Amount.
The aggregate principal amount of Senior Notes which may be
authenticated and delivered under this Indenture is up to $75,000,000
(Seventy-Five Million Dollars and No Cents), except for Senior Notes
authenticated and delivered pursuant to Section 3.5, 3.6, 3.7, 9.16 or 11.7.
SECTION 3.3 Denominations.
The Senior Notes shall be issuable in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
SECTION 3.4 Execution, Authentication, Delivery and Dating.
The Senior Notes shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Vice Presidents, under its corporate seal,
if any, reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Senior Notes and the
corporate seal may be manual or facsimile.
Senior Notes bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Senior Notes or did not
hold such offices at the date of such Senior Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Senior Notes executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Senior Notes, and the Trustee in accordance
with the Company Order shall authenticate and make such Senior Notes available
for delivery.
Each Senior Note shall be dated the date of its authentication.
No Senior Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Senior Note
a certificate of authentication substantially in the form provided for herein
executed by the Trustee or an Authenticating Agent by manual signature of an
authorized signatory of the Trustee or an Authenticating Agent, and
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such certificate upon any Senior Note shall be conclusive evidence, and the only
evidence, that such Senior Note has been duly authenticated and delivered
hereunder.
Notwithstanding the foregoing, if any Senior Note shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Senior Note to the Trustee for cancellation
as provided in Section 3.10, for all purposes of this Indenture such Senior Note
shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.
SECTION 3.5 Temporary Senior Notes.
Pending the preparation of definitive Senior Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Senior Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Senior Notes in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Senior Notes may determine, as
evidenced by their execution of such Senior Notes.
If temporary Senior Notes are issued, the Company will cause definitive
Senior Notes to be prepared without unreasonable delay. After the preparation of
definitive Senior Notes, the temporary Senior Notes shall be exchangeable for
definitive Senior Notes upon surrender of the temporary Senior Notes at the
office or agency of the Company in a Place of Payment, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Senior
Notes the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor one or more definitive Senior Notes
of any authorized denominations and of a like aggregate principal amount and
tenor. Until so exchanged the temporary Senior Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Senior Notes of
such tenor.
SECTION 3.6 Registration; Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office being herein sometimes
collectively referred to as the "Senior Note Register"), in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Senior Notes and of transfers of Senior Notes. The Trustee
is hereby appointed "Senior Note Registrar" for the purpose of registering
Senior Notes and transfers of Senior Notes as herein provided.
Upon surrender for registration of transfer of any Senior Note at the
office or agency in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Senior Notes of any
authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Senior Notes may be exchanged for other
Senior Notes of any authorized denominations and of a like aggregate principal
amount and tenor, upon surrender of the Senior Notes to be exchanged at such
office or agency.
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Whenever any Senior Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Senior Notes which the Holder making the exchange is entitled to
receive.
All Senior Notes issued upon any registration of transfer or exchange
of Senior Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Senior
Notes surrendered upon such registration of transfer or exchange.
Every Senior Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Senior Note Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Senior Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Senior Notes, other
than exchanges pursuant to Section 3.5, 9.16 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Senior Notes during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Senior Notes
selected for redemption under Section 11.3 and ending at the close of business
on the day of such mailing or (ii) to register the transfer of or exchange any
Senior Note so selected for redemption in whole or in part, except the
unredeemed portion of any Senior Note being redeemed in part.
Any Original Senior Notes which are presented to the Registrar for
exchange pursuant to an Exchange Offer shall be exchanged for Series B Senior
Notes of equal principal amount upon surrender to the Registrar of the Original
Senior Notes to be exchanged; provided, however, that the Original Senior Notes
surrendered for exchange in an Exchange Offer shall be duly endorsed and
accompanied by a letter of transmittal or written instrument of transfer in form
satisfactory to the Company, the Trustee and the Registrar, duly executed by the
Holder thereof or his attorney who shall be duly authorized in writing to
execute such document. Whenever any Original Senior Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall, upon Company Order,
authenticate and make available for delivery to the Registrar, the same
aggregate principal amount of Series B Senior Notes as the aggregate principal
amount of Original Senior Notes that have been surrendered.
Notwithstanding any other provisions hereof, no Original Senior Note
may be exchanged by the Holder thereof for a Series B Senior Note other than
pursuant to the Exchange Offer and no Series B Senior Note may be exchanged by
the Holder thereof for an Original Senior Note.
Each Holder of a Senior Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Senior Note in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
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The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 3.7 Mutilated, Destroyed, Lost and Stolen Senior Notes.
If any mutilated Senior Note is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Senior Note of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Senior Note and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Senior Note has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and make
available for delivery, in lieu of any such destroyed, lost or stolen Note, a
new Senior Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Senior Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Senior Note, pay such Senior Note.
Upon the issuance of any new Senior Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Senior Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Senior Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Senior Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Senior Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Senior Notes.
SECTION 3.8 Payment of Interest; Interest Rights Preserved.
Interest (including any Additional Interest) on any Senior Note which
is payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Senior Note (or one or more
Predecessor Senior Notes) is registered at the close of business on the Regular
Record Date for such interest. All payments of interest
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(including any Additional Interest) on any Senior Notes shall be made by the
Company in immediately available funds; provided, however, that should, in
accordance with the terms of the Indenture, interest (including any Additional
Interest) on the Senior Notes not be paid in immediately available funds, such
payment may be paid by check drawn on a bank in The City of New York and mailed
to the address of the Person entitled thereto as such address shall appear in
the Senior Note Register.
Any interest (including any Additional Interest) on any Senior Note
which is payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company,
at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Senior Notes (or their respective Predecessor Senior
Notes) are registered at the close of business on a
Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed
to be paid on each Senior Note and the date of the
proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not
more than 15 days and not less than 7 days prior to
the date of the proposed payment and not less than 7
days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall
cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid,
to each Holder of Senior Notes at its address as it
appears in the Senior Note Register, not less than 10
days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons
in whose names the Senior Notes (or their respective
Predecessor Senior Notes) are registered at the close
of business on such Special Record Date and shall no
longer be payable pursuant to the following clause
(2).
(2) The Company may make payment of any Defaulted
Interest on the Senior Notes in any other lawful
manner not inconsistent with the requirements of any
securities exchange on which such Senior Notes may be
listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed
practicable by the Trustee.
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Subject to the foregoing provisions of this Section, each Senior Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Senior Note shall carry the rights to interest
(including any Additional Interest) accrued and unpaid, and to accrue, which
were carried by such other Senior Note.
SECTION 3.9 Persons Deemed Owners.
Prior to due presentment of a Senior Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Senior Note is registered as the owner of such
Senior Note for the purpose of receiving payment of principal of and any premium
and (subject to Section 3.8) any interest (including any Additional Interest) on
such Senior Note and for all other purposes whatsoever, whether or not such
Senior Note be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.
So long as the Global Senior Note Holder is the registered owner of any
Senior Notes, the Global Senior Note Holder will be considered the sole Holder
under this Indenture of any Senior Notes evidenced by the Global Senior Note for
the purposes of receiving payment on the Senior Notes, receiving notices, and
for all other purposes under this Indenture and the Senior Notes. Beneficial
owners of Senior Notes evidenced by the Global Senior Note will not be
considered the owners or Holders thereof under this Indenture for any purpose,
including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of the
Depositary relating to the Senior Notes.
SECTION 3.10 Cancellation.
All Senior Notes surrendered for payment, redemption or registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Senior Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Senior Notes
previously authenticated hereunder which the Company has not issued and sold,
and all Senior Notes so delivered shall be promptly canceled by the Trustee. No
Senior Notes shall be authenticated in lieu of or in exchange for any Senior
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Senior Notes held by the Trustee shall be promptly
returned to the Company.
SECTION 3.11 Computation of Interest.
Interest on the Senior Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 3.12 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption or other related
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material as a convenience to Holders; provided that any such notice or other
related material may 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 other related material and that reliance may be placed
only on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company shall promptly notify the Trust of any change in the "CUSIP"
numbers.
ARTICLE FOUR
BOOK-ENTRY PROVISIONS FOR GLOBAL SENIOR NOTES
SECTION 4.1 Applicability of Article.
Each Global Senior Note shall be subject to this Article Four.
SECTION 4.2 Book-Entry Provisions For Global Senior Note.
(a) Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any
Global Senior Note held on their behalf by the Depositary or
under the Global Senior Note, 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 the Global Senior Note for all
purposes whatsoever. Any Holder of the Global Senior Note shall,
by acceptance of such Global Senior Note, agree that the
transfers of beneficial interests in such Global Senior Note 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 Global Senior Note shall be required to be
reflected in a book-entry system. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or an agent
of the Company or the Trustee 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 Senior Note.
(b) Notwithstanding any other provision of this Section, unless and
until it is exchanged in whole or in part for individual Senior
Notes represented thereby, a Global Senior Note representing all
or a portion of the Senior Notes may not be transferred except as
a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee
of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
Interests of beneficial owners in the Global Senior Notes (each
an "Interest") may be transferred to one beneficial owner or to
another Agent Member or exchanged for definitive Senior Notes in
accordance with the rules and procedures of the Depositary and
the provisions of this Indenture. In addition, definitive Senior
Notes shall be transferred to all beneficial owners in exchange
for their beneficial interests in
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Global Senior Notes if (i) the Depositary for the Senior Notes
notifies the Company that the Depositary is unwilling or unable
to continue as Depositary for the Global Senior Notes or is no
longer eligible to serve as Depositary pursuant to the terms of
this Indenture and a successor Depositary is not appointed by the
Company within 90 days after delivery of such notice; (ii) the
Company, at its sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of definitive Senior Notes
under this Indenture; or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to any
Senior Notes represented by the Global Senior Notes; and the
Trustee shall, upon receipt of a Company Order in accordance with
Section 3.4, authenticate and make available for delivery,
definitive Senior Notes in an aggregate principal amount equal to
the principal amount of the Global Senior Notes in exchange for
such Global Senior Notes. If specified by the Company pursuant to
Section 3.4, the Depositary may surrender a Global Senior Note in
exchange in whole or in part for Senior Notes of like tenor and
terms and in definitive form on such terms as are acceptable to
the Company, the Trustee and the Depositary.
(c) In connection with the transfer of Global Senior Notes to
beneficial owners pursuant to the third sentence of paragraph (b)
of this Section, the Global Senior Notes shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute and the Trustee upon receipt of a Company Order for
the authentication and delivery of definitive Senior Notes shall
authenticate and make available for delivery, without service
charge:
(i) to the Depositary or to each Person specified by such
Depositary a new Senior Note or Senior Notes of like tenor
and terms and of any authorized denomination as requested by
such Person in aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the Global
Senior Note; and
(ii) to such Depositary a new Global Senior Note of like tenor
and terms and in an authorized denomination equal to the
difference, if any, between the principal amount of the
surrendered Global Senior Note and the aggregate principal
amount of Senior Notes delivered to Holders thereof.
Notwithstanding any other provision of this Indenture, any Senior Note
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Senior Note shall also be a Global Senior Note
and shall bear the legend specified in Section 2.4 except for any Senior Note
authenticated and delivered in exchange for, or upon registration of transfer
of, a Global Senior Note pursuant to the preceding sentence.
(d) The Holder of any Global Senior Note 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 Senior Notes.
(e) Upon the exchange of a Global Senior Note in its entirety for
Senior Notes in definitive form, such Global Senior Note shall be
canceled by the Trustee.
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(f) Notwithstanding anything herein to the contrary, if at any time
the Depositary for the Senior Notes notifies the Company that it
is unwilling or unable to continue as a Depositary for the Senior
Notes or if at any time the Depositary for the Senior Notes shall
no longer be registered or in good standing under the Exchange
Act, or other applicable statute or regulation, the Company shall
appoint a successor Depositary with respect to the Senior Notes.
