AS FILED WITH THE COMMISSION ON MARCH 18, 1999 (SEC FILE NO. 22-22403)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
AMENDMENT NO. 1
TO
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
MERCURY FINANCE COMPANY
(Name of Applicant)
100 FIELD DRIVE, LAKE FOREST, ILLINOIS 60045
(Address of principal executive offices)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
10% SENIOR SECURED NOTES
DUE 2001, SERIES A Approximately $430,000,000
SENIOR SECURED NOTES
DUE 2001, SERIES B
Approximate date of issuance: On or as soon as possible after
the Effective Date (as defined in the Second
Amended Plan of Reorganization dated December 29,
1998 of Mercury Finance Company under chapter 11
of the United States Bankruptcy Code).
Name and address of agent
for service: Mark Dapier, Esq.
Mercury Finance Company
100 Field Drive
Lake Forest, Illinois 60045
(847) 295-8600
With a copy to:
Grant A. Bagan, P.C.
Lewis S. Rosenbloom
McDermott, Will & Emery
227 West Monroe St., Suite 3100
Chicago, Illinois 60606
(312) 372-2000
THE APPLICANT HEREBY AMENDS THIS APPLICATION FOR QUALIFICATION ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS UNTIL (I) THE 20TH
DAY AFTER THE FILING OF A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT IT
SHALL SUPERSEDE THIS AMENDMENT, OR (II) SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 307(C) OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED (THE
"ACT"), MAY DETERMINE UPON THE WRITTEN REQUEST OF THE APPLICANT.
GENERAL
1. GENERAL INFORMATION. Furnish the following as to the applicant:
(a) Form of organization.
A corporation.
(b) State or other sovereign power under the laws of which
organized.
Delaware.
2. SECURITIES ACT EXEMPTION APPLICABLE. State briefly the facts relied
upon by the applicant as a basis for the claim that registration of the
indenture securities under the Securities Act of 1933 is not required.
On July 15, 1998, Mercury Finance Company, a Delaware
corporation (the "Company"), filed a voluntary petition for relief under chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Northern District of Illinois Eastern Division
(the "Bankruptcy Court"). As part of the Second Amended Plan of Reorganization
of the Company dated December 29, 1998 (the "Plan of Reorganization"), the
Company proposes to issue 10% Senior Secured Notes due 2001, Series A and Senior
Secured Notes due 2001, Series B (collectively, the "New Senior Notes"). The
Plan of Reorganization also provides for the issuance of 11% Senior Subordinated
Notes due 2002 (the "New Senior Subordinated Notes"), as well as shares of
common stock of the Company (the "New Common Stock") and warrants to purchase
shares of New Common Stock (the "Warrants"). The New Senior Notes and the New
Senior Subordinated Notes will be issued in part to discharge claims of existing
creditors in the Bankruptcy Case described below.
On December 30, 1998, the Bankruptcy Court approved the
Company's Second Amended Disclosure Statement dated December 29, 1998 (the
"Disclosure Statement") as containing "adequate information" for the purpose of
soliciting votes of holders of claims or equity interests in the Company for
acceptance or rejection of the Plan of Reorganization (Case No. 98 B 20763) and
authorized the Company to solicit acceptances of its Plan of Reorganization. The
Plan of Reorganization was confirmed on March 10, 1999. The New Senior Notes are
to be issued under an indenture and supplemental indentures (together with the
supplemental indentures thereto, the "Senior Note Indenture") between the
Company and Norwest Bank Minnesota, National Association, as trustee, forms of
which are attached hereto as Exhibits T3C1 and T3C2. The effective date of the
Plan of Reorganization will be March 23, 1999 (the "Effective Date").
A copy of the Disclosure Statement is attached as Exhibit T3E5
to this Form T-3 and a copy of the Plan of Reorganization is attached as Exhibit
T3E6 to this Form T-3. Information in this Form T-3 relating to future actions
or intentions of the Company, or other parties pursuant to the Plan of
Reorganization, are the current intentions of such parties, pursuant to the Plan
of Reorganization and as described in the Disclosure Statement, which actions
may be subject to modification, provided that all necessary approvals and/or
consents have been obtained.
The New Senior Notes and the New Senior Subordinated Notes are
proposed to be issued in reliance upon the exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act"), set forth in Section
1145(a)(1) of Title 11 of the Bankruptcy Code, applicable to the offer or sale
under a plan of reorganization under Chapter 11 of the Bankruptcy Code by an
entity that is not an underwriter of a security of a debtor principally in
exchange for a claim against such debtor.
Section 1145 of Title 11 of the Bankruptcy Code exempts the
offer or sale of securities under a plan of reorganization from registration
under the Securities Act and state securities laws if three principal
requirements are satisfied: (1) the securities are issued by a debtor, its
successor, or an affiliate participating in a joint plan with the debtor
(provided that such entity is not an underwriter as defined in Section 1145(b)
of the Bankruptcy Code) under a plan of reorganization; (2) the recipients of
the securities hold a claim against the debtor or such affiliate, an interest in
the debtor or such affiliate, or a claim for an administrative expense against
the debtor or such affiliate; and (3) the securities are issued entirely in
exchange for the recipients' claim against or interest in the debtor or such
affiliate, or "principally" in such exchange and "partly" for cash or property.
The Company believes that the issuance of the New Senior Notes
and the New Senior Subordinated Notes to certain creditors of the Company
pursuant to the Plan of Reorganization will satisfy all three conditions of
Section 1145 of the Bankruptcy Code because (a) the issuances of the New Senior
Notes and the New Senior Subordinated Notes are expressly contemplated under the
Plan of Reorganization as part of the reorganization; (b) the recipients are
holders of "claims" against the Company; and (c) the recipients will obtain such
New Senior Notes and the New Senior Subordinated Notes principally in exchange
for their prepetition claims.
AFFILIATIONS
3. AFFILIATES. Furnish a list or diagram of all affiliates of the
applicant and indicate the respective percentages of voting securities or other
bases of control.
The following tables set forth the relationship between the
Company and all of its affiliates, including their respective percentages of
voting securities, as of February 28, 1999. Pursuant to the federal securities
laws, the directors and executive officers set forth below may be deemed to be
affiliates of the Company due to their positions with the Company; however,
their inclusion in this item is not an admission of their affiliated status with
the Company. The tables are based on information within the Company's
possession. As of February 28, 1999, there were not any persons or entities
known by the Company to be the beneficial owners of more than five percent of
the Company's voting securities. The address for all of the directors and
executive officers listed below is the address of the Company.
Affiliates as of February 28, 1999:
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
NAME RELATIONSHIP SECURITIES
<S> <C> <C>
Dennis H. Chookaszian Director *
William C. Croft Director *
Clifford R. Johnson Director *
Andrew McNally IV Director *
Bruce I. McPhee Director *
Fred G. Steingraber Director *
Philip J. Wicklander Director *
William A. Brandt, Jr President & Chief Executive Officer *
Fred C. Caruso Acting Chief Operating Officer *
Patrick J. O'Malley Acting Principal Financial & *
Accounting Officer
Mercury Finance Corporation of Alabama (Ala) Subsidiary NA
Mercury Finance Company of Arizona (Ariz.) Subsidiary NA
Merc. Finance Company of California (Cal) Subsidiary NA
Mercury Finance Company of Colorado (Del) Subsidiary NA
Mercury Finance Company of Delaware (Del) Subsidiary NA
Mercury Finance Company of Florida (Del) Subsidiary NA
Mercury Finance Company of Georgia (Del) Subsidiary NA
Mercury Finance Company of Illinois (Del) Subsidiary NA
Mercury Finance Company of Idaho (Del) Subsidiary NA
Mercury Finance Company of Iowa (Del) Subsidiary NA
Mercury Finance Company of Indiana (Del) Subsidiary NA
Mercury Finance Company of Kansas (Del) Subsidiary NA
Mercury Finance Company of Kentucky (Del) Subsidiary NA
Mercury Finance Company of Louisiana (Del) Subsidiary NA
Mercury Finance Company Michigan (Del) Subsidiary NA
Mercury Finance Company of Missouri (Del) Subsidiary NA
Mercury Finance Company of Mississippi (Del) Subsidiary NA
Mercury Finance Company of Nevada (Nev.) Subsidiary NA
Mercury Finance Company of New Mexico (Del) Subsidiary NA
Mercury Finance Company of New York (Del) Subsidiary NA
Mercury Finance Company of North Carolina (Del) Subsidiary NA
Mercury Finance Company of Ohio (Del) Subsidiary NA
MFC Finance Company of Oklahoma (Del) Subsidiary NA
Mercury Finance Company of Oregon (Del) Subsidiary NA
Mercury Finance Company of Pennsylvania (Del) Subsidiary NA
Mercury Finance Company of South Carolina (Del) Subsidiary NA
Mercury Finance Company of Tennessee (Tenn.) Subsidiary NA
MFC Finance Company of Texas (Del) Subsidiary NA
Mercury Finance Company of Utah (Del) Subsidiary NA
Mercury Finance Company of Virginia (Del) Subsidiary NA
Mercury Finance Company of Washington (Del) Subsidiary NA
Mercury Finance Company of Wisconsin (Del) Subsidiary NA
Filco Marketing Company (Del) Subsidiary NA
Gulfco Investment Inc. (La) Subsidiary NA
Gulfco Finance Company (La) Subsidiary NA
Midland Finance Co. (IL) Subsidiary NA
MFN Insurance Company (Turks and Caicos) Subsidiary NA
MFC Financial Services, Inc. of Florida Subsidiary NA
- -------------------
*Less than one percent
</TABLE>
After the Effective Date, the above officers and directors
will resign from their positions as directors and/or executive officers of the
Company. The following table sets forth the relationship between the Company and
certain persons who are expected to be directors and/or executive officers on
and after the Effective Date as well as their respective percentages of voting
securities. The address for these persons is the address of the Company.
<TABLE>
<CAPTION>
NAME RELATIONSHIP PERCENTAGE VOTING SECURITIES
<S> <C> <C>
Edward G. Harshfield President, Chairman, Chief Executive Options to purchase 5% of New Common
Officer and Director Stock to be granted on the Effective
Date
Thomas L. Gooding Director -
Andrew C. Halvorsen Director -
Michael A. Kramer Director -
Martin L. Solomon Director -
Robert Stucker Director -
George R. Zoffinger Director -
Jeffrey Weeden Executive Vice President and Chief Options to purchase 1% of the New
Financial Officer Common Stock to be granted on the
Effective Date
Mark Dapier Executive Vice President, General Options to purchase 0.5% of the New
Counsel and Secretary Common Stock to be granted on the
Effective Date
</TABLE>
On the Effective Date, all of the Company's current common
stock will be canceled. Pursuant to the Plan of Reorganization, as of the
Effective Date, (a) 9,500,000 shares of New Common Stock of the Company will be
issued to holders of Senior Debt Claims (as defined in the Plan of
Reorganization) pro rata, based upon each creditor's percentage of the Senior
Debt Claims, and (b) the stockholders of the Company will be entitled to receive
500,000 shares of New Common Stock pro rata, based upon their respective
ownership of Old Common Stock, and Warrants to purchase up to 1,740,000 shares
of the New Common Stock of the Company. Accordingly, as of the Effective Date,
based upon the holders of the Senior Debt Claims on July 1, 1998, the creditors
of the Company listed in Item 5 below may be deemed to be affiliates of the
Company after the Effective Date of the Plan of Reorganization due to their
ownership of more than 10% of the New Common Stock. See Item 5 for their
percentage of voting securities.
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete
mailing addresses of all directors and executive officers of the applicant and
all persons chosen to become directors or executive officers. Indicate all
offices with the applicant held or to be held by each person named.
The address for each director and executive officer listed
below is 100 Field Drive, Lake Forest, Illinois 60045.
Prior to the Effective Date:
NAME OFFICE
- ---- ------
Dennis H. Chookaszian Director
William C. Croft Director.
Clifford R. Johnson Director.
Andrew McNally IV Director.
Bruce I. McPhee Director.
Fred G. Steingraber Director.
Philip J. Wicklander Director.
William A. Brandt, Jr. President and Chief Executive Officer of the Company.
Fred C. Caruso Acting Chief Operating Officer.
Patrick J. O'Malley Acting Principal Financial and Accounting Officer.
Edward G. Stautzenbach Vice President - Marketing.
Steven G. Gould Vice President - Operations.
George R. Carey Vice President - Operations.
Sheila M. Tilson Vice President - Operations and Assistant Secretary.
John N. Brincat, Jr. Vice President - Operations.
Michael Caul Vice President - Operations.
David Joseph Peters Vice President - Operations.
Charles H. Lam Vice President - Operations.
Allan Green Vice President - Portfolio Management.
Upon the effectiveness of the Plan of Reorganization, it is
expected that the composition of the directors and executive officers of the
Company will be as follows:
NAME OFFICE
Edward G. Harshfield President, Chairman and Chief Executive Officer and
Director
Thomas L. Gooding Director
Andrew C. Halvorsen Director
Michael A. Kramer Director
Martin L. Solomon Director
Robert Stucker Director
George R. Zoffinger Director
Jeffrey Weeden Executive Vice President and Chief Financial Officer
Mark Dapier Executive Vice President, General Counsel and Secretary
5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following
information as to each person owning 10 percent or more of the voting securities
of the applicant.
As of December 31, 1998, based on information and reports
filed with the Securities and Exchange Commission, there were not any persons or
entities known by the Company to be the beneficial owners of more than five
percent of the Company's voting securities.
As of the Effective Date, all of the Company's current common
stock and options to purchase common stock will be canceled. Pursuant to the
Plan of Reorganization, as of the Effective Date, (a) 9,500,000 shares of New
Common Stock of the Company will be issued to holders of Senior Debt Claims (as
defined in the Plan of Reorganization) pro rata, based upon each creditor's
percentage of the Senior Debt Claims, and (b) the stockholders of the Company
will be entitled to receive 500,000 shares of New Common Stock, pro rata, based
upon their respective ownership of Old Common Stock, and Warrants to purchase up
to 1,740,000 shares of the New Common Stock of the Company. Accordingly, as of
the Effective Date, based upon the holders of the Senior Debt Claims on July 1,
1998, the following table sets forth certain creditors of the Company, including
their respective percentage ownership of voting securities of the Company, who
may be deemed to be affiliates of the Company after the effective date of the
Plan of Reorganization due to their ownership of more than 10% of the New Common
Stock.
NAME AND ADDRESS AMOUNT OWNED PERCENTAGE OF VOTING
SECURITIES OWNED
Franklin Mutual Series 1,632,000 19.2%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07075
Goldman, Sachs & Co. 1,606,500 18.9%
85 Broad Street
New York, New York 10004
Silver Oak Capital, L.L.C. 935,000 11.0%
c/o Angelo, Gordon & Co. L.P.
245 Park Avenue, 26th Floor
New York, New York 10167
Principal Life Insurance Co. 875,500 10.3%
711 High Street
Des Moines, Iowa 50392
UNDERWRITERS
6. UNDERWRITERS. Give the name and complete mailing address of (a) each
person who, within three years prior to the date of filing the application,
acted as an underwriter of any securities of the applicant which were
outstanding on the date of filing the application, and (b) each proposed
principal underwriter of the securities proposed to be offered. As to each
person specified in (a), give the title of each class of securities
underwritten.
(a) None.
(b) The New Common Stock, Warrants, New Senior Notes and the
New Senior Subordinated Notes proposed to be offered will be exchanged with
certain holders of claims against the Company, as set forth in the Plan, without
the assistance of any underwriter.
CAPITAL SECURITIES
7. CAPITALIZATION. (a) Furnish the following information as to each
authorized class of securities of the applicant.
As of December 31, 1998:
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Common Stock, par value $.01 per share......300,000,000 177,900,671
- -------------------
(1) Does not include options to purchase shares of Common Stock at various
exercise prices which are currently outstanding. All outstanding options
will be cancelled as of the Effective Date.
As of the Effective Date of the Plan of Reorganization:
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Common Stock, par value $.01 per
share (1)..................................50,000,000 10,000,000
Preferred Stock, no par value.................10,000,000 -
Senior Secured Notes due 2001,
Series A and Series B....................$430,000,000(2) $430,000,000(2)
9% Senior Subordinated Notes due 2002........$22,500,000 $22,500,000
- -------------------
(1) Does not include three series of warrants to purchase an aggregate of
1,740,000 shares of New Common Stock (580,000 for each series ) that were
issued pursuant to the Plan of Reorganization. The Series A, Series B and
Series C Warrants shall be exercisable for $15.34, $21.81, $28.27 per
share, respectively, on the Effective Date, and shall expire on the
third, fourth and fifth anniversary of the Effective Date, respectively.
(2) Reflects the Company's estimate of the amount of Senior Notes to be issued.
(b) Give a brief outline of the voting rights of each class of
voting securities referred to in paragraph (a) above.
Each outstanding share of the Company's existing Common Stock
and the New Common Stock has or will have, as applicable, one vote with respect
to all matters subject to common stockholder vote. The other securities are not
voting securities.
Holders of the New Senior Notes and New Senior Subordinated
Notes do not have any voting rights by reason of ownership of those securities.
8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis
of indenture provisions required under section 305(a)(2) of the Act.
The New Senior Notes will be issued pursuant to an Indenture
between the Company and Norwest Bank Minnesota, National Association, as trustee
(the "Senior Note Indenture"), a copy of which (including the supplemental
indentures thereto) is attached hereto as Exhibits T3C1, T3C2 and T3C3.
Capitalized terms used in this Section 8 which are not otherwise defined below
or elsewhere in the Application have the respective meanings assigned to them in
the Senior Note Indenture. Section references used in this Section 8 shall,
unless otherwise specified or the context otherwise requires, be references to
the corresponding sections of the Senior Note Indenture. The following summary
of certain provisions of the Senior Note Indenture does not purport to be
complete and is subject to, and is qualified in its entirety, by reference to
all of the provisions of the Senior Note Indenture.
(A) Events of Default and Notice of Default.
The following are Events of Default under the Senior Note
Indenture:
(i) failure by the Company to pay interest on the New Senior
Notes for 30 days after becoming due;
(ii) failure by the Company to pay the principal of or premium
(if any) on the New Senior Notes, whether at maturity or upon
redemption, repurchase or otherwise;
(iii) failure by the Company to comply with any of its
covenants or the breach by the Company of any of its covenants or
warranties under the Senior Note Indenture (other than a breach of a
covenant or warranty which is specifically provided for elsewhere in
this section (A)) for 30 days after written notice specifying the
failure and that the same is a Default shall have been given to the
Company by the Trustee or to the Company and the Trustee by the Holders
of 25% in principal amount of the New Senior Notes outstanding;
(iv) default or defaults, including a payment default (after
giving effect to all applicable grace periods), under any evidence of
Indebtedness under which the Company or any of its Subsidiaries has an
aggregate principal amount of Indebtedness in excess of $10 million and
either (A) such Indebtedness is already due and payable in full or (B)
such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness. Subject to Sections 11.01 and 9.08 of
the Senior Note Indenture, the Trustee will not be deemed to have
knowledge of such default unless either (1) a Responsible Officer of
the Trustee has actual knowledge of the default or (2) the Trustee has
received written notice thereof from the Company, from any Holder, from
the holder of any such Indebtedness or from the trustee under the
agreement or instrument relating to such Indebtedness;
(v) any judgment or order for the payment of money is entered
against the Company or any Subsidiary for $25 million or more (in
excess of insured amounts) either individually or in the aggregate for
all such judgments or orders against all such Persons and remains
undischarged, unstayed or otherwise unsatisfied for 60 days;
(vi) a court of competent jurisdiction enters a judgment,
decree or order under any state or federal insolvency, bankruptcy,
reorganization or other similar law that is for relief against the
Company or any Subsidiary of the Company, in an involuntary case or
proceeding, or enters a decree or order:
(a) adjudging the Company or any Subsidiary a bankrupt or
insolvent,
(b) approving a petition seeking reorganization,
arrangement, adjustment or composition in respect of
the Company or any Subsidiary of the Company,
(c) appointing a Custodian or other similar official for
the Company or any Subsidiary of the Company or for
all or substantially all of the property of any of
them, or
(d) ordering the winding-up or liquidation of the Company
or any Subsidiary of the Company,
and in each case the judgment, order or decree remains unstayed and in
effect for 60 days.
(vii) the Company or any of its Subsidiaries pursuant to or
within the meaning of any state or federal insolvency, bankruptcy,
reorganization or other similar law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of a judgment, decree or order
for relief against it in an involuntary case or
proceeding,
(c) consents to the institution of a bankruptcy or an
insolvency proceeding against it,
(d) files a petition or answer or consent seeking
reorganization or relief with respect to the Company
under any applicable law,
(e) consents to the appointment of, or taking possession
by, a Custodian or other similar official of it or
any subsidiary for all or substantially all of its
property,
(f) makes an assignment for the benefit of its creditors,
(g) generally is not able to pay its debts as they become
due, or
(h) takes any corporate action to authorize or effect any
of the foregoing;
(viii) the Subsidiaries Guaranty Agreement or any future
guaranty agreement entered into by a Subsidiary hereafter acquired or
created is held to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary guarantor, or
any Person acting on behalf of any Subsidiary guarantor denies to
disaffirm its obligations under its subsidiary guarantee agreement;
(ix) default in the performance, or breach, of any covenant or
warranty of the Company or any Subsidiary, and the continuance of such
default or breach for a period of time which extends beyond the
applicable grace or cure period provided, in any Collateral Security
Document; or
(x) notwithstanding anything in Section 9.01 of the Senior
Note Indenture to the contrary, if the Company defaults in the
performance of or breaches any covenant in Article III of the First
Supplemental Indenture or Article III of the Second Supplemental
Indenture to the Senior Note Indenture (other than Section 3.8 of the
First Supplemental Indenture and Second Supplemental Indenture) or
Section 7.05 of the Senior Note Indenture, an Event of Default will
immediately occur, without giving effect to the passage of time,
notice, or both.