If a successor Depositary for the Senior Notes is not appointed
by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, the Company will
execute, and the Trustee, upon Company Request, will authenticate
and make available for delivery Senior Notes in definitive form
in an aggregate principal amount equal to the principal amount of
the Global Senior Note or Global Senior Notes representing Senior
Notes in exchange for such Global Senior Note or Global Senior
Notes.
ARTICLE FIVE
REMEDIES
SECTION 5.1 Events of Default.
An "Event of Default" as used herein is any one of the following:
(a) failure by the Company to pay interest (including any Additional
Interest) on any Senior Note when due and payable, if such
failure continues for a period of 30 days;
(b) failure by the Company to pay principal on any Senior Note when
due and payable at Stated Maturity or upon redemption,
acceleration or otherwise;
(c) failure by the Company to comply with any other agreement or
covenant contained in this Indenture (other than a default
specified in clause (a) or (b) above) if such failure continues
for a period of 30 days after notice to the Company by the
Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the Senior Notes then
Outstanding;
(d) Indebtedness of the Company or any Subsidiary of the Company is
not paid within any applicable grace period after final maturity
or in the event that final maturity is accelerated because of a
default and, in either case, where the aggregate principal amount
of such Indebtedness so unpaid or accelerated is equal to or
greater than 5% of the Company's Consolidated Net Worth at the
quarter end preceding the end of such grace period or such
acceleration;
(e) existence of one or more judgments against the Company or any of
its Subsidiaries, which remain undischarged 60 days after all
rights to directly review such judgment, whether by appeal or
writ, have been exhausted or have expired, in excess, either
individually or in the aggregate, of 5% of the Company's
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Consolidated Net Worth as of the quarter end preceding the end of
such 60-day period; or
(f) a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) shall take
possession of the Company or any Significant Subsidiary or any
substantial part of the property of the Company or any
Significant Subsidiary without the consent of the Company or such
Significant Subsidiary, respectively, or a court having
jurisdiction in the premises shall enter a decree or order for
relief in respect of the Company or such Significant Subsidiary
in an involuntary case under any applicable bankruptcy,
insolvency, receivership, conservatorship or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, trustee, custodian, conservator, sequestrator (or other
similar official) of the Company or the Significant Subsidiary or
for any substantial part of the property of the Company or the
Significant Subsidiary, or ordering the winding-up or liquidation
of the affairs of the Company or the Subsidiary, and such decree
or order shall continue unstayed and in effect for a period of 60
consecutive days, or the Company or the Significant Subsidiary
shall commence a voluntary case under any applicable bankruptcy,
insolvency, receivership, conservatorship or other similar law
now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case under any such law, or
shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, conservator,
sequestrator (or other similar official) of the Company or the
Significant Subsidiary or of any substantial part of the property
of the Company or the Significant Subsidiary, or shall make any
general assignment for the benefit of creditors, or shall take
any corporate action in furtherance of any of the foregoing.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
clause (f) of Section 5.1) occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Senior Notes may declare the principal amount of all of the Senior
Notes to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by Holders), and upon any such declaration such
principal amount shall become immediately due and payable. If any Event of
Default specified in clause (f) of Section 5.1 occurs, the principal amount of
all of the Senior Notes shall automatically 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 with respect to
Senior Notes has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Senior Notes, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue interest (including any Additional
Interest) on all Senior Notes,
(B) the principal of (and premium, if any, on) any Senior
Notes which have become due otherwise than by such
declaration of acceleration and any interest (including
any Additional Interest) thereon at the rate or rates
prescribed therefor in such Senior Notes,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates
prescribed therefor in such Senior Notes, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable, expenses, disbursements and advances of
the Trustee's agents and counsel; and
(2) all Events of Default with respect to Senior Notes, other
than the non-payment of the principal of Senior Notes which
have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest
(including any Additional Interest) on any Senior
Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of
(or premium, if any, on) any Senior Note at the
Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Senior Notes, the whole amount then due and payable on such
Senior Notes for principal and any premium and interest (including any
Additional Interest) and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue principal and premium and on any
overdue interest (including any Additional Interest), at the rate or rates
prescribed therefor in such Senior Notes, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable expenses, disbursements and advances of the Trustee's
agents and counsel.
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If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may (or, at the
direction of Holders of not less than 25% of the Outstanding Senior Notes
shall), in addition to any other remedies available to it, institute a judicial
proceeding for the collection of the sums so due and unpaid and may prosecute
such proceeding to judgment or final decree, and may enforce the same against
the Company or any other obligor upon the Senior Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Senior Notes, wherever
situated.
If an Event of Default with respect to Senior Notes occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Senior Notes by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Senior Notes), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay the reasonable expenses, disbursements
and advances of the Trustee's agents and counsel, and any other amounts due the
Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Senior
Notes 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; provided, however,
the Trustee may vote on behalf of the Holders for the election of a trustee in
bankruptcy or similar official and may be a member of a creditors' or other
similar committee.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Senior
Notes.
All rights of action and claims under this Indenture or the Senior
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Senior Notes or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable expenses, disbursements and
advances of the Trustee's agents and counsel, be for the ratable benefit of the
Holders of the Senior Notes in respect of which such judgment has been
recovered.
SECTION 5.6 Application of Money Collected.
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Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest (including any Additional Interest), upon presentation of the Senior
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest (including
any Additional Interest) on the Senior Notes 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 Senior Notes for principal and
any premium and interest (including any Additional
Interest), respectively.
SECTION 5.7 Limitation on Suits.
No Holder of any Senior Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with
respect to the Senior Notes;
(2) the Holders of not less than 25% in principal amount
of the Outstanding Senior Notes shall have made
written request to the Trustee to institute
proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs,
expenses and liabilities to be incurred in compliance
with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day
period by the Holders of a majority in principal
amount of the Outstanding Senior Notes;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest.
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Notwithstanding any other provision in this Indenture, the Holder of
any Senior Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 3.8)
any interest (including any Additional Interest) on such Senior Note on the
Stated Maturity or maturities expressed in such Senior Note (or, in the case of
redemption, on the Redemption Date), and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Senior Notes in the last paragraph of
Section 3.7, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Senior
Notes to exercise any right or remedy accruing upon any Default shall impair any
such right or remedy or constitute a waiver of any such Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 5.12 Control by Holders.
The Holders of a majority in principal amount of the Outstanding Senior
Notes shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Senior Notes, provided
that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture,
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such
direction, and
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(3) subject to the provisions of Section 6.1, the Trustee
shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would involve
the Trustee in personal liability.
SECTION 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Senior Notes may on behalf of the Holders of all the Senior Notes
waive any past default hereunder and its consequences, except a default:
(1) in the payment of the principal of or any premium or
interest (including any Additional Interest) on any
Senior Note, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended
without the consent of the Holder of each Outstanding
Senior Note affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
The parties to this Indenture agree, and each Holder of any Senior
Notes by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Senior Notes, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Senior Notes on or after the
Stated Maturity or maturities expressed in such Senior Notes (or, in the case of
redemption, on or after the Redemption Date).
SECTION 5.15 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage 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.
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ARTICLE SIX
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section. If an Event of Default occurs (and is not cured), the Trustee, in
the exercise of its power, must use the degree of care of a prudent man in the
conduct of his own affairs. Subject to the requirement in the foregoing
sentence, the Trustee is under no obligation to exercise any of its rights or
powers under this Indenture at the request of any Holder, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense and then only to the extent required by
the terms of this Indenture. 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
of liability is not reasonably assured to it.
Except during the continuance of an Event of Default, (i) the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and (ii) in the absence of bad faith on
its part, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Indenture.
The Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall
not be liable with respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders or a majority in
principal amount of the Outstanding Senior Notes relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust power conferred upon the Trustee, under this Indenture.
SECTION 6.2 Notice of Defaults.
If a Default occurs and is continuing and is actually known to a
Responsible Officer of the Trustee, the Trustee shall mail to each Holder notice
of the Default as to and to the extent provided in the Trust Indenture Act.
Except in the case of a Default in the payment of principal of, premium, if any,
or interest (including any Additional Interest) on any Senior Note, the Trustee
may withhold 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 determines that withholding notice is in the interest of the Holders.
SECTION 6.3 Certain Rights of Trustee.
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Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of
the Company, personally or by agent or attorney at the sole cost
of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligent action,
negligent omission or its willful misconduct; and
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(i) the Trustee shall not be charged with knowledge of any Event of
Default under Section 5 (other than an Event of Default under
Section 5.1(a) or (b) if the Trustee is also the Paying Agent
with respect to the Senior Notes) hereof unless either (1) a
Responsible Officer of the Trustee shall have actual knowledge
thereof or (2) the Trustee shall have received notice thereof in
accordance with Section 1.5 hereof from the Company or a Holder.
SECTION 6.4 Not Responsible for Recitals or Issuance of Senior Notes.
The recitals contained herein and in the Senior Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Senior Notes. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Senior Notes or the proceeds thereof.
SECTION 6.5 May Hold Senior Notes.
The Trustee, any Authenticating Agent, any Paying Agent, any Senior
Note Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Senior Notes and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent, Senior
Note Registrar or such other agent.
SECTION 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.7 Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee such compensation as from time
to time agreed in writing with the Trustee for all
services rendered by it hereunder (which compensation
shall not be limited by any provision of law in
regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with
any provision of this Indenture (including the
reasonable compensation and the expenses and
disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be
attributable to its negligence or bad faith or
willful misconduct;
(3) to indemnify each of the Trustee or any predecessor
Trustee and their agents for, and to hold them
harmless against, any and all loss, liability,
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damage, claim or expense, including taxes (other than
taxes based on the income of the Trustee) incurred
without negligence, willful misconduct or bad faith
on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of
defending itself against any claim or liability in
connection with the exercise or performance of any of
its powers or duties hereunder;
(4) to secure the Company's obligations under this
Section, the Trustee shall have a lien prior to the
Senior Notes upon all money or property held or
collected by the Trustee in its capacity as Trustee,
except for such money and property which is held in
trust to pay principal (and premium, if any) or
interest (including any Additional Interest) on
particular Senior Notes;
(5) when the Trustee incurs any expenses or renders any
services after the occurrence of an Event of Default
specified in Section 5.1(f), such expenses and the
compensation for such services are intended to
constitute expenses of administration under the
Bankruptcy Code or any similar federal or state law
for the relief of debtors; and
(6) that the provisions of this Section 6.7 shall survive
the termination of this Indenture or the appointment
of a successor trustee.
SECTION 6.8 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 6.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Senior
Notes by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the
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Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition, at the expense
of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Senior
Notes.
(c) The Trustee may be removed at any time with respect to the Senior
Notes by Act of the Holders of a majority in principal amount of
the Outstanding Senior Notes, delivered to the Trustee and to the
Company. If the instrument of acceptance by a successor Trustee
required by Section 6.11 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of
removal, the Trustee being removed may petition, at the expense
of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Senior
Notes.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Senior Note for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the
Company by a Board Resolution may remove the Trustee with
respect to the Senior Notes, or (ii) subject to Section
5.14, any Holder who has been a bona fide Holder of a Senior
Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with
respect to all Senior Notes and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly
appoint a successor Trustee and shall comply with the applicable
requirements of Section 6.11. If, within one year after such
resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Senior Notes delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable
requirements of Section 6.11, become the successor Trustee and to
that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by
the Company or the Holders and accepted appointment in the manner
required by Section 6.11, any Holder who has been a bona fide
Holder
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of a Senior Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor
Trustee to all Holders of Senior Notes in the manner provided in
Section 1.6. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
SECTION 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee,
every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument in writing accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but,
on the request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument in writing transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee
hereunder.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such
rights, powers and trusts referred to in paragraph (a) of this
Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be eligible
under this Article.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Senior Notes shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Senior Notes so authenticated with the same effect as if such
successor Trustee had itself authenticated such Senior Notes.