If a Default or an Event of Default occurs and is continuing
and if it is actually known to the Trustee, the Trustee shall mail to
Holders a notice of the Default or Event of Default within 90 days
after it occurs, as provided in the Trust Indenture Act. In the case of
any Default of the character specified in Section clause (iii) of this
Section 8(A), no such notice to Holders will be given until at least 30
days after the Default occurs. The Company will notify the Trustee of
any uncured Event of Default within 10 days after any Responsible
Officer of the Company becomes aware of or receives actual notice of
the Event of Default.
(B) Authentication and Delivery of the New Senior Notes and the
Application of Proceeds Thereof.
A New Senior Note shall not be valid until authenticated by
the manual signature of the Trustee. The signature shall be conclusive evidence
that the New Senior Note has been authenticated and delivered under the Senior
Note Indenture. The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate the New Senior Notes. An authenticating agent may
authenticate the New Senior Notes whenever the Trustee may do so. Each reference
in the Senior Note Indenture to authentication by the Trustee includes
authentication by such agent. Notwithstanding the foregoing, if any New Senior
Note has been authenticated and delivered but never issued and sold by the
Company, and the Company shall deliver the New Senior Note to the Trustee for
cancellation, such New Senior Note will be deemed never to have been
authenticated and delivered and will not be entitled to the benefits of the
Senior Note Indenture.
There will be no proceeds from the issuance of the New Senior
Notes because the New Senior Notes will be issued as part of an exchange for the
cancellation of the Company's Senior Debt Claims (as defined in the Plan of
Reorganization).
(C) Release of Property Subject to the Lien of the Senior Note
Indenture.
The Company's obligations under the New Senior Notes issued
under the Senior Note Indenture are secured by liens on, and security interests
in, on the assets of the Company and certain of its Subsidiaries. Pursuant to
the terms and conditions of the First Supplemental Indenture and of the Second
Supplemental Indenture, the Company and its Subsidiaries may, without requesting
the consent of the Trustee or the holders of New Senior Notes, (a) sell used,
worn out or surplus equipment in the ordinary course of business and (b)
consummate sales, contributions and transfers of Receivables pursuant to any
Working Capital Facility. The New Senior Notes are subject to subordination in
favor of the Working Capital Facility.
Subject to applicable law, the release of any Company
Collateral or Subsidiary Collateral from Liens created by the Collateral
Documents or the release of, in whole or in part, the Liens created by the
Collateral Documents, will not be deemed to impair the Collateral Documents in
contravention of the Senior Note Indenture if and to the extent the Company
Collateral, Subsidiary Collateral or Liens are released pursuant to, and in
accordance with, the applicable Collateral Documents or pursuant to, and in
accordance with, the terms of the Senior Note Indenture. To the extent
applicable, without limitation, the Company and the Subsidiaries of the Company
party to the Subsidiaries Guaranty Agreement (the "Subsidiary Guarantors") shall
cause Section 314(d) of the Act, relating to the release of property or
securities from the Liens of the Collateral Documents, to be complied with.
(D) Satisfaction and Discharge.
The obligations of the Company under the New Senior Notes and
the Senior Note Indenture will terminate (except for certain obligations of the
Company to indemnify the Trustee and the Authenticating Agent under certain
circumstances, and certain obligations with respect to unclaimed funds) when (i)
all outstanding New Senior Notes theretofore authenticated and delivered (other
than New Senior Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 of the Senior Note Indenture)
have been delivered to the Trustee for cancellation, (ii) the Company has paid
or caused to be paid all other sums payable by it, and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent specified by the Senior Note
Indenture relating to the satisfaction and discharge of the Senior Note
Indenture have been complied with.
(E) Evidence as to Compliance with Conditions and Covenants.
The Company is required to furnish the Trustee, within 120
days after the end of each fiscal year of the Company, an Officers' Certificate
complying with Section 314(a)(4) of the Trust Indenture Act and stating whether
or not the signers know of any Default that occurred during such fiscal year. If
they do, the Officers' Certificate shall describe the Default and its status.
Such compliance shall be determined without regard to periods of grace or notice
requirements.
The Company is also required to deliver to the Trustee an
Officers' Certificate promptly upon becoming aware of any Event of Default or a
Default which could result in an Event of Default described in clause (vi) or
clause (vii) of Section (A) above and which Officer's Certificate will specify
such Default or Event of Default.
9. OTHER OBLIGORS. Give the name and complete mailing address of any
person, other than the applicant, who is an obligor upon the indenture
securities.
The Subsidiaries of the Company are guaranteeing the
obligations of the Company under the Senior Note Indenture pursuant to the
Subsidiaries Guaranty Agreement and are pledging their assets to secure their
obligations thereunder pursuant to the Subsidiaries Security Agreement.
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for
qualification comprises:
(a) Pursuant to Rule 309(a) of Regulation S-T, requirements as to
sequential numbering shall not apply to this electronic format document.
(b) The statement of eligibility and qualification of each trustee
under the indenture or to be qualified (previously filed).
(c) The following Exhibits in addition to those filed as a part of the
statement of eligibility and qualification of each trustee.
*Exhibit T3A. Certificate of Incorporation of the Company,
incorporated by reference to Exhibit 3A to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (Sec File No. 0-10176). The
Certificate of Incorporation will be amended and
restated in connection with the Plan of
Reorganization. The form of Amended and Restated
Certificate of Incorporation of the Company is
attached as Exhibit I to the Disclosure Statement
(and is filed as Exhibit T3E14 to this Form T-3).
*Exhibit T3B. By-Laws of the Company, incorporated by
reference to Exhibit 3B to the Company's Form 10
filed February 1, 1989 (Sec File No. 0-10176). The
By-Laws will be amended and restated in connection
with the Plan of Reorganization. The form of Restated
By-Laws of the Company is attached as Exhibit I to
the Disclosure Statement (and is filed as Exhibit
T3E14 to this Form T-3).
Exhibit T3C1. Form of the New Senior Note Indenture between
the Company and Norwest Bank Minnesota, National
Association, as trustee.
Exhibit T3C2 Form of Supplemental Indentures with respect to
the New Senior Notes between the Company and Norwest
Bank Minnesota, National Association, as trustee.
Exhibit T3D. Not applicable.
*Exhibit T3E1. Order Governing Plan Confirmation Hearing of
Mercury Finance Company.
Exhibit T3E2. [Intentionally Omitted]
*Exhibit T3E3. Proof of Claim Form.
Exhibit T3E4. Notice of Hearing to Consider Confirmation of
Mercury Finance Company's Second Amended Plan of
Reorganization and Deadline for Filing Objections.
Exhibit T3E5. Second Amended Disclosure Statement with
respect to the Plan of Reorganization dated as of
December 30, 1998 (the "Disclosure Statement"). The
Exhibits to the Disclosure Statement are filed as
separate Exhibits to this Form T-3.
Exhibit T3E6. Mercury Finance Company Second Amended Plan of
Reorganization dated as of December 30, 1998 (Exhibit
A to the Disclosure Statement).
Exhibit T3E7. Form of the Supplemental New Senior Note
Indentures between the Company and Norwest Bank
Minnesota, National Association, as trustee (Exhibit
B to the Disclosure Statement). See Exhibit T3C2
above.
Exhibit T3E8. Form of the New Senior Note Indenture between
the Company and Norwest Bank Minnesota, National
Association, as trustee (Exhibit C to the Disclosure
Statement). See Exhibit T3C1 above.
*Exhibit T3E9. Form of Collateral Documents for the New Senior
Notes (Exhibit D to the Disclosure Statement).
Exhibit T3E10 Form of Supplemental Subordinated Note
Indenture between the Company and Norwest Bank
Minnesota, National Association, as trustee (Exhibit
E to the Disclosure Statement).
Exhibit T3E11. Form of the Subordinated Note Indenture
between the Company and Norwest Bank Minnesota,
National Association, as trustee (Exhibit F to the
Disclosure Statement).
*Exhibit T3E12. Form of Registration Rights Agreement among
the Company and the persons identified on Schedule 1
therein (Exhibit G to the Disclosure Statement).
Exhibit T3E13. Form of Warrant Agreement between the Company
and Harris Trust and Savings Bank, as trustee
(Exhibit H to the Disclosure Statement).
*Exhibit T3E14. Form of the Charter and Bylaws of the Company
upon the effectiveness of the Plan of Reorganization
(Exhibit I to the Disclosure Statement).
Exhibit T3E15. [Intentionally Omitted]
Exhibit T3E16. Fairness Opinion of Investment Bank (Exhibit K
to the Disclosure Statement).
*Exhibit T3E17. Agreement dated May 14, 1998 among the Company
and certain creditors of the Company (Exhibit L to
the Disclosure Statement), incorporated by reference
to the Company's Form 8-K filed with the Securities
and Exchange Commission on May 15, 1998 (Sec File No.
0-10176).
Exhibit T3E18. Projected Financial Information of the Company
(Exhibit M to the Disclosure Statement).
*Exhibit T3E19. The Company's Annual Report on Form 10-K for
the year ended December 31, 1997; the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998; the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998
(Exhibit N to the Disclosure Statement); the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, all incorporated
herein by reference (Sec File No.
0-10176).
Exhibit T3E20. Liquidation Analysis of the Company (Exhibit O
to the Disclosure Statement).
Exhibit T3E21. Forms of Ballots for accepting or rejecting
the Plan of Reorganization.
Exhibit T3E22. [Intentionally Omitted].
*Exhibit T3E23. Exhibit Q to the Disclosure Statement
(Certificate of Incorporation and Bylaws of the
Company). See Exhibits T3A and T3B above.
*Exhibit T3E24. Form of Indemnification Agreement for certain
officers and directors of the Company (Exhibit R to
the Disclosure Statement).
Exhibit T3E25. Monthly Operating Report of the Company
(Exhibit S to the Disclosure Statement).
Exhibit T3E26 Consulting Agreement dated November 5, 1998
between the Company and Edward G. Harshfield. Form of
Employment Agreement between the Company and Edward
G. Harshfield to be executed on the Effective Date.
Exhibit T3E27 Notice of Pendency of Class Action, Proposed
Partial Settlement of Class Action, and Settlement
Hearing regarding Minnesota State Board of
Investment, Jay Levin, et. al. vs. Mercury Finance
Company (Civ. Act. No. 97 C 3035); James Feree, on
behalf of Himself and All Others Similarly Situated
vs. Mercury Finance Company et al. (Civ. Can. No. 97
C 245); In re Mercury Finance Company, Debtor (Case
No. 98 C 8246), Official Committee of Securities
Claimants Appointed in the Chapter 11 Case of Mercury
Finance Company v. Cerbeus Partners, L.P. (Adv. Pro
No. 98 A 1580).
Exhibit T3E28 Class 7B Liquidating Trust Agreement.
Exhibit T3F. See Cross Reference Sheet showing the location
in the New Senior Note Indenture of the provisions
inserted therein pursuant to Section 310 through
318(a), inclusive, of the Trust Indenture Act of 1939
(included in Exhibit T3C1 hereof).
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Company, Mercury Finance Company, a corporation organized and existing under the
laws of Delaware, has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, and its seal to be hereunto affixed
and attested, all in the city of Chicago, and State of Illinois, on the 17th day
of March, 1999.
MERCURY FINANCE COMPANY
Attest: By: /s/ William Brandt, Jr.
President and Chief Executive Officer
Attest: By: /s/ Patrick O'Malley
Chief Accounting Officer
Mercury Finance Company
and
Norwest Bank Minnesota, National Association,
Trustee
-----------------------
INDENTURE
Dated as of ______________, 1999
-----------------------
SENIOR SECURED NOTES
SENIOR SECURED NOTES
CROSS REFERENCE SHEET*
This Cross Reference Sheet
shows the location in the Indenture
of the provisions inserted pursuant
to Sections 310 - 318(a),
inclusive, of the Trust Indenture Act of 1939, as amended.
Trust Indenture Act Sections of Indenture
Section 310(a)(1) ....................................... 10.08
(a)(2) ....................................... 10.08
(a)(3) ....................................... Inapplicable
(a)(4) ....................................... Inapplicable
(a)(5) ....................................... 10.08
(b) ....................................... 10.07
(c) ....................................... Inapplicable
Section 311(a) ....................................... 10.12
(b) ....................................... 10.12
(c) ....................................... Inapplicable
Section 312(a) ....................................... 8.01, 8.02
(b) ....................................... 8.02
(c) ....................................... 8.02
Section 313(a) ....................................... 8.03
(b) ....................................... 8.03
(c) ....................................... 8.03
(d) ....................................... 8.03
Section 314(a) ....................................... 8.04
(a)(4) ....................................... 7.07
(b) ....................................... 5.02
(c)(1) ....................................... 14.05
(c)(2) ....................................... 14.05
(c)(3) ....................................... Inapplicable
(d) ....................................... 5.03
(e) ....................................... 14.05
(f) ....................................... Inapplicable
Section 315(a) ....................................... 10.01
(b) ....................................... 9.08
(c) ....................................... 10.01
(d) ....................................... 10.01, 10.02
(e) ....................................... 9.07
Section 316(a)(1)(A)...................................... 9.01, 9.06
(a)(1)(B) ....................................... 9.01
(a)(2) ....................................... Inapplicable
(b) ....................................... 9.04, 9.09
(c) ....................................... 14.11
Section 317(a)(1) ....................................... 9.02
(a)(2) ....................................... 9.11
(b) ....................................... 7.03
Section 318(a) ....................................... 14.08
........................................................
* The Cross Reference Sheet is not part of the Indenture.
Table of Contents*
Recitals 1
ARTICLE I. Definitions......................................................1
Section 1.01. Certain Terms Defined.................................1
Act ...................................................
Affiliate..................................................2
Authenticating Agent.......................................2
Board of Directors.........................................2
Board Resolution...........................................2
Business Day...............................................2
Capital Lease..............................................2
Capital Lease Obligations..................................2
Collateral Security Documents..............................3
Commission.................................................3
Common Stock...............................................3
Company 3
Company Request or Company Order...........................3
Corporate Trust Office.....................................4
Covenant Defeasance........................................4
Default 4
Defaulted Interest.........................................4
Defeasance.................................................4
Defeasible Series..........................................4
Depositary.................................................4
Event of Default...........................................4
Exchange Act...............................................5
GAAP ..................................................5
Global Security............................................5
Holder ..................................................5
Indebtedness...............................................5
Indenture..................................................6
Interest ..................................................6
Interest Payment Date......................................6
Material Adverse Effect....................................6
Maturity 7
Notice of Default..........................................7
Officer's Certificate......................................7
Opinion of Counsel.........................................7
Original Issue Discount Security...........................7
Outstanding................................................7
Paying Agent...............................................8
Person ..................................................8
Place of Payment...........................................8
Predecessor Security.......................................8
Redemption Date............................................9
Redemption Price...........................................9
Regular Record Date........................................9
Responsible Officer........................................9
Securities.................................................9
Security Register and Security Registrar..................10
Special Record Date.......................................10
Stated Maturity...........................................10
Subsidiary................................................10
Trust Indenture Act.......................................11
Trustee 11
U.S. Government Obligation................................11
Vice President............................................11
Working Capital Facility..................................11
ARTICLE II. THE SECURITIES.................................................12
Section 2.01. Designation and Amount of Securities.................12
Section 2.02. Form of Securities and Trustee's Certificate of
Authentication.......................................14
Section 2.03. Date and Denominations...............................15
Section 2.04. Execution, Authentication, and Delivery of
Securities...........................................15
Section 2.05. Registration of Transfer and Exchange................16
Section 2.06. Temporary Securities.................................18
Section 2.07. Mutilated, Destroyed, Lost, and Stolen Securities....19
Section 2.08. Cancellation of Surrendered Securities...............19
Section 2.09. Payment of Interest; Interest Rights Preserved.......20
Section 2.10. Persons Deemed Owners................................21
Section 2.11. Computation of Interest..............................21
Section 2.12. CUSIP Numbers........................................22
ARTICLE III. REDEMPTION OF SECURITIES......................................22
Section 3.01. Applicability of Article.............................22
Section 3.02. Election to Redeem; Notice to Trustee................22
Section 3.03. Deposit of Redemption Price..........................23
Section 3.04. Securities Payable on Redemption Date................23
Section 3.05. Securities Redeemed in Part..........................24
ARTICLE IV. SINKING FUNDS..................................................24
Section 4.01. Applicability of Article.............................24
Section 4.02. Satisfaction of Sinking Fund Payments With
Securities...........................................24
Section 4.03. Redemption of Securities for Sinking Fund............25
ARTICLE V. SECURITY........................................................25
Section 5.01. Security Interest....................................25
Section 5.02. Recording of Security Interests; Opinions of
Counsel..............................................26
Section 5.03. Release of Collateral................................27
Section 5.04. Release upon Defeasance or Release of Company's
Obligations..........................................28
Section 5.05. Reliance on Opinion of Counsel.......................28
Section 5.06. Payment of Expenses..................................28
Section 5.07. Trustee's Duties.....................................28
ARTICLE VI. DEFEASANCE AND COVENANT DEFEASANCE.............................29
Section 6.01. Company's Option to Effect Defeasance or Covenant
Defeasance...........................................29
Section 6.02. Defeasance and Discharge.............................29
Section 6.03. Covenant Defeasance..................................30
Section 6.04. Conditions to Defeasance or Covenant Defeasance......30
Section 6.05. Deposited Money and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous Provisions.....32
Section 6.06. Reinstatement........................................33
ARTICLE VII. PARTICULAR COVENANTS OF THE COMPANY...........................33
Section 7.01. Payment of Principal, Premium, and Interest on
Securities...........................................33
Section 7.02. Maintenance of Office or Agency......................34
Section 7.03. Money for Securities Payments to be Held in Trust....34
Section 7.04. Payment of Taxes and Other Claims....................35
Section 7.05. Existence............................................36
Section 7.06. Compliance with Laws.................................36
Section 7.07. Statement by Officers as to Default..................36
Section 7.08. Waiver of Certain Covenants..........................36
Section 7.09. Calculation of Original Issue Discount...............37
ARTICLE VIII. SECURITIES HOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE......................................................37
Section 8.01. Company to Furnish Trustee Names and Addresses of
Holders..............................................37
Section 8.02. Preservation of Information; Communication to
Holders..............................................37
Section 8.03. Reports by Trustee...................................38
Section 8.04. Reports by Company...................................38
ARTICLE IX. DEFAULT........................................................38
Section 9.01. Event of Default.....................................38
Section 9.02. Covenant of Company to Pay to Trustee Whole Amount
Due on Securities on Default in Payment of Interest
or Principal; Suits for Enforcement by Trustee.......42
Section 9.03. Application of Money Collected by Trustee............43
Section 9.04. Limitation on Suits by Holders of Securities.........44
Section 9.05. Rights and Remedies Cumulative; Delay or Omission in
Exercise of Rights not a Waiver of Event of Default..44
Section 9.06. Rights of Holders of Majority in Principal Amount of
Outstanding Securities to Direct Trustee.............45
Section 9.07. Requirement of an Undertaking to Pay Costs in
Certain Suits Under the Indenture or Against the
Trustee..............................................45
Section 9.08. Notice of Defaults...................................45
Section 9.09. Unconditional Right of Holders to Receive
Principal, Premium, and Interest.....................45
Section 9.10. Restoration of Rights and Remedies...................46
Section 9.11. Trustee May File Proofs of Claims....................46
ARTICLE X SUBORDINATION OF SECURITIES......................................47
Section 10.01 Securities Subordinate to Working Capital Facility
Indebtedness.........................................47
Section 10.02 Payment Over of Proceeds Upon Dissolution, etc.......47
Section 10.03 Payment Permitted....................................47
Section 10.03 Payment Permitted....................................48
Section 10.05 Provisions Solely to Define Relative Rights..........48
Section 10.05 Provisions Solely to Define Relative Rights..........49
ARTICLE XI. CONCERNING THE TRUSTEE.........................................49
Section 11.01. Certain Duties and Responsibilities.................49
Section 11.02. Certain Rights of Trustee...........................50
Section 11.03. Not Responsible for Recitals or Issuance of
Securities..........................................50
Section 11.04. May Hold Securities.................................51
Section 11.05. Money Held in Trust.................................51
Section 11.06. Compensation and Reimbursement......................51
Section 11.07. Disqualification; Conflicting Interests.............52
Section 11.08. Corporate Trustee Required Eligibility..............52
Section 11.09. Resignation and Removal; Appointment of Successor...52
Section 11.10. Acceptance of Appointment by Successor..............54
Section 11.11. Merger, Conversion, Consolidation, or Succession to
Business............................................55
Section 11.12. Preferential Collection of Claims Against Company...55
Section 11.13. Appointment of Authenticating Agent.................56
ARTICLE XII. SUPPLEMENTAL INDENTURES AND CERTAIN ACTIONS...................57
Section 12.01. Purposes for Which Supplemental Indentures May Be
Entered Into Without Consent of Holders.............57
Section 12.02. Modification of Indenture With Consent of Holders
of at Least a Majority in Principal Amount of
Outstanding Securities..............................58
Section 12.03. Execution of Supplemental Indentures................59
Section 12.04. Effect of Supplemental Indentures...................59
Section 12.05. Conformity with Trust Indenture Act.................60
Section 12.06. Reference in Securities to Supplemental Indentures..60
ARTICLE XIII. CONSOLIDATION, MERGER, SALE, OR TRANSFER.....................60
Section 13.01. Consolidations and Mergers of Company and Sales
Permitted Only on Certain Terms.....................60
ARTICLE XIV. SATISFACTION AND DISCHARGE OF INDENTURE.......................61
Section 14.01. Satisfaction and Discharge of Indenture.............61
Section 14.02. Application of Trust Money..........................62
ARTICLE XV. MISCELLANEOUS PROVISIONS.......................................62
Section 15.01. Successors and Assigns of Company Bound by
Indenture...........................................62
Section 15.02. Service of Required Notice to Trustee and Company...62
Section 15.03. Service of Required Notice to Holders; Waiver.......62
Section 15.04. Indenture and Securities to be Construed in
Accordance with the Laws of the State of New York...63
Section 15.05. Compliance Certificates and Opinions................63
Section 15.06. Form of Documents Delivered to Trustee..............63
Section 15.07. Payments Due on Non-Business Days...................64
Section 15.08. Provisions Required by Trust Indenture Act to
Control.............................................64
Section 15.09. Invalidity of Particular Provisions.................64
Section 15.10. Indenture May be Executed In Counterparts...........64
Section 15.11. Acts of Holders; Record Dates.......................64
Section 15.12. Effect of Headings and Table of Contents............67
Section 15.13. Benefits of Indenture...............................67
This INDENTURE, dated as of ___________ __, 1999, between
Mercury Finance Company, a corporation duly organized and existing under the
laws of the State of Delaware (the "Company"), and Norwest Bank Minnesota,
National Association, a U.S. national banking association, as Trustee (the
"Trustee").