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SECTION 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Senior Notes), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents (which may be
an affiliate of the Company) with respect to the Senior Notes which shall be
authorized to act on behalf of the Trustee to authenticate Senior Notes issued
upon exchange, registration of transfer or partial redemption thereof (but not
upon original issuance or pursuant to Section 3.7), and Senior Notes so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Senior Notes by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of Senior
Notes with respect to which such Authenticating Agent will serve, as their names
and addresses appear in the Senior Note Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named
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as an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Senior Notes
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
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This is one of the Senior Notes designated and referred to in the
within mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:_________________________________
As Authenticating Agent
By:_________________________________
Authorized Signatory
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders;
Trustee to Furnish Senior Note Register.
(a) The Company will furnish or cause to be furnished to the Trustee:
(i) semi-annually, not later than five Business Days after each
Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the
Holders of Senior Notes as of such Regular Record Date, and
(ii) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the
Trustee in its capacity as Senior Note Registrar.
(b) The Trustee shall furnish to the Company a copy of the list
maintained as the Senior Note Register from time to time as
requested by the Company in writing.
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SECTION 7.2 Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee
as provided in Section 7.1 and the names and addresses of
Holders received by the Trustee in its capacity as Senior
Note Registrar. The Trustee may destroy any list furnished
to it as provided in Section 7.1 upon receipt of a new list
so furnished.
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Indenture or under
the Senior Notes, and the corresponding rights and
privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
(c) Every Holder of Senior Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither
the Company nor the Trustee nor any agent of either of them
shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within sixty (60) days after each May 15
following the date of this Indenture deliver to Holders a
brief report, dated as of such May 15, which complies with
the provisions of such Section 313(a). To the extent that
any such report is required by the Trust Indenture Act with
respect to any 12-month period, such report shall cover the
12-month period ending March 15 and shall be transmitted by
the next succeeding May 15.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each
securities exchange upon which any Senior Notes are listed,
with the SEC and with the Company. The Company will promptly
notify the Trustee when any Senior Notes are listed on any
securities exchange.
SECTION 7.4 Reports by Company.
The Company shall file with the SEC and shall furnish to the Trustee
and the Holders, within 15 days after it files them with the SEC, copies of its
annual report and the information, documents and other reports which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and to provide to the Trustee and
the Holders the annual reports and the information, documents and other reports
which are specified in Section 13 or 15(d) of the Exchange Act and applicable to
a US corporation subject to such sections, such information, documents and other
reports to be filed and provided at the times specified for the filing of such
information, documents and reports under such section. The
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Company also shall comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the
Company herein and in the Senior Notes;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes (provided, that such
uncertificated Senior Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that
the uncertificated Senior Notes are described in Section
163(f)(2)(B) of the Code);
(c) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power conferred upon the
Company hereunder and under the Senior Notes;
(d) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other
provision herein or in the Senior Notes, or to make any other
provisions with respect to matters or questions arising under
this Indenture or under the Senior Notes that shall not be
inconsistent with the provisions of this Indenture; provided
that, in each case, such provisions shall not adversely affect
the interests of the Holders;
(e) to evidence, and provide for the acceptance of, the appointment
of a successor Trustee hereunder;
(f) to add any additional Events of Default;
(g) to secure the Senior Notes or add a Guarantor; or
(h) to comply with any requirement of the SEC or state securities
regulators in connection with the qualification of this Indenture
under the Trust Indenture Act or any registration or
qualification of the Senior Notes under the Securities Act or
state securities laws.
SECTION 8.2 Supplemental Indentures with Consent of Holders.
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(a) Except as otherwise provided in Section 8.2(b), with the written
consent of the Holders of a majority in principal amount of the
Outstanding Senior Notes, by Act of such Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating or waiving
any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided,
however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Senior Note affected
thereby,
(A) change the Stated Maturity of the principal of, or any
installment of interest on, any Senior Note, or reduce the
principal amount thereof, premium, if any, or the rate of
interest (including any Additional Interest) thereon, or
change the coin or currency in which the principal of any
Senior Note or any premium or the interest (including any
Additional Interest) thereon is payable, or impair the right
to institute suit for the enforcement of any such payment
after the Stated Maturity;
(B) reduce the percentage in principal amount of the Outstanding
Senior Notes the consent of whose Holders is required for
any such amendment or modification, or the consent of whose
Holders is required for any waiver (of compliance with the
provisions of this Indenture or Defaults hereunder and their
consequences) provided for in this Indenture;
(C) modify any provision of Section 11.2 or the definitions used
therein if the effect of such modification or waiver is to
decrease the amount of any payment required to be made by
the Company thereunder or extend the maturity date of such
payment;
(D) modify any of the provisions of this Section 8.2 or Section
5.13 relating to supplemental indentures requiring the
consent of Holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants,
except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Senior Note affected thereby;
(E) except as otherwise permitted under the provisions of
Article Ten, consent to the assignment or transfer by the
Company of any of its rights and obligations under this
Indenture; or
(F) waive a default in payment with respect to the Senior Notes
(other than a default in payment that is due solely because
of the acceleration of the Maturity of the Senior Notes).
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(b) It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such
Act and such notice shall approve the substance thereof.
SECTION 8.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Eight or the modifications
thereby of the trusts created by this Indenture, the Trustee shall receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 8.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Senior Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby and entitled to the benefits thereof.
SECTION 8.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Eight
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 8.6 Reference in Senior Notes to Supplemental Indentures.
Senior Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Eight may, and shall if required
by the Trustee, bear a notation in form acceptable to the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Senior Notes so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Senior Notes.
SECTION 8.7 Notice of Supplemental Indenture.
After an supplemental indenture hereunder becomes effective, the
Company shall mail to Holders a notice briefly describing such supplemental
indenture; provided, that the failure to give such notice to all Holders, or any
defect therein, will not impair or affect the validity of the supplemental
indenture.
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ARTICLE NINE
COVENANTS
SECTION 9.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Holders that it
will duly and punctually pay the principal of (and premium, if any, on) and
interest (including any Additional Interest) on the Senior Notes in accordance
with the terms of the Senior Notes and this Indenture.
The Senior Notes shall be included in the Same-Day Funds Settlement
System or equivalent system of the Depositary until maturity to the extent such
systems are available. Each Global Senior Note will be paid in accordance with
the provisions of Section 4.2 hereof.
SECTION 9.2 Maintenance of Office or Agency.
The Company will maintain an office or agency in a Place of Payment
where Senior Notes may be presented or surrendered for payment and where Senior
Notes may be surrendered for registration of transfer or exchange. Initially,
the Company hereby designates the Corporate Trust Office for all such purposes.
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 fail to
furnish the Trustee with the address thereof, such presentations and surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations and surrenders.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Senior Notes for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 9.3 Money for Senior Notes Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to the Senior Notes, it will, on or before each due date of the
principal of or any premium or interest (including any Additional Interest) on
any of the Senior Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal and any premium
and interest (including any Additional Interest) so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for the
Senior Notes, it will, prior to each due date of the principal of or any premium
or interest (including any Additional Interest) on any Senior Notes, deposit
with a Paying Agent, in immediately available funds, a sum sufficient to pay
such amount, such sum to be held as provided by the Trust
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Indenture Act, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section that
such Paying Agent will:
(1) hold all sums held by it for the payment of principal
of (and premium, if any) or interest (including any
Additional Interest) on Senior Notes in trust for the
benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Senior Notes) in the
making of any such payment of principal (and premium,
if any) or interest (including any Additional
Interest); and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest (including any Additional Interest) on any Senior Note and remaining
unclaimed for two years after such principal, premium or interest (including any
Additional Interest) has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Senior Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
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SECTION 9.4 Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date
hereof, an Officers' Certificate (one of the signers of which
shall be the principal executive officer, principal financial
officer or principal accounting officer of the Company), stating
whether or not to the best knowledge of the signers thereof the
Company is, or was during the preceding year, in default in the
performance and observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the
Company shall be or shall have been in default, specifying all
such defaults and the nature and status thereof of which they may
have knowledge.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives
notice or takes any other action with respect to a claimed
default (other than with respect to Indebtedness in the principal
amount of less than 5% of the Company's Consolidated Net Worth at
the quarter end preceding the giving of such notice or taking of
such action with respect to a claimed default), the Company shall
deliver to the Trustee by registered or certified mail, or by
facsimile transmission, confirmed by delivery of the original, an
Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 9.5 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which adequate reserves (in the good faith judgment of the
Board of Directors) have been made.
SECTION 9.6 Maintenance of Properties.
The Company will cause all properties owned by the Company or any
Restricted Subsidiary or used or held for use in the conduct of its business or
the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of its Board of Directors, desirable in the
conduct of its business or the business of the Company or such Subsidiary and
not disadvantageous in any material respect to the Holders.
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SECTION 9.7 Corporate Existence; Keeping of Books.
Subject to Article Ten, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the existence,
rights (charter and statutory) and franchises of the Company and its
Subsidiaries; provided, however, that the existence of any Subsidiary and any
such right or franchise of the Company or any Subsidiary may be terminated if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries and that the loss thereof is not and is not reasonably likely to be
disadvantageous in any material respect to the Holders.
The Company shall keep, and cause each Subsidiary to keep, proper books
and records, in which full and correct entries shall be made of all financial
transactions and the assets, liabilities and business of the Company and its
Subsidiaries, in each case in accordance with GAAP.
SECTION 9.8 Insurance.
The Company will at all times maintain and will cause each of its
Subsidiaries to maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and reputable insurers, insurance
on all its properties in such amounts as management of the Company reasonably
determines is appropriate under the circumstances.
SECTION 9.9 Net Worth Maintenance.
On the Issue Date, and at all times thereafter determined at the end of
each fiscal quarter, the Company shall maintain Consolidated Net Worth equal to
(i) $50.0 million plus (ii) a cumulative amount equal to twenty-five percent
(25%) of the Consolidated Net Income (but not loss), if any, of the Company and
its Subsidiaries for each fiscal quarter commencing with the quarter after the
Issue Date.
SECTION 9.10 Limitations on Indebtedness.
(a) Except for the issuance of the Senior Notes, the Company shall
not incur, directly or indirectly, any Indebtedness or issue any
Disqualified Capital Stock; provided, however, that the Company
may incur Indebtedness or issue Disqualified Capital Stock if, on
the date of such incurrence or issuance and after giving effect
thereto, (i) no Default or Event of Default has occurred and is
continuing or would result therefrom and (ii) the Leverage Ratio
does not exceed 2.0 to 1.0.
(b) The Company will not create, incur, issue, assume, guarantee or
otherwise in any manner become directly or indirectly liable for
or with respect to, or otherwise permit to exist, any Junior
Indebtedness or Pari Passu Indebtedness (other than Acquired
Indebtedness) unless the Stated Maturity of principal (or any
required repurchase, redemption, defeasance or sinking fund
payments) of such Junior Indebtedness or Pari Passu Indebtedness
is after the final Stated Maturity of principal of the Senior
Notes.
(c) The Company will not permit any Subsidiary to, directly or
indirectly, incur any Indebtedness or issue any Disqualified
Capital Stock.
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(d) The Company shall not incur any Indebtedness which would be
senior in right of payment to the Senior Notes.