RECITALS
A. The Company has duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time of its senior
secured notes (the "Securities"), to be issued in one or more series as in this
Indenture provided.
B. All acts and things necessary to make the Securities, when
the Securities have been executed by the Company and authenticated by the
Trustee and delivered as provided in this Indenture, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
indenture and agreement according to its terms, have been done and performed,
and the execution and delivery by the Company of this Indenture and the issue
hereunder of the Securities have in all respects been duly authorized; and the
Company, in the exercise of legal right and power in it vested, is executing and
delivering this Indenture and proposes to make, execute, issue and deliver the
Securities.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the
Securities are authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Securities by the Holders
thereof, it is mutually agreed, for the equal and proportionate benefit of the
respective Holders from time to time of the Securities or of a series thereof,
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. CERTAIN TERMS DEFINED
(a) The terms defined in this Section 1.01 for all purposes of
this Indenture and of any indenture supplemental hereto (except as herein or
therein otherwise expressly provided or unless the context of this Indenture or
any indenture supplemental hereto otherwise requires) have the respective
meanings specified in this Section 1.01. All other terms used in this Indenture
that are defined in the Trust Indenture Act, either directly or by reference
therein (except as herein otherwise expressly provided or unless the context of
this Indenture otherwise requires), have the respective meanings assigned to
such terms in the Trust Indenture Act as in force at the date of original
execution of this Indenture.
Act:
The term "Act," when used with respect to any Holder, has the
meaning set forth in Section 15.11.
Affiliate:
The term "Affiliate" means, with respect to a particular
Person, any Person that, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, control of a Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
Authenticating Agent:
The term "Authenticating Agent" means any Person authorized by
the Trustee pursuant to Section 11.13 to act on behalf of the Trustee to
authenticate Securities of one or more series.
Board of Directors:
The term "Board of Directors" means the Board of Directors of
the Company or any duly authorized committee of such Board.
Board Resolution:
The term "Board Resolution" means a copy of a resolution
delivered to the Trustee and certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification.
Business Day:
The term "Business Day," when used with respect to any Place
of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in that Place of Payment are authorized
or required by law or executive order to close.
Capital Lease:
The term "Capital Lease" means, with respect to any Person,
any lease of property (whether real, personal, or mixed) by such Person or any
of its Subsidiaries as lessee that would be capitalized on a balance sheet of
such Person or any of its Subsidiaries prepared in conformity with GAAP, other
than, in the case of such Person or any of its Subsidiaries, any such lease
under which such Person or any of its Subsidiaries is the lessor.
Capital Lease Obligations:
The term "Capital Lease Obligations" means, with respect to
any Person, the capitalized amount of all obligations of such Person and its
Subsidiaries under Capital Leases, as determined on a consolidated basis in
conformity with GAAP.
Collateral Security Documents:
The term "Collateral Security Documents" has the meaning set forth in
Section 5.01(a).
Commission:
The term "Commission" means the Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
Common Stock:
The term "Common Stock" means the common stock of the Company.
Company:
The term "Company" means Mercury Finance Company, a Delaware
corporation, until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" will mean such
successor Person.
Company Collateral:
The term "Company Collateral" means, collectively, (i) "Collateral" as
such term is defined in the Company Pledge Agreement and (ii) "Collateral" as
such term is defined in the Company Security Agreement.
Company Pledge Agreement:
The term "Company Pledge Agreement" means the Company Pledge
Agreement dated as of ___________ __, 1999 between the Company and the Trustee,
as supplemented and amended from time to time in accordance with the terms
thereof.
Company Request or Company Order:
The term "Company Request" or "Company Order" means a written
request or order signed in the name of the Company by one of its Responsible
Officers and delivered to the Trustee.
Company Security Agreement:
The term "Company Security Agreement" means the Company
Security Agreement dated as of ___________ __, 1999 between the Company and the
Trustee, as supplemented and amended from time to time in accordance with the
terms thereof.
Company Security Documents:
The term "Company Security Documents" means the Company Pledge
Agreement and the Company Security Agreement.
Corporate Trust Office:
The term "Corporate Trust Office" means the office of the
Trustee at which at any particular time its corporate trust business is
principally administered, which on the date hereof is Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479.
Covenant Defeasance:
The term "Covenant Defeasance" has the meaning set forth in
Section 6.03.
Default:
The term "Default" means any event which, with notice or
passage of time or both, would constitute an Event of Default.
Defaulted Interest:
The term "Defaulted Interest" has the meaning set forth in
Section 2.09.
Defeasance:
The term "Defeasance" has the meaning set forth in Section
6.02.
Defeasible Series:
The term "Defeasible Series" has the meaning set forth in
Section 6.01.
Depositary:
The term "Depositary" means, with respect to Securities of any
series issuable in whole or in part in the form of one or more Global
Securities, a clearing agency registered under the Exchange Act that is
designated to act as Depositary for such Securities in accordance with Section
2.01.
Event of Default:
The term "Event of Default" has the meaning set forth in
Section 9.01(a).
Exchange Act:
The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as the same may be in effect from time to time.
Finance Business
The term "Finance Business" means the business of acquiring
and/or making loans (a majority of which shall be secured) and/or servicing
Receivables and the transaction of such other business as may be reasonably
incidental thereto including, without limitation, the leasing business and the
direct lending business including the sale of insurance as agent or broker.
GAAP:
The term "GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and The American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by any
successor entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination.
Global Security:
The term "Global Security" means a Security that evidences all
or part of the Securities of any series and is authenticated and delivered to,
and registered in the name of, the Depositary for such Securities or a nominee
thereof.
Holder:
The term "Holder" means a person in whose name a particular
Security is registered in the Security Register.
Indebtedness:
The term "Indebtedness" means, as applied to any Person,
without duplication, (a) indebtedness for borrowed money, all indebtedness
evidenced by notes, bonds, debentures or other evidences of indebtedness, and
all indebtedness under purchase money mortgages or other purchase money liens or
conditional sales or similar title retention agreements, in each case where such
indebtedness has been created, incurred, assumed or guaranteed by such Person or
where such Person is otherwise liable therefor, and (b) indebtedness for
borrowed money secured by any mortgage, pledge or other lien or encumbrance upon
property owned by such Person even though such Person has not assumed or become
liable for the payment of such indebtedness; provided, however, that
indebtedness of the type referred to in clause (b) above shall be included
within the definition of "Indebtedness" only to the extent of the lesser of: (i)
the amount of the underlying indebtedness referred to in the clause (b) above
and (ii) the aggregate value of the security for such indebtedness.
Indenture:
The term "Indenture" means this Indenture, as this Indenture
may be amended, supplemented or otherwise modified from time to time, including,
for all purposes of this Indenture 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. The term
"Indenture" will also include the terms of particular series of Securities
established in accordance with Section 2.01.
Indenture Obligations:
The term "Indenture Obligations" means the obligations of the
Company to pay principal of, premium, if any, and interest on, and other amounts
payable in respect of, the Securities at the Stated Maturity of each such
payment, and (to the extent permitted by applicable law) as provided in the
Securities, interest on overdue principal, if any, of, overdue interest, if any,
on, and other overdue amounts, if any, payable with respect to, the Securities
and the performance of all other obligations of the Company and its Subsidiaries
to the Trustee and the Holders (with respect to the Securities) under this
Indenture, the Securities and the Company Security Documents, according to the
terms thereunder, and all other amounts due or to become due under this
Indenture, the Company Security Documents and the Subsidiaries Security
Agreement.
Interest:
The term "interest," (i) when used with respect to an Original
Issue Discount Security, which by its terms bears interest only after Maturity,
means interest which accrues from and after and is payable after Maturity and
(ii) when used with respect to any Security, means the amount of all interest
accruing on such Security, including any default interest and any interest that
would have accrued after any Event of Default but for the occurrence of such
Event of Default, whether or not a claim for such interest would be otherwise
allowable under applicable law.
Interest Payment Date:
The term "Interest Payment Date," when used with respect to
any Security, means the Stated Maturity of an installment of interest on such
Security.
Material Adverse Effect:
The term "Material Adverse Effect" means a material adverse
effect on the business, assets, financial condition or results of operations of
the Company (taken together with its Subsidiaries as a whole).
Maturity:
The term "Maturity," when used with respect to any Security,
means the date on which the principal of that Security or an installment of
principal becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for redemption, or
otherwise.
Notice of Default:
The term "Notice of Default" means a written notice of the
kind set forth in Section 9.01(a)(iv).
Officer's Certificate:
The term "Officer's Certificate" means a certificate executed
on behalf of the Company by a Responsible Officer and delivered to the Trustee.
Opinion of Counsel:
The term "Opinion of Counsel" means an opinion in writing
signed by legal counsel, who, subject to any express provisions hereof, may be
an employee of or counsel to the Company or any Subsidiary, reasonably
acceptable to the Trustee.
Original Issue Discount Security:
The term "Original Issue Discount Security" means any Security
which provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 9.01(b).
Outstanding:
The term "Outstanding" means, when used with reference to
Securities as of a particular time, all Securities theretofore issued by the
Company and authenticated and delivered by the Trustee under this Indenture,
except (a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation, (b) Securities in respect of which (i) notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made, and (ii) money in the amount required
for the redemption thereof has been deposited with the Trustee or any Paying
Agent (other than the Company) in trust for the Holders of such Securities, (c)
Securities paid pursuant to Section 2.07(c), and (d) Securities in exchange for
or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of the Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent, or waiver hereunder, (x) the principal amount of an Original Issue
Discount Security that will be deemed to be Outstanding will be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof to such date pursuant to
Section 9.01(b), (y) the principal amount of a Security denominated in one or
more foreign currencies or currency units will be the U.S. dollar equivalent,
determined in the manner contemplated by Section 2.01 on the date of original
issuance of such Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent on the date of
original issuance of such Security of the amount determined as provided in
clause (i) above) of such Security, and (z) Securities owned by the Company or
any other obligor upon the Securities or any Affiliate of the Company or of such
other obligor will be disregarded and deemed not to be Outstanding, except that,
in determining whether the Trustee will be protected in relying upon any such
request, demand, authorization, direction, notice, consent, or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned will be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
Paying Agent:
The term "Paying Agent" means any Person authorized by the
Company to pay the principal of or any premium or interest on any Securities on
behalf of the Company.
Person:
The term "Person" means any individual, partnership,
corporation, limited liability company, limited liability partnership, joint
stock company, business trust, trust, unincorporated association, joint venture,
or other entity, or a governmental or political subdivision or agency thereof.
Place of Payment:
The term "Place of Payment," when used with respect to the
Securities of any series, means the place or places for the payment of the
principal of and any premium and interest on the Securities of that series
established in accordance with Section 2.01.
Predecessor Security:
The term "Predecessor Security," when used with respect to any
particular Security, means every previous Security evidencing all or a portion
of the same debt as that evidenced by such Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section 2.07 in
exchange for or in lieu of a mutilated, destroyed, lost, or stolen Security will
be deemed to evidence the same debt as the mutilated, destroyed, lost, or stolen
Security.
Receivables:
The term "Receivables" means (i) consumer installment sale
contracts and loans evidenced by promissory notes secured by new and used
automobiles and light trucks, (ii) other consumer installment sale contracts or
lease contracts and (iii) loans secured by residential mortgages, in the case of
each of the clauses (i), (ii) and (iii), that are purchased or originated in the
ordinary course of business by the Company or any Subsidiary of the Company.
Redemption Date:
The term "Redemption Date," when used with respect to any
Security to be redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
Redemption Price:
The term "Redemption Price," when used with respect to any
Security to be redeemed, means the price (including premium, if any) at which it
is to be redeemed pursuant to this Indenture.
Regular Record Date:
The term "Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means the date established
for that purpose in accordance with Section 2.01.
Responsible Officer:
The term "Responsible Officer," when used (a) with respect to
the Company, means the Chief Executive Officer, the President, the Chief
Financial Officer, the Treasurer or the Secretary of the Company and (b) with
respect to the Trustee, means any Vice President, any Assistant Vice President,
any Assistant Secretary, any Assistant Treasurer, any trust officer or assistant
trust officer, or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time are such officers, respectively, or to whom any corporate trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
Securities:
The term "Securities" has the meaning set forth in the first
recital of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture.
Security Interest:
The term "Security Interest" means the security interest in
the Company Collateral and the Subsidiaries Collateral, including the priority
thereof, created by the Collateral Security Documents in favor of the Trustee
for the benefit of the Holders of the Securities issued hereunder.
Security Register and Security Registrar:
The terms "Security Register" and "Security Registrar" have
the respective meanings set forth in Section 2.05.
Special Record Date:
The term "Special Record Date" for the payment of any
Defaulted Interest means a date fixed by the Trustee pursuant to Section 2.09.
Stated Maturity:
The term "Stated Maturity," when used with respect to any
Security, any installment of interest thereon, or any other amount payable under
this Indenture or the Securities, means the date specified in this Indenture or
such Security as the regularly scheduled date on which the principal of such
Security, such installment of interest, or such other amount, is due and
payable.
Subsidiaries Collateral:
The term "Subsidiaries Collateral" has the meaning assigned to
the term "Collateral" in the Subsidiaries Security Agreement.
Subsidiaries Guaranty Agreement:
The term "Subsidiaries Guaranty Agreement" means the
Subsidiaries Guaranty Agreement dated as of ___________ __, 1999 made by each
Subsidiary of the Company in favor of the Trustee for the benefit of the Holders
as it may be supplemented and amended from time to time in accordance with the
terms thereof.
Subsidiaries Security Agreement:
The term "Subsidiaries Security Agreement" means the
Subsidiaries Security Agreement dated as of ____________ __, 1999 between each
Subsidiary and the Trustee.
Subsidiary:
The term "Subsidiary" means, as applied with respect to any
Person, any corporation, partnership, or other business entity of which, in the
case of a corporation, more than 50% of the issued and outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation has or might have voting power upon the
occurrence of any contingency), or, in the case of any partnership or other
legal entity, more than 50% of the ordinary equity capital interests, is at the
time directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries, or by one or more of such Person's
other Subsidiaries. Unless the context of this Indenture or any indenture
supplemental hereto otherwise expressly requires, the term "Subsidiary" shall
refer to a Subsidiary of the Company.
Trust Indenture Act:
The term "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended, 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.
Trustee:
The term "Trustee" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture and,
thereafter, "Trustee" will mean or include each Person who is then a Trustee
hereunder, and if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series will mean each Trustee with
respect to Securities of that series.
U.S. Government Obligation:
The term "U.S. Government Obligation" means (a) any security
that is (i) a direct obligation of the United States of America for the payment
of which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof and (b) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended) as custodian with respect to any U.S. Government Obligation
specified in clause (a), which U.S. Government Obligation is held by such
custodian for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal of or interest on any such U.S.
Government Obligation, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
Vice President:
The term "Vice President," when used with respect to the
Company or the Trustee, means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president."
Working Capital Facility:
The term "Working Capital Facility" means one or more funding
arrangements in an aggregate principal amount not to exceed at any one time $40
million with a financial institution or other lender or purchaser to finance or
refinance the purchase or origination of Receivables by the Company or any
Subsidiary or to otherwise provide funding for the general working capital needs
of the Company and its Subsidiaries in each case in the ordinary course of the
Finance Business.
(b) The words "Article" and "Section" refer to an Article and
Section, respectively, of this Indenture. The words "herein", "hereof," and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section, or other subdivision. Certain terms
used principally in Articles VI, VII, and X are defined in those Articles. Terms
in the singular include the plural and terms in the plural include the singular.
ARTICLE II. THE SECURITIES
SECTION 2.01. DESIGNATION AND AMOUNT OF SECURITIES
(a) The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is unlimited.
(b) The Securities may be issued in one or more series. There
will be established in or pursuant to a Board Resolution and, subject to Section
2.04, set forth or determined in the manner provided in an Officer's
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series: (i) the title of the Securities of
the series (which will distinguish the Securities of the series from Securities
of any other series); (ii) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in the exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.05, 2.06, 2.07, 3.05, or 12.06 and except for any
Securities which, pursuant to Section 2.04, are deemed never to have been
authenticated and delivered hereunder); (iii) the Person to whom any interest on
a Security of the series will be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest; (iv) the date or dates
on which the principal of the Securities of the series is payable; (v) the rate
or rates at which the Securities of the series will bear interest, if any, the
date or dates from which such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, and the Regular Record Date for any
interest payable on any Interest Payment Date; (vi) the place or places where
the principal of and any premium and interest on Securities of the series will
be payable; (vii) the period or periods within which, the price or prices at
which, and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any, of the Company to redeem or purchase Securities of the
series pursuant to any sinking fund or analogous provisions or at the option of
a Holder thereof and the period or periods within which, the price or prices at
which, and the terms and conditions upon which Securities of the series will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (ix) if
other than denominations of $1,000 and integral multiples thereof, the
denominations in which Securities of the series will be issuable; (x) the
currency, currencies, or currency units in which payment of the principal of and
any premium and interest on any Securities of the series will be payable if
other than the currency of the United States of America and the manner of
determining the equivalent thereof in the currency of the United States of
America for purposes of the definition of "Outstanding" in Section 1.01; (xi) if
the amount of payments of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index, based
upon a formula, or in some other manner, the manner in which such amounts will
be determined; (xii) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the Company or a
Holder thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies, or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election is
made will be payable, and the periods within which and the terms and conditions
upon which such election is to be made; (xiii) if other than the principal
amount thereof, the portion of the principal amount of Securities of the series
which will be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 9.01(b); (xiv) if applicable, that the Securities of the
series will be subject to either or both of Defeasance or Covenant Defeasance as
provided in Article VI, provided that no series of Securities that is
convertible into Common Stock pursuant to Section 2.01(b)(xvi) or convertible
into or exchangeable for any other securities pursuant to Section 2.01(b)(xvii)
will be subject to Defeasance pursuant to Section 6.02; (xv) if and as
applicable, that the Securities of the series will be issuable in whole or in
part in the form of one or more Global Securities and, in such case, the
Depositary or Depositaries for such Global Security or Global Securities and any
circumstances other than those set forth in Section 2.05 in which any such
Global Security may be transferred to, and registered and exchanged for
Securities registered in the name of, a Person other than the Depositary for
such Global Security or a nominee thereof and in which any such transfer may be
registered; (xvi) the terms and conditions, if any, pursuant to which the
Securities are convertible into Common Stock; (xvii) the terms and conditions,
if any, pursuant to which the Securities are convertible into or exchangeable
for any other securities, including (without limitation) securities of Persons
other than the Company; (xviii) if and as applicable, that the Securities of the
series will be subordinate and subject in right of payment to the prior payment
of other Indebtedness; and (xix) any other terms of, or provisions, covenants,
rights or other matters applicable to, the series (which terms, provisions,
covenants, rights or other matters will not be inconsistent with the provisions
of this Indenture, except as permitted by Section 12.01(d)).
(c) All Securities of any one series will be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to the Board Resolution referred to below and (subject to Section
2.04) set forth or determined in the manner provided in the Officer's
Certificate referred to above or in any such indenture supplemental hereto.
(d) If any of the terms of the series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action will be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee concurrently with or prior to the delivery
of the Officer's Certificate setting forth the terms of the series.
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
(a) The Securities of each series will be in such form as may
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, and may have such letters, numbers, or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. If the form of Securities of
any series is established by action taken pursuant to a Board Resolution, a copy
of an appropriate record of such action will be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee concurrently
with or prior to the delivery of the Company Order contemplated by Section 2.04
for the authentication and delivery of such Securities.
(b) The definitive Securities will be printed, lithographed,
or engraved on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
(c) The Trustee's certificate of authentication will be in
substantially the following form:
[Form of Trustee's Certificate of Authentication for Securities]
Trustee's Certificate of Authentication
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
---------------------------------,
as Trustee
By:
Authorized Signatory
(d) Every Global Security authenticated and delivered
hereunder will bear a legend in substantially the following form:
[Form of Legend for Global Securities]
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee thereof. This Security may not be transferred to, or registered or
exchanged for Securities registered in the name of, any Person other than the
Depositary or a nominee thereof, and no such transfer may be registered, except
in the limited circumstances described in the Indenture. Every Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, this Security will be a Global Security subject to the
foregoing, except in such limited circumstances.
SECTION 2.03. DATE AND DENOMINATIONS
Each Security will be dated the date of its authentication.