(e) The foregoing provisions shall not apply to:
(1) Permitted Acquisition Indebtedness of the Company and its
Subsidiaries;
(2) Permitted Repurchase Facilities of the Company and its
Subsidiaries;
(3) Guarantees by the Company of (1) and (2);
(4) Intercompany Indebtedness owed by the Company to any of its
Subsidiaries or owed by any Subsidiary to the Company;
(5) Incurrence by the Company of its obligations under the
Senior Notes;
(6) Non-Recourse Indebtedness of the Company and its
Subsidiaries;
(7) Securities issued in a securitization by a Securitization
Entity formed by or on behalf of the Company or its
Subsidiaries, regardless of whether such securities are
treated as indebtedness for tax purposes, provided that
neither the Company nor any Subsidiary (other than the
Securitization Entity formed solely for the purpose of such
securitization) is directly or indirectly liable as a
guarantor or otherwise (excluding the provision of Credit
Support) for such securities or obligations of the
Securitization Entity;
(8) Unsecured working capital loans to Subsidiaries, not to
exceed $5.0 million in the aggregate, provided, however,
that such Indebtedness shall be considered to be
Indebtedness of the Company for the purpose of the Leverage
Ratio;
(9) Acquired Indebtedness of Subsidiaries, provided, however,
that such Acquired Indebtedness shall be considered to be
Indebtedness of the Company for the purpose of the Leverage
Ratio;
(10) Indebtedness secured by Permitted Liens; or
(11) Hedging Obligations directly related to: (i) Indebtedness
permitted to be incurred by the Company or its Subsidiaries
pursuant to this Indenture; (ii) loans held by the Company
or its Subsidiaries pending sale; or (iii) loans with
respect to which the Company or any Subsidiary has an
outstanding purchase offer or commitment, financing
commitment or security interest.
(f) For purposes of determining compliance with the foregoing
covenant: (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of
Indebtedness described above, the Company, in good faith,
will classify such item of Indebtedness and be required to
include the amount and type of such Indebtedness in one of
the above clauses; and (ii) an item of Indebtedness may be
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divided and classified in more than one of the types of
Indebtedness described above.
SECTION 9.11 Limitation on Issuances and Sales of Capital Stock
Subsidiaries.
Except pursuant to existing agreements, options or option plans, the
Company (a) will not permit any Subsidiary to issue or sell any shares of its
Capital Stock(other than to the Company or a Wholly Owned Subsidiary) and (b)
will not permit any Person to own any shares of Capital Stock of any Subsidiary.
SECTION 9.12 Liquidity Maintenance.
The Company shall, at all times when the Senior Notes are not rated in
an investment grade category by one or more nationally recognized statistical
rating organizations, maintain Liquid Assets with a value equal to at least 100%
of the required interest (including Additional Interest) payments due on the
Senior Notes on the next succeeding semi-annual Interest Payment Date. Liquid
Assets of a Subsidiary may be included in such calculation only to the extent
that such Liquid Assets may at such time be distributed to the Company without
restriction or notice to any Person. Such Liquid Assets shall not be the subject
of any pledge, Lien, encumbrance or charge of any kind and shall not be used as
collateral or security for Indebtedness for borrowed money or otherwise of the
Company or its Subsidiaries nor may such Liquid Assets be used as reserves for
any self-insurance maintained by the Company.
SECTION 9.13 Limitations on Restricted Payments.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, make any Restricted Payment if, at the time of such Restricted
Payment or after giving effect thereto,
(a) a Default or Event of Default shall have occurred and be
continuing; or
(b) the Company would fail to maintain sufficient Liquid Assets to
comply with the terms of the covenant set forth in Section 9.12
hereof; or
(c) the aggregate amount of all Restricted Payments (the amount of
such payments, if other than in cash, having been determined in
good faith by the relevant Board of Directors, whose
determination shall be conclusive and evidenced by a Board
Resolution filed with the Trustee) declared and made after the
Issue Date would exceed the sum of;
(i) 25% of the aggregate Consolidated Net Income (or, if such
Consolidated Net Income is a deficit, 100% of such deficit)
of the Company accrued on a cumulative basis during the
period beginning on the first day of the fiscal quarter
during which the Issue Date occurred and ending on the last
day of the Company's last fiscal quarter ending prior to the
date of such proposed Restricted Payment; plus
(ii) the aggregate Net Cash Proceeds received by the Company as
capital contributions (other than from a Subsidiary) after
the Issue Date; plus
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(iii) the aggregate Net Cash Proceeds and the Fair Market Value
of property not constituting Net Cash Proceeds received by
the Company from the issuance or sale (other than to a
Subsidiary) of Qualified Capital Stock after the issue date
of the Senior Notes; plus
(iv) 100% of the amount of any Indebtedness of the Company or a
Subsidiary that is issued after the issue date of the Senior
Notes that is thereafter converted into or exchanged for
Qualified Capital Stock of the Company; or
(d) the Unsecured Debt Coverage Ratio for the Company for the most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date
of such Restricted Payment is less than 2.00 to 1.00, determined
after giving effect to such Restricted Payment; provided,
however, that the foregoing provisions will not prevent (y) the
payment of a dividend within 60 days after the date of its
declaration if at the date of declaration such payment was
permitted by the foregoing provisions or (z) any Permitted
Payment.
SECTION 9.14 Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
(other than a Securitization Entity) to, create, assume or otherwise cause or
suffer to exist or to become effective any consensual encumbrance or restriction
on the ability of any such Subsidiary to
(a) pay any dividends or make any other distribution on its Capital
Stock;
(b) make payments in respect of any Indebtedness owed to the Company
or any other Subsidiary; or
(c) make loans or advances to the Company or any Subsidiary or to
guarantee Indebtedness of the Company or any other Subsidiary;
other than, in the case of (a), (b) and (c),
(1) restrictions imposed by Applicable Law;
(2) restrictions existing under agreements in effect on the date
of this Indenture;
(3) consensual encumbrances or restrictions binding upon any
Person at the time such Person becomes a Subsidiary of the
Company so long as such encumbrances or restrictions are not
created, incurred or assumed in contemplation of such Person
becoming a Subsidiary;
(4) restrictions with respect to a Subsidiary imposed pursuant
to an agreement entered into for the sale or disposition of
all or substantially all the assets (which term may include
the Capital Stock) of such Subsidiary;
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(5) restrictions on the transfer of assets which are subject to
Liens;
(6) restrictions existing under agreements evidencing Permitted
Acquisition Indebtedness or Permitted Repurchase Facilities
of any Subsidiary if such Indebtedness (i) is made without
recourse to, and with no cross-collateralization (which
shall not include Guarantees), against the assets of, the
Company or any other Subsidiary, and (ii) upon complete or
partial liquidation of which the Indebtedness must be
correspondingly repaid in whole or in part, as the case may
be; and
(7) restrictions existing under any agreement that renews,
extends, increases, refinances or replaces any of the
agreements containing the restrictions in clauses (2), (3)
and (6); provided that the terms and conditions of any such
restrictions (except for changes in interest rates related
to changes in market rates) are not less favorable to the
Holders than those under the agreement evidencing or
relating to the Indebtedness renewed, extended, increased,
refinanced or replaced.
SECTION 9.15 Limitations on Transactions with Affiliates.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (except
that the Company and any of its Subsidiaries may enter into any transaction or
series of related transactions with any Subsidiary of the Company without
limitation under this covenant) unless: (i) such transactions or series of
related transactions is on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a comparable
transaction in an arm's length dealing with a Person that is not such an
Affiliate or, in the absence of such a comparable transaction, on terms that the
relevant Board of Directors determines in good faith would be offered to a
Person that is not an Affiliate; (ii) with respect to any transaction or series
of related transactions involving aggregate payments in excess of $250,000, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions complies with clause (i) above and has
been approved by a majority of the Disinterested Directors of the relevant Board
of Directors of the Company or such Subsidiary, as the case may be; and (iii)
with respect to any transaction or series of related transaction involving
aggregate payments in excess of $1,000,000, or in the event that no members of
the Board of Directors are Disinterested Directors with respect to any
transaction or series of transactions included in clause (ii), (x) in the case
of a transaction involving real property, the aggregate rental or sale price of
such real property shall be the fair market sale or rental value of such real
property as determined in a written opinion by a nationally recognized expert
with experience in appraising the terms and conditions of the type of
transaction or series of transactions for which approval is required and (y) in
all other cases, the Company delivers to the Trustee a written opinion of a
nationally recognized expert with experience in appraising the terms and
conditions of the type of transaction or series of transactions for which
approval is required to the effect that the transaction or series of
transactions are fair to the Company or such Subsidiary from a financial point
of view. The limitations set forth in this paragraph will not apply to (i)
transactions entered into pursuant to any agreement already in effect on the
Issue Date and any renewals or extensions thereof not involving modifications
materially adverse to the Company or any Subsidiary, (ii) normal banking
relationships with an Affiliate on an arms'
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length basis, (iii) any employment agreement, stock option, employee benefit,
indemnification, compensation, business expense reimbursement or other
employment-related agreement, arrangement or plan entered into by the Company or
any of its Subsidiaries which agreement, arrangement or plan was adopted by the
Board of Directors of the Company or such Subsidiary (including a majority of
the Disinterested Directors), as the case may be, (iv) any Restricted Payment or
Permitted Payment, (v) any transaction or series of transactions in which the
total amount involved does not exceed $125,000, or (vi) services rendered and
obligations incurred by the Company or any of its Subsidiaries pursuant to
existing agreements or agreements between the Company and/or any of its
Subsidiaries.
SECTION 9.16 Limitations on Liens and Guarantees.
The Company will not create, assume, incur or suffer to exist any Lien
(other than a Permitted Lien) upon any of the Company's assets (including the
Capital Stock of any Subsidiary) as security for Indebtedness, without
effectively providing that the Senior Notes will be equally and ratably secured
with (or prior to) such Indebtedness.
In addition, the Company will not permit any Subsidiary of the Company,
directly or indirectly, to guarantee or assume, or subject any of its assets to
a Lien (other than a Permitted Lien) to secure, any Pari Passu Indebtedness or
Junior Indebtedness unless (i) such Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a guarantee
of, or pledge of assets to secure, the Senior Notes by such Subsidiary on terms
at least as favorable to the Holders of the Senior Notes as such guarantee or
security interest in such assets is to the holders of such Pari Passu
Indebtedness or Junior Indebtedness, except that in the event of a guarantee or
security interest in such assets with respect to (x) Pari Passu Indebtedness,
the guarantee or security interest in such assets under the supplemental
indenture shall be made pari passu to the guarantee or security interest in such
assets with respect to such Pari Passu Indebtedness or (y) Junior Indebtedness,
any such guarantee or security interest in such assets with respect to such
Junior Indebtedness shall be subordinated to such Subsidiary's guarantee or
security interest in such assets with respect to the Senior Notes to the same
extent as such Junior Indebtedness is subordinated to the Senior Notes and (ii)
such Subsidiary waives and will not in any manner whatsoever claim, or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Subsidiary of the Company
as a result of any payment by such Subsidiary under its guarantees.
SECTION 9.17 Offer to Purchase upon a Change of Control Event.
(a) Upon the occurrence of a Change of Control Event, the Company
will offer to repurchase (the "Change of Control Purchase Offer")
all Senior Notes from the Holders, and each Holder will have the
right to require that the Company repurchase such Holder's Senior
Notes, at a purchase price in cash equal to 101% of the principal
amount thereof (the "Change of Control Purchase Price") plus
accrued and unpaid interest (including any Additional Interest),
if any, to the Change of Control Purchase Date (subject to the
right of Holders on the relevant Regular Record Date to receive
interest (including any Additional Interest) due on an Interest
Payment Date occurring prior to such Change of Control Purchase
Date), in accordance with the provisions of this Section 9.17.
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(b) Within 30 days following any Change of Control Event, the Company
shall mail a notice to each Holder with a copy to the Trustee (a
"Change of Control Purchase Notice") stating:
(i) that a Change of Control Event has occurred and that such
Holder has the right to require the Company to purchase such
Holder's Senior Notes at a Change of Control Purchase Price
in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest (including any Additional
Interest), if any, to the Change of Control Purchase Date
(subject to the right of Holders on the relevant Regular
Record Date to receive interest (including any Additional
Interest) on an Interest Payment Date occurring prior to the
Change of Control Purchase Date);
(ii) the circumstances and relevant facts regarding such Change
of Control Event (including, in the case of any merger,
consolidation or sale of all or substantially all assets,
information with respect to pro forma results of operations,
cash flow and capitalization after giving effect to such
Change of Control Event);
(iii) the Change of Control Purchase Date (which shall be no
earlier than 30 days nor later than 60 days from the date
such Change of Control Purchase Notice is mailed);
(iv) that, unless the Company defaults in making such payment,
any Senior Note accepted for payment pursuant to the Change
of Control Purchase Offer shall cease to accrue interest
(including any Additional Interest) after the Change of
Control Purchase Date;
(v) that Holders electing to have a Senior Note purchased
pursuant to any Change of Control Purchase Offer shall be
required to surrender the Senior Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse
of the Senior Note completed, or transfer by book-entry
transfer, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the
notice, at least three Business Days before the Change of
Control Purchase Date; and
(vi) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case
may be, receives, not later than the last Business Day prior
to the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Senior Note (and identification
number) the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such
Senior Note purchased.