The Securities of each series will be issuable only in registered form without
coupons in such denominations as may be specified in accordance with Section
2.01. In the absence of any such specified denomination with respect to the
Securities of any series, the Securities of such series will be issuable in
denominations of $1,000 and integral multiples thereof.
SECTION 2.04. EXECUTION, AUTHENTICATION, AND DELIVERY OF SECURITIES
(a) The Securities will be executed on behalf of the Company
by the Chief Executive Officer or the President of the Company and attested by
the Treasurer or the Secretary of the Company under its corporate seal. The
signature of any of these officers on the Securities may be manual or facsimile.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted, or otherwise reproduced on the Securities.
(b) Only such Securities bearing the Trustee's certificate of
authentication, signed manually by the Trustee, will be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such execution of
the certificate of authentication by the Trustee upon any Securities executed by
the Company will be conclusive evidence that the Securities so authenticated
have been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 2.08, for all
purposes of this Indenture such Security will be deemed never to have been
authenticated and delivered hereunder and will never be entitled to the benefits
of this Indenture.
(c) Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company will bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
(d) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order will authenticate and make such
Securities available for delivery. If the form or terms of the Securities of the
series have been established in or pursuant to one or more Board Resolutions as
permitted by Sections 2.01 and 2.02, in authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee will be entitled to receive, and (subject to
Section 11.01) will be fully protected in relying upon, an Opinion of Counsel
stating (i) if the form of such Securities has been established by or pursuant
to a Board Resolution as permitted by Section 2.02, that such form has been
established in conformity with the provisions of this Indenture, (ii) if the
terms of such Securities have been established by or pursuant to a Board
Resolution as permitted by Section 2.01, that such terms have been established
in conformity with the provisions of this Indenture, and (iii) that such
Securities, when authenticated and delivered by the Trustee and issued by the
Company in the manner and subject to any conditions specified in such Opinion of
Counsel, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
laws of general applicability relating to or affecting creditors' rights and by
general principles of equity.
(e) Notwithstanding the provisions of Sections 2.01 and
2.04(d), if all Securities of a series are not to be originally issued at one
time, it will not be necessary to deliver the Officer's Certificate otherwise
required pursuant to Section 2.01 or the Company Order and Opinion of Counsel
otherwise required pursuant to Section 2.04(d) at or prior to the time of
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
SECTION 2.05. REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Company will cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company will provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
(b) Upon surrender for registration of transfer of any
Security of any series at the office or agency in a Place of Payment for that
series, the Company will execute, and the Trustee will authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Securities of the same series, of any authorized denominations
and of a like aggregate principal amount and tenor.
(c) At the option of the Holder, Securities of any series may
be exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company will execute, and the
Trustee will authenticate and make available for delivery, the Securities which
the Holder making the exchange is entitled to receive.
(d) Every Security presented or surrendered for registration
of transfer or exchange will (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument or instruments of
transfer, in form reasonably satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing. No service charge will be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 2.06, 3.05, or 12.06 not involving any transfer.
The Company will not be required (i) to issue, register the transfer of, or
exchange Securities of any series during a period beginning at the opening of
business 15 calendar days before the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 3.02(c) and
ending at the close of business on the day of such mailing or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Securities to be redeemed in part, the
portion thereof not being redeemed.
(e) All Securities issued upon any registration of transfer or
exchange of Securities will be valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
(f) Notwithstanding any other provision in this Indenture, no
Global Security may be transferred to, or registered or exchanged for Securities
registered in the name of, any Person other than the Depositary for such Global
Security or any nominee thereof, and no such transfer may be registered, unless
(i) such Depositary (A) notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security or (B) ceases to be a clearing
agency registered under the Exchange Act, (ii) the Company executes and delivers
to the Trustee a Company Order that such Global Security shall be so
transferable, registrable, and exchangeable, and such transfers shall be
registrable, (iii) there shall have occurred and be continuing an Event of
Default with respect to the Securities evidenced by such Global Security or (iv)
there shall exist such other circumstances, if any, as have been specified for
this purpose in accordance with Section 2.01. Notwithstanding any other
provision in this Indenture, a Global Security to which the restriction set
forth in the preceding sentence shall have ceased to apply may be transferred
only to, and may be registered and exchanged for Securities registered only in
the name or names of, such Person or Persons as the Depositary for such Global
Security shall have directed and no transfer thereof other than such a transfer
may be registered. Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security to which the
restriction set forth in the first sentence of this Section 2.05(f) shall apply,
whether pursuant to this Section 2.05, Section 2.06, 2.07, 3.05, or 12.06 or
otherwise, will be authenticated and delivered in the form of, and will be, a
Global Security.
SECTION 2.06. TEMPORARY SECURITIES
Pending the preparation of definitive Securities of any
series, the Company may execute and register and upon Company Order the Trustee
will authenticate and make available for delivery temporary Securities (printed,
lithographed, or typewritten), of any authorized denomination, and substantially
in the form of the definitive Securities but with such omissions, insertions,
and variations as may be appropriate for temporary Securities, all as may be
determined by the officers executing such Securities as evidenced by their
execution of such Securities; provided, however, that the Company will use
reasonable efforts to have definitive Securities of that series available at the
times of any issuance of Securities under this Indenture. Every temporary
Security will be executed and registered by the Company and be authenticated by
the Trustee upon the same conditions and in substantially the same manner, and
with like effect, as the definitive Securities. The Company will execute and
register and furnish definitive Securities of such series as soon as practicable
and thereupon any or all temporary Securities of such series may be surrendered
in exchange therefor at the office or agency of the Company in the Place of
Payment for that series, and the Trustee will authenticate and make available
for delivery in exchange for such temporary Securities of such series one or
more definitive Securities of the same series, of any authorized denominations,
and of a like aggregate principal amount and tenor. Such exchange will be made
by the Company at its own expense and without any charge to the Holder therefor.
Until so exchanged, the temporary Securities of any series will be entitled to
the same benefits under this Indenture as definitive Securities of the same
series authenticated and delivered hereunder.
SECTION 2.07. MUTILATED, DESTROYED, LOST, AND STOLEN SECURITIES
(a) If any mutilated Security is surrendered to the Trustee,
the Company will execute and the Trustee will authenticate and make available
for delivery in exchange therefor a new Security of the same series and of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
(b) If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss, or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company will execute and the Trustee will authenticate
and make available for delivery, in lieu of any such destroyed, lost, or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
(c) In case any such mutilated, destroyed, lost, or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
(d) Upon the issuance of any new Security under this Section
2.07, 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.
(e) Every new Security of any series issued pursuant to this
Section 2.07 in exchange for any mutilated Security or in lieu of any destroyed,
lost, or stolen Security will constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost, or
stolen Security shall be at any time enforceable by anyone, and will be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Securities of that series duly issued hereunder.
(f) The provisions of this Section 2.07 are exclusive and will
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost, or stolen Securities.
SECTION 2.08. CANCELLATION OF SURRENDERED SECURITIES
All Securities surrendered for payment, redemption,
registration of transfer or exchange, or for credit against any sinking fund
payment will, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and will be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered will be promptly canceled by the Trustee. No Securities will be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 2.08, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee will be disposed of as directed by a
Company Order, provided, however, that the Trustee will not be required to
destroy canceled Securities except in accordance with its established policies.
SECTION 2.09. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED
(a) Except as otherwise provided in accordance with Section
2.01 with respect to any series of Securities, interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date will be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest.
(b) Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") will 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
together with interest thereon (to the extent permitted by law) at the rate of
interest applicable to such Security, at its election in each case, as provided
in clause (i) or (ii) below:
(i) The Company may elect to make payment of any
Defaulted Interest (and interest thereon, if any) to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
will be fixed in the following manner. The Company will notify the
Trustee in writing of the amount of Defaulted Interest (and interest
thereon, if any) proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company
will deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest (and
interest thereon, if any) or will 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 (and interest thereon, if
any) as in this clause (i) provided. Thereupon the Trustee will fix a
Special Record Date for the payment of such Defaulted Interest (and
interest thereon, if any) which will be not more than 15 calendar days
and not less than 10 calendar days prior to the date of the proposed
payment and not less than 10 calendar days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee will
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, will cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at such Holder's address as it appears in the
Security Register, not less than 10 calendar days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest
(and interest thereon, if any) and the Special Record Date therefor
having been so mailed, such Defaulted Interest will be paid to the
Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and will no longer be payable
pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted
Interest (and interest thereon, if any) on the Securities of any series
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and
upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause (ii), such manner of payment shall be deemed practicable by
the Trustee.
(c) Subject to the foregoing provisions of this Section 2.09,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security will carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 2.10. PERSONS DEEMED OWNERS
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee, and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and any
premium and (subject to Section 2.09) any interest on such Security and for all
other purposes whatsoever, whether or not such Security shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
will be affected by notice to the contrary.
SECTION 2.11. COMPUTATION OF INTEREST
Except as otherwise specified in accordance with Section 2.01
for Securities of any series, interest on the Securities of each series will be
computed on the basis of a 360-day year consisting of 12 30-day months.
SECTION 2.12. CUSIP NUMBERS
The Company, in issuing Securities of any series, may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee will use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice 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 a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption will
not be affected by any defect in or omission of such numbers. To the extent
applicable, the Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.
ARTICLE III. REDEMPTION OF SECURITIES
SECTION 3.01. APPLICABILITY OF ARTICLE
Securities of any series which are redeemable before their
Stated Maturity will be redeemable in accordance with their terms and (except as
otherwise specified in accordance with Section 2.01 for Securities of any
series) in accordance with this Article III.
SECTION 3.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE
(a) The election of the Company to redeem any Securities will
be evidenced by a Board Resolution. In case of any redemption at the election of
the Company, the Company will, at least 60 calendar 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, of the principal amount of
Securities of such series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Company will furnish the Trustee with an Officer's Certificate evidencing
compliance with such restriction.
(b) Notice of redemption of Securities to be redeemed at the
election of the Company will be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and will
be irrevocable. Notice of redemption will be given by mail, first-class postage
prepaid, not less than 30 or more than 60 calendar days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register. All notices of redemption will identify the Securities to
be redeemed (including the CUSIP numbers thereof, if applicable) and will state
(i) the Redemption Date, (ii) the Redemption Price, (iii) if less than all the
Outstanding Securities of any series are to be redeemed, the identification
(and, in the case of partial redemption of any Securities, the principal
amounts) of the particular Securities to be redeemed, (iv) that on the
Redemption Date the Redemption Price will become due and payable upon each such
Security to be redeemed and, if applicable, that interest thereon will cease to
accrue on and after said date, (v) the place or places where such Securities are
to be surrendered for payment of the Redemption Price, (vi) that the redemption
is for a sinking fund, if such is the case, and (vii) the specific provision of
this Indenture pursuant to which such Securities are to be redeemed.
(c) If less than all the Securities of any series are to be
redeemed, the particular Securities to be redeemed will be selected not more
than 60 calendar days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
such method as the Trustee may deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series. The Trustee
will promptly notify the Company in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
(d) For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities will
relate, in the case of any Securities redeemed or to be redeemed only in part,
to the portion of the principal amount of such Securities which has been or is
to be redeemed.