(c) Holders electing to have a Senior Note purchased will be required
to surrender the Senior Note, with the form entitled "Option of
Holder to Elect Purchase" duly completed, to the Company at the
address specified in the notice at least three Business Days
prior to the Change of Control Purchase Date. Holders will be
entitled to withdraw their election if the Trustee or the Company
receives not later
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than one Business Day prior to the Change of Control Purchase
Date, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Senior Note (and
identification number) which was delivered by the Holder for
purchase by the Company and a statement that such Holder is
withdrawing his election to have such Senior Note purchased.
(d) On the Change of Control Purchase Date, all Senior Notes
purchased by the Company in a Change of Control Purchase Offer
shall be delivered to the Trustee for cancellation, and the
Company shall pay the Change of Control Purchase Price plus
accrued and unpaid interest (including any Additional Interest),
if any, to the Holders entitled thereto.
(e) On or before the Change of Control Purchase Date, the Company
will deliver to the Trustee an Officers' Certificate stating that
the Senior Notes purchased in the Change of Control Purchase
Offer are accepted for payment by the Company in accordance with
the terms of this Section. The Company, the Depositary or the
Paying Agent, as the case may be, will promptly (but in any case
not later than five days after the Change of Control Purchase
Date) pay to each tendering Holder an amount equal to the Change
of Control Purchase Price of the Senior Notes tendered by such
Holder plus interest (including any Additional Interest) accrued
thereon (subject to the right of Holders on the relevant Regular
Record Date to receive interest (including any Additional
Interest) due on the relevant Interest Payment Date). The Company
will publicly announce the results of the Change of Control
Purchase Offer on the Change of Control Purchase Date.
(f) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other
applicable securities laws or regulations in connection with the
repurchase of Senior Notes pursuant to this Section 9.17. To the
extent that the provisions of any securities laws or regulations
conflict with the provisions of this Section 9.17, the Company
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
this Section 9.17 by virtue thereof.
SECTION 9.18 Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Senior Notes unless such consideration is paid to all Holders that
provide such consent or so waive or agree to amend.
SECTION 9.19 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 9.5 to 9.16, inclusive, with
respect to the Senior Notes if before the time of compliance the Holders of a
majority in principal amount of the Outstanding Senior Notes shall, by act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such
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waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE TEN
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
SECTION 10.1 Merger, Consolidation or Transfer of Assets of the
Company.
The Company shall not consolidate with or merge with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of, in one transaction or a
series of transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all of the Company's obligations under the Senior
Notes and this Indenture; (ii) immediately after giving effect to such
transaction (and treating any Indebtedness that becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as having
been Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of Indebtedness
without violating Section 9.10(a) hereof; and (iv) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other disposition and such supplemental indenture (if any)
comply with this Indenture and all conditions precedent provided for herein
relating to such transaction have been complied with.
SECTION 10.2 Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any sale, assignment, conveyance, transfer, lease or
other disposition of the properties and assets of the Company substantially as
an entirety in accordance with Section 10.1, the Successor Company 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 Company
herein, and in the event of any such sale, assignment, conveyance, transfer or
other disposition, the Company (which term shall for this purpose mean the
Successor Company), except in the case of a lease, shall be discharged of all
obligations and covenants under this Indenture and the Senior Notes and may be
dissolved and liquidated.
SECTION 10.3 Senior Notes to Be Secured in Certain Events.
If, upon any such consolidation of the Company with or merger of the
Company into any other corporation, or upon any sale, assignment, conveyance,
transfer, lease or other disposition of the property of the Company
substantially as an entirety to any other Person, any property or assets of the
Company would thereupon become subject to any Lien to secure Pari Passu
Indebtedness or Junior Indebtedness, then unless such Lien could be created
pursuant to Section 9.16 without equally and ratably securing the Senior Notes,
the Company, prior to or
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simultaneously with such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition, will, as to such property or assets,
secure the Senior Notes Outstanding (together with, if the Company shall so
determine, any other Indebtedness of the Company now existing or hereinafter
created which is not subordinate in right of payment to the Senior Notes)
equally and ratably with the Pari Passu Indebtedness or prior to the Junior
Indebtedness which upon such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition is to become secured as to such
property or assets by such Lien.
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ARTICLE ELEVEN
REDEMPTION OF SENIOR NOTES
SECTION 11.1 Applicability of Article.
Any redemption of Senior Notes before their Stated Maturity shall be in
accordance with their terms and in accordance with this Article.
SECTION 11.2 Optional Redemption.
The Senior Notes will not be redeemable prior to August 1, 2002, except
as provided on the reverse of the Form of Senior Note set forth in Section 2.3.
SECTION 11.3 Election to Redeem; Selection by Trustee of Senior Notes
to Be Redeemed.
Any election to redeem Senior Notes shall be evidenced by a Board
Resolution. In case of any redemption at the election of the Company of less
than all the Senior Notes, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Senior Notes to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Senior Notes to be redeemed pursuant to this Section 11.3.
If less than all the Senior Notes are to be redeemed, the particular
Senior Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Senior Notes not previously
called for redemption, by such method as the Trustee in its sole discretion
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for Senior
Notes or any integral multiple thereof) of the principal amount of Senior Notes
of a denomination larger than the minimum authorized denomination for Senior
Notes.
The Trustee shall promptly notify the Company in writing of the Senior
Notes selected for redemption and, in the case of any Senior Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Senior Notes shall
relate, in the case of any Senior Notes redeemed or to be redeemed only in part,
to the portion of the principal amount of such Senior Notes which has been or is
to be redeemed.
SECTION 11.4 Notice of Redemption.
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Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Senior Notes to be redeemed, at his address appearing in
the Senior Note Register.
All notices of redemption shall identify the Senior Notes to be
Redeemed (including CUSIP numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest (including
Additional Interest), if any,
(3) if less than all the Outstanding Senior Notes are to
be redeemed, the identification (and, in the case of
partial redemption of any Senior Notes, the principal
amounts) of the particular Senior Notes to be
redeemed,
(4) that on the Redemption Date the Redemption Price and
accrued interest (including Additional Interest), if
any, will become due and payable upon each such
Senior Note to be redeemed and, if applicable, that
interest (including Additional Interest) thereon will
cease to accrue on and after said date, and
(5) the place or places where such Senior Notes are to be
surrendered for payment of the Redemption Price and
accrued interest (including Additional Interest), if
any.
Notice of redemption of Senior Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company and shall be
irrevocable.
SECTION 11.5 Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 9.3) an amount of
money in immediately available funds sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest (including Additional Interest) on, all the Senior Notes which are to
be redeemed on that date.
SECTION 11.6 Senior Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Senior Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest, including any Additional Interest) such Senior Notes shall cease to
bear interest. Upon surrender of any such Senior Note for redemption in
accordance with said notice, such Senior Note shall be paid by the Company at
the Redemption Price, together with accrued interest (including any Additional
Interest) to the Redemption Date; provided, however, that installments of
interest whose stated maturity is on or prior to the
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Redemption Date shall be payable to the Holders of such Senior Notes, or one or
more Predecessor Senior Notes, registered as such at the close of business on
the relevant Regular Record Dates according to their terms and the provisions of
Section 3.8.
If any Senior Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, subject
to Section 1.13 hereof, until paid, bear interest (including any Additional
Interest) from the Redemption Date at the rate prescribed therefor in the Senior
Note.
SECTION 11.7 Senior Notes Redeemed in Part.
Any Senior Note which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Senior Note
without service charge, a new Senior Note or Senior Notes of like tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Senior Note so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
Board Resolution, at any time, elect to have either Section 12.2 or 12.3 be
applied to all Outstanding Senior Notes upon compliance with the conditions set
forth below in this Article.
SECTION 12.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 12.4, be deemed to have been discharged
from its obligations with respect to all Outstanding Senior Notes on the date
the conditions set forth below are satisfied (hereinafter, "Legal Defeasance").
For this purpose, Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the Outstanding
Senior Notes, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 12.5 and the other Sections of this Indenture referred to in
(a) and (b) below, and the Company shall be deemed to have satisfied all its
other obligations under the Senior Notes and this Indenture (and the Trustee, on
written demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of Outstanding Senior Notes to receive solely from the trust fund
described in Section 12.4, and as more fully set forth in such Section, payments
in respect of the principal of, premium, if any, and interest (including any
Additional Interest) on such Senior Notes as and when such payments are due, (b)
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the Company's obligations with respect to such Senior Notes under Sections 3.5,
3.6, 3.7, 9.2, 9.3 and 9.5, (c) the rights, powers, trusts, duties and
immunities of the Trustee and any Authenticating Agent hereunder and the
Company's obligations in connection therewith and (d) this Article. Subject to
compliance with this Article, the Company may exercise its option under this
Section 12.2 notwithstanding the prior exercise of its option under Section
12.3.
SECTION 12.3 Covenant Defeasance.
Upon the Company's exercise under Section 12.1 of the option applicable
to this Section 12.3, the Company shall, subject to the satisfaction of the
conditions set forth in Section 12.4, be released from its obligations under the
covenants contained in Article Nine (except Sections 9.1, 9.2, 9.5 and 9.7) with
respect to the Outstanding Senior Notes on and after the date the conditions set
forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior
Notes shall thereafter be deemed not Outstanding for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed Outstanding for all other purposes hereunder (it being
understood that such Senior Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
Outstanding Senior Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 5.1,
but, except as specified above, the remainder of this Indenture and such Senior
Notes shall be unaffected thereby.
SECTION 12.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions precedent to the effectiveness of
any Legal Defeasance or Covenant Defeasance:
(a) the Company shall (i) irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, unencumbered cash in
United States dollars, unencumbered U.S. Government Obligations,
or a combination thereof, in such amounts as will be sufficient,
in a written opinion of a nationally recognized firm of
independent public accountants delivered to the Trustee, to pay
the principal of, premium, if any, and interest (including any
Additional Interest) on the outstanding Senior Notes on the
stated date for payment thereof or on the applicable Redemption
Date, as the case may be, and the Company must specify whether
the Senior Notes are being defeased to maturity or to a
particular Redemption Date, and (ii) irrevocably instruct the
Trustee to apply such cash and U.S. Government Obligations to
such payments with respect to the Senior Notes;
(b) in the case of an election under Section 12.2, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United
States confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the
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Outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 12.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States confirming that the Holders of the Outstanding
Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if
such Covenant Defeasance has not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing (i) on the date of such deposit (other than a Default
or Event of Default resulting from the Incurrence of Indebtedness
all or a portion of the proceeds of which will be used to defease
the Senior Notes pursuant to this Article concurrently with such
Incurrence) and (ii) insofar as Section 5.1(f) hereof is
concerned, at any time during the period ending on the 91st day
after the date of deposit (such condition not being satisfied
until such 91st day) ;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to
which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit,
the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the
Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 12.5 Deposited Money and U.S. Government Obligations To Be Held
in Trust; Other Miscellaneous Provisions.
Subject to Section 12.6, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee pursuant to Section
12.4 in respect of the Outstanding Senior Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Senior Notes
and this Indenture, to the payment, either directly or through any Paying Agent
(excluding the Company acting as Paying Agent) as the Trustee may
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determine, to the Holders of such Senior Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest (including any
Additional Interest), but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 12.4 or the principal and interest
received in respect thereof.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the written request
of the Company any money or U.S. Government Obligations held by it as provided
in Section 12.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
12.4), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 12.6 Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 12.2 or 12.3, as the case may
be, by reason of any order or judgment of any court or Governmental Authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Senior Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 12.2 or
12.3 until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 12.2 or 12.3, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest (including any Additional Interest) on any Senior
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money held by the Trustee or Paying Agent.
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ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.1. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company shall not have any liability for any obligations of the Company
under the Senior Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Holder by accepting
a Senior Note waives and releases all such liability.
SECTION 13.2. Execution in Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
RESOURCE AMERICA, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
THE BANK OF NEW YORK, as Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
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SENIOR NOTES
REGISTRATION RIGHTS AGREEMENT
Dated as of July 22, 1997
among
RESOURCE AMERICA, INC.
and
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 22nd day of July, 1997, between Resource America, Inc., a
Delaware corporation (the "Company") and Friedman, Billings, Ramsey & Co., Inc.
(the "Initial Purchaser,").
This Agreement is made pursuant to the Purchase Agreement, dated as of
July 22, 1997, between the Company and the Initial Purchaser (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial Purchaser
of $115 million aggregate principal amount of 12% Senior Notes due 2004 (the
"Notes"). In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchaser 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 Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used herein without definition shall have
their respective meanings set forth in or pursuant to the Purchase
Agreement or the Offering Memorandum dated July 16, 1997, in respect of
the Notes, as applicable. All references to Sections herein are to
Sections of this Agreement unless otherwise indicated. As used in this
Agreement, the following capitalized defined terms shall have the
following meanings:
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Company, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Exchange Notes" shall mean the 12% Notes, issued by the
Company containing terms identical to the Notes in all material
respects (except that (i) interest thereon shall accrue from the last
interest payment date on which interest was paid on the Notes or, if no
interest has been paid, from the date of original issue of the Notes,
(ii) the transfer restrictions on the Notes shall be modified or
eliminated, as appropriate, and (iii) certain provisions relating to an
increase in the stated rate of interest of the Notes shall be
eliminated), to be offered to Holders of the Notes in exchange for the
Notes pursuant to the Exchange Offer.
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"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Notes for Registrable Notes pursuant to Section 2.1.
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.
"Failure to Register" shall have the meaning set forth in
Section 3 hereof.
"Holders" shall mean the Initial Purchaser, 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.
"Indenture" shall mean the Indenture dated as of July 22, 1997
between the Company and The Bank of New York, a New York banking
corporation, as trustee, as the same may be amended from time to time
in accordance with the terms thereof, providing for the issuance of the
Notes.
"Initial Purchaser" shall have the meaning set forth in the
preamble.
"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 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.
"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, 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 a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registrable Senior Note/Registrable Notes" shall mean one or
more of the Notes subject to the Indenture; provided, however, that a
Senior Note shall cease to be a Registrable Senior Note when (i) a
Registration Statement with respect to such Senior Note shall have been
declared effective under the Securities Act and such Notes shall have
been transferred pursuant to such Registration Statement, (ii) such
Senior Note shall have been sold pursuant to Rule 144 (or any similar
provision then in force, but not Rule
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<PAGE>
144A) under the Securities Act, or shall be saleable pursuant to
paragraph (k) of Rule 144 (or any similar provision then in effect) or
pursuant to an opinion of counsel that a transfer may be effected
without compliance with the Securities Act under circumstances which
will result in the Senior Note being freely tradeable by the purchaser
provided such purchaser is not an affiliate of the Company, (iii) such
Note shall have ceased to be outstanding or (iv) such Note shall have
been exchanged for an Exchange Note upon the consummation of the
Exchange Offer.
"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. (the "NASD")
registration and filing fees, including, if applicable, the fees and
expenses of any "qualified independent underwriter" (and the reasonable
fees of its counsel) that is required to be retained by any Holder of
Registrable Notes in accordance with the rules and regulations of the
NASD, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws and compliance with the rules of
the NASD (including reasonable fees and disbursements of counsel for
any underwriters or Holders in connection with blue sky qualification
of any of the Exchange Notes or Registrable Notes), (iii) all expenses
of any Persons engaged by the Company to prepare or assist 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 fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Notes on any securities
exchange or exchanges, (v) all rating agency fees, (vi) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, 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 or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Notes by a Holder, (vii) the fees and expenses of the
Trustee, and any escrow agent or custodian, and (viii) any fees and
disbursements of the underwriters customarily required to be paid by
issuers or sellers of securities and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, and the expenses of any such
Holder's counsel 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.
"Rule 144" shall mean Rule 144 under the 1933 Act, or any
successor rule.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
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"Shelf Registration" shall mean a registration effected
pursuant to Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2.2 of this Agreement which covers all of the Registrable Notes
required to be registered on an appropriate form for purposes of an
offering on a continuous basis pursuant to Rule 415, under the
Securities Act, or any similar rule that may be adopted by the
Commission, 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.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Trustee" shall mean the trustee with respect to the Notes
under the Indenture.
2. Registration Under the 1933 Act.
2.1 Exchange Offer.
(a) The Company shall (i) prepare and, not later than
December 30, 1997, file with the Commission an Exchange Offer
Registration Statement under the Securities Act with respect
to a proposed offer (the "Exchange Offer") to the Holders to
issue and deliver to such Holders, in exchange for the
Registrable Notes, a like principal amount of Exchange Notes,
(ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the
Securities Act on or prior to February 16, 1998, (iii) use its
best efforts to keep the Exchange Offer Registration Statement
effective until the closing of the Exchange Offer, subject to
its use by Participating Broker-Dealers (as defined below) as
contemplated in Section 3(f) below, and (iv) use its best
efforts to cause the Exchange Offer to be consummated not
later than March 30, 1998. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective
of such Exchange Offer to enable each Holder eligible and
electing to exchange Registrable Notes for Exchange Notes
(assuming that such Holder is not an affiliate of the Company,
within the meaning of Rule 405 under the Securities Act,
acquires the Exchange Notes in the ordinary course of such
Holder's business and has no arrangements or understandings
with any Person to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes and, if such Holder
is not a broker-dealer, such Holder is not engaged in, and
does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Notes) and to
trade such Exchange Notes from and after each such Holder's
receipt of the Exchange Notes without any limitations or
restrictions under the Securities Act and without material
restrictions under the securities laws of a substantial
proportion of the several states of the United States.
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<PAGE>
(b) In connection with the Exchange Offer, the
Company shall:
(i) mail to each Holder a copy of
the Prospectus forming part of the Exchange Offer
Registration Statement, together with an
appropriate letter of transmittal and related
documents;
(ii) keep the Exchange Offer open
for not less than 30 calendar days after the date
notice thereof is mailed to the Holders (or
longer if required by applicable law);
(iii) use the services of the
Depositary for the Exchange Offer;
(iv) permit Holders to withdraw
tendered Registrable Notes at any time prior to
the close of business, New York time, on the last
business day on which the Exchange Offer shall
remain open, by sending to the institution
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; and
(v) otherwise comply in all respects
with all applicable laws relating to the Exchange
Offer.
(c) As soon as practicable after the close of the
Exchange Offer, the Company shall:
(i) accept for exchange all
Registrable Notes duly tendered and not validly
withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer
Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver to the Trustee for
cancellation all Registrable Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to
authenticate and deliver Exchange Notes to each
Holder of Registrable Notes equal in principal
amount to the Registrable Notes of such Holder so
accepted for exchange.
Interest on each of the Exchange Notes will accrue from the last
interest payment date on which interest was paid on the Registrable Notes
surrendered in exchange therefor or, if no interest has been paid on the
Registrable Notes, from the date of original issue of the Registrable Notes. The
Exchange Offer shall not be subject to any conditions, other than that (i) the
Exchange Offer, or the making of any exchange by a Holder, does not violate
applicable law or
6
<PAGE>
any applicable interpretation of the staff of the Commission, (ii) no action or
proceeding shall have been instituted or threatened in any court by or before
any governmental agency with respect to the Exchange Offer which, in the
Company's judgment, might impair the ability of the Company to proceed with the
Exchange Offer, or (iii) there shall not have been adopted or enacted any law,
statute, rule or regulation which, in the Company's judgment, would materially
impair the ability of the Company to proceed with the Exchange Offer. Each
Holder of Registrable Notes (other than Participating Broker-Dealers (as defined
below)) who wishes to exchange such Registrable Notes for Exchange Notes will be
required to represent that (i) it is not an affiliate of the Company, (ii) any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business, (iii) it has no arrangement with any Person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes,
and (iv) it is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of the Exchange Notes. The Company
shall inform the Initial Purchaser of the names and addresses of the Holders to
whom the Exchange Offer is made, and the Initial Purchaser shall have the right,
subject to applicable law and at its expense, to contact such Holders and
otherwise facilitate the tender of Registrable Notes in the Exchange Offer.
2.2 Shelf Registration.
(a) (i) If, because of any change in law or
applicable interpretations thereof by the staff of the
Commission, the Company is not permitted to effect the
Exchange Offer as contemplated by Section 2.1 hereof or if for
any other reason the Exchange Offer Registration Statement is
not declared effective on or prior to February 16, 1998, (ii)
if for any other reason the Exchange Offer is not consummated
on or prior to March 30, 1998, or (iii) upon the request of
the Initial Purchaser (with respect to any Registrable Notes
which it acquired directly from the Company) following
consummation of the Exchange Offer if such Initial Purchaser
shall hold Registrable Notes which it acquired directly from
the Company and if such Initial Purchaser is not permitted, in
the opinion of counsel to such Initial Purchaser, pursuant to
applicable law or applicable interpretation of the staff of
the Commission, to participate in the Exchange Offer, the
Company shall, at the Company's cost, subject to Section 2.3
hereof,
(A) as promptly as practicable, file with
the Commission, and thereafter shall use its best
efforts to cause to be declared effective on or prior
to March 30, 1998 (or promptly in the event of a
request by the Initial Purchaser), a Shelf
Registration Statement relating to the offer and sale
of the Registrable Notes by the Holders from time to
time in accordance with the methods of distribution
selected by the Majority Holders and set forth in
such Shelf Registration Statement. In the event that
a Shelf Registration Statement is required to be
filed upon the request of the Initial Purchaser
pursuant to clause (iii) above, the Company shall
file and use its best efforts to have declared
effective by the Commission both an Exchange Offer
Registration Statement pursuant to Section 2.1 hereof
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
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<PAGE>
Registrable Notes held by such Initial Purchaser
after completion of the Exchange Offer;
(B) use its best efforts to keep the Shelf
Registration Statement continuously effective in
order to permit the Prospectus forming a part thereof
to be usable by Holders identified as selling
security holders in such Shelf Registration Statement
for a period of two years from the date the Shelf
Registration Statement is declared effective by the
Commission or until such earlier date as all
Registrable Notes shall have been disposed of or on
which all Registrable Notes shall be saleable without
registration pursuant to Rule 144 (or any similar
provision then in effect), or as a result of any
changes in the existing registration requirements
under the Securities Act which eliminate the Holders'
need for the Shelf Registration Statement, or upon
receipt of an opinion of counsel satisfactory to the
Initial Purchaser which provides that all Registrable
Notes may be resold without registration in a
transaction that would result in the Registrable
Notes being freely tradeable provided that the
purchaser is not an affiliate of the Company (the
"Effectiveness Period"); and
(C) notwithstanding any other provisions
hereof, use its best efforts to ensure that (i) any
Shelf Registration Statement and any amendment
thereto and any Prospectus forming a part thereof and
any supplement thereto complies in all material
respects with the Securities Act and the rules and
regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a
material fact or omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading and (iii) any
Prospectus forming a part of any Shelf Registration
Statement, and any supplement to such Prospectus (as
amended or supplemented from time to time), does not
include an untrue statement of a material fact or
omit to state a material fact necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not
misleading, except that the Company shall be entitled
to rely on the information provided to them by the
Holders with respect to such Holders.
(b) The Company further agrees, if necessary, to
supplement or amend the Shelf Registration Statement if
reasonably requested by the Majority Holders with respect to
information relating to the Holders and otherwise as required
by Section 3(b) hereof, to use their best efforts to cause any
such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable
and to furnish to the Holders of Registrable Notes copies of
any such supplement or amendment promptly after its being used
or filed with the Commission.
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<PAGE>
2.3 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2 and, in the case
of any Shelf Registration Statement, will reimburse the Holders or Initial
Purchaser for the reasonable fees and disbursements of one firm or counsel
designated in writing by the Majority Holders to act as counsel for the Holders
of the Notes in connection therewith, and, in the case of an Exchange Offer
Registration Statement, will reimburse the Initial Purchaser, as applicable, for
the reasonable fees and disbursements of one firm or counsel in connection
therewith (however, the reimbursement of such fees and disbursements on behalf
of the Holders or the Initial Purchaser shall not exceed an amount to be agreed
upon by the Company and the Initial Purchaser prior to the filing of any such
Registration Statement). Each Holder shall pay all expenses of its counsel,
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.
2.4. Effectiveness.
(a) The Company will be deemed not to have used its
best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may
be, to become, or to remain, effective during the requisite
period if it voluntarily takes any action that would result in
any such Registration Statement not being declared effective
or in the Holders of Registrable Notes covered thereby not
being able to exchange or offer and sell such Registrable
Notes during the period unless (i) such action is required by
applicable law or (ii) such action is taken by the Company in
good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including
the acquisition or divestiture of assets, so long as the
Company complies with the requirements of Section 3(b) hereof,
if applicable, as promptly as practicable.
(b) An Exchange Offer Registration Statement pursuant
to Section 2.1 hereof or a Shelf Registration Statement
pursuant to Section 2.2 hereof will not be deemed to have
become effective unless it has been declared effective by the
Commission; provided, however, that if, after a Shelf
Registration Statement has been declared effective, the
offering of Registrable Notes pursuant to such Shelf
Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the Commission or
any other governmental agency or court, such Shelf
Registration Statement will be deemed not to be effective
during the period of such interference, until the offering of
Registrable Notes pursuant to such Shelf Registration
Statement may legally resume.
2.5. Additional Interest. In the event that either (i) the Exchange
Offer Registration Statement is not filed with the Commission on or prior to
December 30, 1997, (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to February 16, 1998, or (iii) the Exchange Offer
is not consummated on or prior to March 30, 1998 or a Shelf Registration
Statement is not declared effective on or prior to March 30, 1998 (each a
"Registration Default") additional interest (the "Registration Penalty") will
accrue on the Notes from and including the day following such Registration
Default. The Registration Penalty will be paid semi-annually in arrears, with
the first semi-annual payment due on the first interest or distribution payment
date,
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<PAGE>
as applicable, following the date on which such Registration Penalty begins to
accrue. The Registration Penalty shall be equal to one-half of one percent
(0.50%) per annum following December 30, 1997 in the case of (i) above, February
16, 1998 in the case of clause (ii) above or March 30, 1998 in the case of (iii)
above, which rate will be increased by an additional one-half of one percent
(0.50%) per annum for each 90-day period that any such additional interest
continues to accrue; provided, that the aggregate increase in the Note interest
rate will in no event exceed one percent per annum (1.0%). Upon (x) the filing
of the Exchange Offer Registration Statement after December 30, 1997, (y) the
effectiveness of the Exchange Offer Registration Statement after February 16,
1998, or (z) the day before the date of the consummation of the Exchange Offer
or the effectiveness of a Shelf Registration Statement, as the case may be,
after March 30, 1998, the interest rate borne by the Notes from the date of such
filing, effectiveness or the day before the date of the consummation, as the
case may be, will be reduced by the full amount of the Registration Penalty;
provided, however, that, if after any such reduction in interest rate, a
different event specified in clause (i), (ii) or (iii) above occurs, the
interest rate may again be increased by the applicable Registration Penalty and
thereafter reduced pursuant to the foregoing provisions. At no time will a
Registration Penalty in excess of one percent (1.00%) be payable pursuant to the
provisions of this Registration Rights Agreement.
2.6 Specific Enforcement. Without limiting the remedies available to
the Initial Purchaser and the Holders, the Company acknowledges that any failure
by the Company to comply with its obligations under Section 2.1 and Section 2.2
hereof may result in material irreparable injury to the Initial Purchaser 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 Initial Purchaser or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2.1 and Section 2.2 hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
(a) prepare and file with the Commission a
Registration Statement, within the time period specified in
Section 2, on the appropriate form under the Securities Act,
which form (i) shall be selected by the Company, (ii) shall,
in the case of a Shelf Registration, be available for the sale
of the Registrable Notes by the selling Holders thereof and
(iii) shall comply as to form in all material respects with
the requirements of the applicable form and include or
incorporate by reference all financial statements required by
the Commission to be filed therewith, and use its 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 Commission such
amendments and post-effective amendments to each Registration
Statement and such supplements to the Prospectus as may be
necessary under applicable law; and comply with the provisions
of the Securities Act with respect to the disposition of all
of the Registrable Notes or Exchange Notes, as applicable,
covered by each Registration
10
<PAGE>
Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling
Holders thereof;
(c) in the case of a Shelf Registration, (i) notify
each Holder of the Registrable Notes, at least five days prior
to filing, that a Shelf Registration Statement with respect to
the Registrable Notes is being filed and advise such Holders
that the distribution of the Registrable Notes will be made in
accordance with the method selected by the Holders of a
majority in aggregate principal amount of the Registrable
Notes being registered; and (ii) furnish to each Holder of the
Registrable Notes, to counsel for the Initial Purchaser, to
one firm or counsel for the Holders and to each underwriter of
an underwritten offering of the 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, including financial statements and
schedules and, if the Holder so requests, all exhibits
(including those incorporated by reference) in order to
facilitate the public sale or other disposition of the
Registrable Notes; and (iii) subject to the penultimate
paragraph of Section 3, hereby consent to the use of the
Prospectus or any amendment or supplement thereto by each of
the selling Holders of the Registrable Notes in connection
with the offering and sale of the Registrable Notes covered by
the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Notes or Exchange Notes, as applicable, under all
applicable state securities or "blue sky" laws of such
jurisdiction as any Holder (or Participating Broker-Dealer
with respect to Exchange Notes) of the Registrable Notes or
Exchange Notes, as applicable, covered by a Registration
Statement and each underwriter of an underwritten offering of
the Registrable Notes shall reasonably request by the time the
applicable Registration Statement is declared effective by the
Commission, to cooperate with the Holders in connection with
any filings required to be made with the NASD, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable each such Holder and underwriter 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) or (ii) take any action
which would subject it, its board of directors or its officers
to general service of process or taxation in any such
jurisdiction where it or they are not then so subject;
(e) in the case of a Shelf Registration, notify each
Holder of the Registrable Notes and counsel for the Initial
Purchaser promptly and, if requested by such Holder or
counsel, confirm such advice in writing promptly (i) when a
Shelf Registration Statement has become effective, (ii) of any
request by the Commission or any state securities authority
for post-effective amendments and supplements to a Shelf
Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become
effective, (iii) of
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<PAGE>
the issuance by the Commission or any state securities
authority of any stop order suspending the effectiveness of a
Shelf Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective
date of a Shelf 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 the offering of the Registrable
Notes cease to be true and correct in all material respects,
(v) of the happening of any event or the discovery of any
facts during the period a Shelf Registration Statement is
effective which makes any statement made in such Shelf
Registration Statement or the Prospectus untrue in any
material respect or which requires the making of any changes
in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading, (vi) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Notes for
sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose and (vii) of any determination
by the Company that a post-effective amendment to a Shelf
Registration Statement would be appropriate;
(f) (i) in the case of the Exchange Offer (A) include
in the Exchange Offer Registration Statement a "Plan of
Distribution" section covering the use of the Prospectus
included in the Exchange Offer Registration Statement by
broker-dealers who have exchanged their Registrable Notes for
Exchange Notes for the resale of such Exchange Notes, (B)
furnish to each broker-dealer who desires to participate in
the Exchange Offer, without charge, as many copies of each
Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such broker-dealer may
reasonably request, (C) include in the Exchange Offer
Registration Statement a statement that any broker-dealer who
holds Registrable Notes acquired for its own account as a
result of market-making activities or other trading activities
(a "Participating Broker-Dealer"), and who receives Exchange
Notes for Registrable Notes pursuant to the Exchange Offer,
may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the Securities Act in connection
with any resale of such Exchange Notes, (D) subject to the
penultimate paragraph of Section 3, hereby consent to the use
of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto,
by any Participating Broker-Dealer in connection with the sale
or transfer of the Exchange Notes covered by the Prospectus or
any amendment or supplement thereto, and (E) include in the
transmittal letter or similar documentation to be executed by
an exchange offeree in order to participate in the Exchange
Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account
in exchange for Registrable Notes, the undersigned
represents that the Registrable Notes were acquired
by it as a result of market-making or other trading
activities and acknowledges that
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<PAGE>
it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale
of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act;" and
(y) a statement to the effect that by a
Participating Broker-Dealer making the acknowledgment
described in clause (x) and by delivering a
Prospectus in connection with the exchange of
Registrable Notes, the Participating Broker-Dealer
will not be deemed to admit that it is an underwriter
within the meaning of the Securities Act; and
(ii) to the extent any Participating
Broker-Dealer participates in the Exchange
Offer, the Company shall use its best
efforts to cause to be delivered at the
request of an entity representing the
Participating Broker-Dealers (which entity
shall be the Initial Purchaser, unless it
elects not to act as such representative)
only one, if any, "cold comfort" letter with
respect to the Prospectus in the form
existing on the last date on which exchanges
will be accepted and with respect to each
subsequent amendment or supplement, if any,
effected during the period specified in
clause (D) below; and
(iii) to the extent any
Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use
its best efforts to maintain the
effectiveness of the Exchange Offer
Registration Statement for a period of 180
days following the closing of the Exchange
Offer; and
(iv) 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(b) hereof or
take any other action as a result of this
Section 3(f), during the period commencing
180 days after the last date for which
exchanges are accepted pursuant to the
Exchange Offer (as such period may be
extended by the Company) and Participating
Broker-Dealers shall not be authorized by
the Company and shall not deliver such
Prospectus after such period in connection
with resales contemplated by this Section 3;
and
(v) (A) in the case of an Exchange
Offer, furnish counsel for the Initial
Purchaser and (B) in the case of a Shelf
Registration, furnish one firm or counsel
for the Holders of the Registrable Notes,
copies of any request by the Commission or
any state securities authority for
amendments or supplements to a Registration
Statement and Prospectus or for additional
information; and
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(vi) use its best efforts to obtain
the withdrawal of any order suspending the
effectiveness of a Registration Statement at
the earliest possible moment and provide
immediate notice to each Holder of the
withdrawal of any such order.
(g) in the case of a Shelf Registration, furnish to
each Holder of the Registrable Notes, and each underwriter, if
any, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without
documents incorporated therein by reference and all exhibits
thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders of the Registrable Notes to
facilitate the timely preparation and delivery of certificates
representing the 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 or the underwriters, if any, may reasonably request at
least three business days prior to the closing of any sale of
the Registrable Notes;
(i) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each as
contemplated by Section 3(e)(ii)-(vii) hereof, use its best
efforts to prepare a supplement or post-effective amendment to
the 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 at the time of such delivery 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 to suspend use of the Prospectus as
promptly as practicable after the occurrence or discovery 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. At
such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, the
Company agrees promptly to notify each Holder of such
determination, to amend or supplement the Prospectus if
necessary to correct any untrue statement or omission therein
and to furnish each Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may
reasonably request;
(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, (a) provide copies
of such document to the Initial Purchaser, on behalf of such
Holders, and their counsel and (b) make representatives of the
Company (as shall be reasonably requested by the Majority
Holders of the Registrable Securities, or the Initial
Purchaser on behalf of such
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Holders), 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 Initial Purchaser, on
behalf of such Holders, and its counsel shall not have
previously been advised and furnished a copy or to which the
Initial Purchaser, on behalf of such Holders, or its 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, and provide the
Trustee with printed certificates for the Exchange Notes or
the Registrable Notes, as the case may be, in a form eligible
for deposit with the Depositary;
(l) (i) cause the Indenture to be qualified under the
Trust Indenture Act of 1939 (the "TIA") in connection with the
registration of the Notes, (ii) 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 (iii) execute, and use its 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 Commission to enable
the Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into
agreements (including underwriting agreements) and take all
other customary and appropriate actions (including those
reasonably requested by the Majority Holders) in order to
expedite or facilitate the disposition of such Registrable
Notes and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration
is an underwritten registration:
(i) make such representations and warranties
to the Holders of such Registrable Notes and the
underwriters, if any, in form, substance and scope as
are customarily made by issuers to underwriters in
similar underwritten offerings as may be reasonably
requested by such underwriters;
(ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters,
if any, and the holders of a majority in aggregate
principal amount of the Registrable Notes being
sold), addressed to each selling Holder and the
underwriters, if any, covering the matters
customarily covered in opinions requested in sales of
securities or underwritten offerings and such other
matters as may be reasonably requested by such
Holders and underwriters;
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(iii) obtain "cold comfort" letters and
updates thereof from the Company's independent
certified public accountants addressed to the
underwriters, if any, and use its best efforts to
have such letters addressed to the selling Holders of
the Registrable Notes, such letters to be in
customary form and covering matters of the type
customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten
offerings;
(iv) enter into a securities sales agreement
with the Holders and an agent of the Holders
providing for, among other things, the appointment of
such agent for the selling Holders for the purpose of
soliciting purchases of the Registrable Notes, which
agreement shall be in form, substance and scope
customary for similar offerings;
(v) if an underwriting agreement is entered
into, cause the same to set forth indemnification
provisions and procedures substantially equivalent to
the indemnification provisions and procedures set
forth in Section 5 hereof with respect to the
underwriters and all other parties to be indemnified
pursuant to said Section; and
(vi) deliver such documents and certificates
as are customarily delivered in similar offerings and
as may be reasonably requested by the Holders of a
majority in aggregate principal amount of the
Registrable Notes being sold and the managing
underwriters, if any.
The above shall be done at (i) the effectiveness of such Shelf
Registration Statement (and each post-effective amendment thereto) and (ii) each
closing under any underwriting or similar agreement as and to the extent
required thereunder. In the case of any underwritten offering, the Company shall
provide written notice to the Holders of all of the Registrable Notes of such
underwritten offering at least 30 days prior to the filing of a Prospectus
supplement for such underwritten offering. Such notice shall (x) offer each such
Holder the right to participate in such underwritten offering, (y) specify a
date, which shall be no earlier than 10 days following the date of such notice,
by which the Holder must inform the Company of its intent to participate in such
underwritten offering and (z) include the instructions such Holder must follow
in order to participate in such underwritten offering;
(n) in the case of a Shelf Registration Statement, upon the
execution of a confidentiality agreement reasonably requested by the
Company, in accordance with such procedural conditions as the Company
shall reasonably impose, make available for inspection by
representatives of the Holders of the Registrable Notes and any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any one firm or counsel or accountant
retained by such Holders or underwriters, all financial and other
records, pertinent corporate documents and properties of the Company
reasonably requested by any such persons, and cause the officers,
directors, employees and any other agents of the Company to supply all
information reasonably requested by any such
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representative, underwriter, special counsel or accountant in
connection with a Registration Statement;
(o) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide copies of such document to the
Initial Purchaser and make such changes in any such document prior to
the filing thereof as the Initial Purchaser may reasonably request; and
(ii) in the case of a Shelf Registration Statement, a reasonable time
prior to filing any Shelf Registration Statement, any Prospectus
forming a part thereof, any amendment to such Shelf Registration
Statement or amendment or supplement to such Prospectus, provide copies
of such documents to the Holders of the Registrable Notes, to the
Initial Purchaser, to one firm or counsel on behalf of the Holders and
to the underwriter or underwriters of an underwritten offering of the
Registrable Notes, if any, make such changes in any such document prior
to the filing thereof as counsel for the Company and counsel for the
Majority Holders and the underwriter or underwriters may reasonably
agree and make representatives of the Company (as shall be reasonably
requested by the Majority Holders of the Registrable Securities, or the
Initial Purchaser on behalf of such Holders or any underwriter),
available for discussion of such document; provided that any party
receiving any document pursuant to this clause (ii) who does not raise
any objections to the filing of such document within five calendar days
after receipt of such document shall be deemed to have no objection to
the filing of such document;
(p) in the case of a Shelf Registration Statement, use its
best efforts to cause all of the Registrable Notes to be listed on any
securities exchange on which similar securities issued by the Company
are then listed if so requested by the Majority Holders or by the
underwriter or underwriters of an underwritten offering of Registrable
Notes, if any;
(q) in the case of a Shelf Registration Statement, use its
best efforts to cause the Registrable Notes to be rated with the
appropriate rating agencies if so requested by the Majority Holders or
by the underwriter or underwriters of an underwritten offering of
Securities, if any;
(r) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder; and
(s) cooperate and assist in any filings required to be made
with the NASD and, in the case of a Shelf Registration Statement, in
the performance of any due diligence investigation by any underwriter
and its counsel (including any "qualified independent underwriter" that
is required to be retained in accordance with the rules and regulations
of the NASD).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of the Registrable Notes to
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<PAGE>
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 or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii)
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) 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
that was current at the time of receipt of such notice. If the Company shall
give any such notice to suspend the disposition of the Registrable Notes
pursuant to a Shelf Registration Statement as a result of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vii) hereof, the Company shall be deemed to have used its best efforts
to keep the Shelf Registration Statement effective during such period of
suspension provided that the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Shelf Registration Statement.
4. Underwritten Registrations.
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Majority Holders and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Initial Purchaser, each participating Holder, each Participating
Broker-Dealer, each other person who participates in an offering of the
Registrable Notes, including underwriters (as defined in the Securities
Act and referred to herein as "Underwriters"), and each person, if any,
who controls any participating Holder, Initial Purchaser or any other
participating person within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each of the foregoing being an
"Indemnitee"), as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any
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<PAGE>
amendment thereto) pursuant to which Exchange Notes or
Registrable Notes were registered under the Securities Act,
including all documents incorporated therein by reference, or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation or
investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred (including fees and disbursements of one firm or
counsel chosen by the Indemnitees, provided that.
notwithstanding Section 5(c), notice is promptly provided by
any party seeking reimbursement), reasonably incurred in
investigating, preparing or defending against any litigation
or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Initial
Purchaser, any Holder or any Underwriter expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) In the case of a Shelf Registration Statement, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the
Company, the Initial Purchaser, each Underwriter and the other selling
Holders, and each of their respective "controlling persons" (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the directors of the Company and each of the
Company's officers who signed the Shelf Registration Statement against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 5(a) hereof, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements
or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus included therein (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company expressly for use in the Shelf
Registration Statement (or any amendment thereto) or such Prospectus
(or any amendment or supplement thereto); provided, however, that no
such Holder shall be liable
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<PAGE>
for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of such Holder's Registrable
Notes pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought
hereunder, but failure so to notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have on
account of this indemnity agreement except as provided in Section
5(a)(iii). An indemnifying party may participate at its own expense in
the defense of such action. If it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any
other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such indemnified
parties reasonably object to such assumption on the ground that there
may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel separate from their
own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances.
(d) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 5
is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company, the
Holders and the Initial Purchaser shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity incurred by the Company, the Holders and
the Initial Purchaser; provided, however, that 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. As between the
Company, the Holders and the Initial Purchaser, such parties shall
contribute to the aggregate losses, liabilities, claims, damages and
expense of the nature contemplated by such indemnity agreement in such
proportions as shall be appropriate to reflect (i) the relative
benefits received by the Company on the one hand, the Holders on
another hand and the Initial Purchaser on another hand, from the
offering of the Exchange Notes or Registrable Notes included in such
offering, and (ii) the relative fault of the Company on the one hand,
the Holders on another hand and the Initial Purchaser on another hand,
with respect to the statements or omissions which resulted in such
loss, liability, claim, damage or expense, or action in respect
thereof, as well as any other relevant equitable considerations. The
Company, the Holders and the Initial Purchaser agree that it would not
be just and equitable if contribution pursuant to this Section 5 were
to be determined by pro rata allocation or by any other method of
allocation which does not take into account the relevant equitable
considerations. For purposes of this Section 5, each Person, if any,
who controls the Initial Purchaser or a Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to
20
<PAGE>
contribution as the Initial Purchaser or such Holder, and each trustee
of director of the Company, each officer of the Company who signed the
Registration Statement, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to
contribution as the Company. The parties hereto agree that any
underwriting discount or commission or reimbursement of fees paid to
Initial Purchaser pursuant to the Purchase Agreement shall not be
deemed to be a benefit received by Initial Purchaser in connection with
the offering of the Exchange Notes or Registrable Notes included in
such offering.
6. Miscellaneous.
6.1 Rule 144 and Rule 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the Exchange Act, the Company
covenants that it will file any reports required to be filed by it under Section
13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the
Commission thereunder, and that if it ceases to be so required to file such
reports it will upon the request of any Holder of the Registrable Notes (a) make
publicly available such information, if any, as is necessary to permit sales
pursuant to Rule 144 under the Securities Act), provided all of the other
applicable provisions of Rule 144 can be met by the Holder, (b) deliver such
information to a prospective purchaser as is necessary to permit sales pursuant
to Rule 144A under the Securities Act, if sales can otherwise be made under Rule
144A, and (c) take such further action that is reasonable in the circumstances,
in each case, to the extent required from time to time to enable such Holder to
sell its Registrable Notes without registration under the Securities Act within
the limitation of the exemptions provided by, but only to the extent such
exemptions apply, (i) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (ii) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (iii) any similar rules or regulations
hereafter adopted by the Commission. Upon the request of any Holder of the
Registrable Notes, the Company will deliver to such Holder a written statement
as to whether it has complied with such requirements.
6.2 No Inconsistent Agreements. The Company has not entered into, and
will not after the date of this Agreement enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or which 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 or the Company's
other issued and outstanding securities under any such agreements.
6.3 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 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 has been obtained by
the Company; provided, however, that no amendment, modification, supplement,
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
6.4 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,
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or any courier guaranteeing overnight delivery (a) 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 6.4, which address initially
is, with respect to Initial Purchaser, the address set forth in the Purchase
Agreement; and (b) if to the Company, initially at the Company's address set
forth in the Purchase Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 6.4.
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 under the
Indenture, at the address specified in such Indenture.
6.5 Successor 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 Purchase 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 conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such person shall be entitled to receive the benefits hereof.
6.6 Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights.
6.7 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.
6.8 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
6.10 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
22
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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.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RESOURCE AMERICA, INC.
By: _________________________________________
Name: ______________________________________
Title: ______________________________________
CONFIRMED AND ACCEPTED, As of the date first above written:
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By: _____________________________________
Name: _____________________________________
Title:_____________________________________
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<PAGE>
Exhibit 23(a)
CONSENT OF GRANT THORNTON LLP
We have issued our report dated October 25, 1996 accompanying the consolidated
financial statements of Resource America, Inc. and subsidiaries appearing in the
Annual Report on Form 10-K for the year ended September 30, 1996 which are
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
reports and to the use of our name as it appears under the caption "Experts."
/s/ Grant Thornton LLP
--------------------------
GRANT THORNTON LLP
Cleveland, Ohio
November 14, 1997