SECTION 3.03. DEPOSIT OF REDEMPTION PRICE
At or prior to 10:00 a.m., New York City time, on any
Redemption Date, the Company will 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 7.03) an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) any accrued interest on, all of the Securities that are to be
redeemed on that date.
SECTION 3.04. SECURITIES PAYABLE ON REDEMPTION DATE
(a) Notice of redemption having been given as aforesaid, the
Securities so to be redeemed will, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company defaults in the payment of the Redemption Price and accrued
interest) such Securities will cease to accrue interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security will
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified in
accordance with Section 2.01, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates in accordance with their terms
and the provisions of Section 2.09.
(b) If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and any premium will, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 3.05. SECURITIES REDEEMED IN PART
Any Security that is to be redeemed only in part will 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 will execute, and
the Trustee will authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities of the same
series and 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 Security so surrendered.
ARTICLE IV. SINKING FUNDS
SECTION 4.01. APPLICABILITY OF ARTICLE
The provisions of this Article IV will be applicable to any
sinking fund for the retirement of Securities of a series except as otherwise
specified in accordance with Section 2.01 for Securities of such series. The
minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." If provided for by the terms of Securities of any series, the
amount of any sinking fund payment may be subject to reduction as provided in
Section 4.02. Each sinking fund payment with respect to Securities of a
particular series will be applied to the redemption of Securities of such series
as provided for by the terms of Securities of such series.
SECTION 4.02. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES
The Company (a) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (b) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series, provided that such Securities have not been previously so credited. Such
Securities will be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such sinking fund payment will be reduced
accordingly.
SECTION 4.03. REDEMPTION OF SECURITIES FOR SINKING FUND
Not less than 60 calendar days prior to each sinking fund
payment date for any series of Securities, the Company will deliver to the
Trustee an Officer's Certificate specifying the amount of the next ensuing
sinking fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, that is to be satisfied by payment of cash and the
portion thereof, if any, that is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 4.02 and will also deliver to the
Trustee any Securities to be so delivered. Not less than 30 calendar days before
each such sinking fund payment date, the Trustee will select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 3.02(c) and cause notice of the redemption thereof to be given in the
name of and at the expense of the Company in the manner provided in Section
3.02(b). Such notice having been duly given, the redemption of such Securities
will be made upon the terms and in the manner stated in Sections 3.04 and 3.05.
ARTICLE V. SECURITY
SECTION 5.01. SECURITY INTEREST
(a) In order to secure the payment of the Indenture
Obligations, the Company and the Trustee have entered into the Company Security
Documents. In addition, the Subsidiaries of the Company have guaranteed the
payment of the Indenture Obligations pursuant to the Subsidiaries Guaranty
Agreement. Payment of amounts due by the Subsidiaries under the Subsidiaries
Guaranty Agreement is secured by the Subsidiaries Security Agreement entered
into by each Subsidiary and the Trustee. The Company Security Documents, the
Subsidiaries Guaranty Agreement and the Subsidiaries Security Agreement are
herein referred to collectively as the "Collateral Security Documents." The
Trustee and each Holder, by accepting Securities issued under this Indenture,
acknowledge the binding effect of the Collateral Security Documents as in effect
and in existence on the date hereof; provided, that in the event of a conflict
between the provisions of any of the Collateral Security Documents and the
provisions of the Trust Indenture Act, the provisions of the Trust Indenture Act
will control.
(b) The Trustee and each Holder, by accepting Securities
issued under this Indenture, acknowledge and agree that, as more fully set forth
in the Company Pledge Agreement, the Company Security Agreement, the
Subsidiaries Guaranty Agreement and the Subsidiaries Security Agreement, if the
Company or any Subsidiary enters into a Working Capital Facility, the rights of
any party lending money to the Company or a Subsidiary pursuant to such Working
Capital Facility, with respect to certain assets comprising a portion of the
Company Collateral or the Subsidiaries Collateral will be senior to those of the
Holders of Securities.
(c) The Company Collateral, and subject to subsection (b) of
this Section 5.01, the Subsidiaries Collateral, will be held for the equal and
ratable benefit and security of the Holders of Securities of each series issued
under this Indenture without preference, priority, or distinction of any thereof
over any other by reason of difference in time of issuance, sale, or otherwise,
and for the enforcement of the Indenture Obligations.
SECTION 5.02. RECORDING OF SECURITY INTERESTS; OPINIONS OF COUNSEL
(a) The Company and each Subsidiary, as applicable, has
executed, delivered, filed, and recorded or, as set forth on Schedule ___, will
execute, deliver, file, and record, all instruments and documents, and has done
or, as set forth on Schedule ___, will do all such acts and other things, at the
Company's or such Subsidiaries' expense, as applicable, as are necessary to
subject the Company Collateral and the Subsidiaries Collateral to the Security
Interest. The Company will, and will cause each Subsidiary, as applicable, to
execute, deliver, file and record all instruments and do all acts and other
things as may be reasonably necessary to perfect, maintain and protect the
Security Interest.
(b) In addition to its obligations under the Collateral
Security Documents, the Company will, and will cause each Subsidiary to, deliver
promptly after the execution and delivery of this Indenture, as contemplated in
Schedule ___, any other instrument of further assurance or amendment or waiver
of any provision of this Indenture or the Collateral Security Documents relating
to the lien and security interest in the Company Collateral and the Subsidiaries
Collateral for the benefit of the Holders of Securities, an Opinion of Counsel
in a form acceptable to the Trustee either (i) stating that, in the opinion of
such Counsel, this Indenture, the Collateral Security Documents, any financing
statements, any continuation statements, and any other instruments of further
assurance or amendment have been properly recorded, registered, and filed with
respect to such types of Company Collateral or Subsidiaries Collateral as to
which a lien and security interest may be perfected by such actions, and that
all such other acts and things have been done, to the extent necessary under
applicable law to perfect and make effective the Security Interest therein and
reciting the elements of such action in reasonable detail, and stating that, as
to the Collateral Security Documents, such recording, registrations and filing,
and such other acts and things are the only recordings, registrations and
filings, or other acts and things, necessary under applicable law to give notice
thereof and that no rerecordings, reregistrations, refilings, or other acts or
things, are necessary under applicable law to maintain such notice, further
stating that all financing statements and continuation statements have been
executed and filed that are necessary under applicable law fully to preserve and
protect the rights of the Holders of Securities and the Trustee hereunder and
under the Collateral Security Documents with respect to types of Company
Collateral or Subsidiary Collateral as to which a lien and security interest may
be perfected by such filing, or (ii) stating that, in the opinion of such
counsel, no such action is necessary under applicable law to perfect or make
effective the Security Interest. Any such opinion may be based upon reasonable
assumptions not inconsistent with the terms of this Indenture or the Collateral
Security Documents as to future matters and as to actions taken and to be taken
by the Company and any Subsidiary or any other Person (other than the Trustee),
and may set forth the reasons underlying such opinion.
(c) In addition to its obligations under the Collateral
Security Documents, the Company will furnish to the Trustee, within thirty
calendar days after ___________ __, in each year beginning with the year 2000,
an Opinion of Counsel (which may be an opinion of internal counsel), dated as of
such date, in a form acceptable to the Trustee, either (i) stating that, in the
opinion of such Counsel, such action has been taken with respect to the
recording, registering, filing, rerecording, reregistering, and refiling of the
Indenture, all supplemental indentures, the Collateral Security Documents,
financing statements, continuation statements, and all other instruments of
further assurance as is necessary under applicable law to maintain the Security
Interest and reciting the elements of such action in reasonable detail, and
stating that all financing statements and continuation statements have been
executed and filed and such other acts and things have been done that are
necessary under applicable law fully to preserve and protect the rights of the
Holders and the Trustee hereunder and under the Collateral Security Documents,
or (ii) stating that, in the opinion of such Counsel, no such action is
necessary under applicable law to maintain the Security Interest. Any such
opinion may be based upon reasonable assumptions not inconsistent with the terms
of this Indenture or the Collateral Security Documents as to future matters and
as to actions taken or to be taken by the Company, any Subsidiary or any other
Person (other than the Trustee), and may set forth the reasons underlying such
opinion.
SECTION 5.03. RELEASE OF COLLATERAL
In addition to its relative obligations under the Collateral
Security Documents, as a condition to any release of Company Collateral or
Subsidiaries Collateral, the Company will, and will cause each Subsidiary to,
deliver to the Trustee the certificate or opinion, if any, required by Section
314(d) of the Trust Indenture Act as to the fair value of any Company Collateral
or Subsidiaries Collateral to be released, dated as of a date not more than 60
calendar days prior to the date of release. Any release of Company Collateral or
Subsidiaries Collateral made in compliance with the provisions of a Company
Security Document or the Subsidiaries Security Agreement, as the case may be,
will be deemed not to impair the Security Interest in contravention of the
provisions of this Indenture.
SECTION 5.04. RELEASE UPON DEFEASANCE OR RELEASE OF COMPANY'S OBLIGATIONS
In the event that (a) the Company complies with Section 14.01
or (b) the Indenture Obligations have been terminated and there are no other
Indenture Obligations under the Collateral Security Documents that remain
Outstanding, the Trustee will, upon the request of the Company and on behalf of
the Holders of Securities issued hereunder, disclaim and give up any and all
rights it has in or to the Company Collateral and the Subsidiaries Collateral
and any rights it has under the Collateral Security Documents (excluding
unasserted indemnity claims thereunder), and the Trustee will not be deemed to
hold the Security Interest for the benefit of the Holders.
SECTION 5.05. RELIANCE ON OPINION OF COUNSEL
The Trustee will, before taking any action under this Article
V, be entitled to receive an Opinion of Counsel, stating the legal effect of
such action, and that such action will not be in contravention of the provisions
hereof or of the Collateral Security Documents. Any such opinion will be full
protection to the Trustee for any action taken or omitted to be taken in
reliance thereon.
SECTION 5.06. PAYMENT OF EXPENSES
On demand of the Trustee, the Company forthwith will pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
under this Indenture and all such sums will be a Lien upon the Company
Collateral and will be secured thereby.
SECTION 5.07. TRUSTEE'S DUTIES
(a) Subject to Section 5.01 and the provisions of the
Collateral Security Documents, the Trustee will have power to enter into any
agreement or take any action required by the Collateral Security Documents
pursuant to the terms thereof and to institute and to maintain such suits and
proceedings, to the extent permitted under the terms of the Collateral Security
Documents, as it may deem expedient to prevent any impairment of the Company
Collateral or the Subsidiaries Collateral by any acts which may be unlawful or
in violation of the Collateral Security Documents or this Indenture, including
the power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule, or order that may be unconstitutional or otherwise invalid or
if the enforcement of, or compliance with, such enactment, rule or order would
impair the Security Interest in contravention of this Indenture or be
prejudicial to the interests of the Holders of Securities issued hereunder or of
the Trustee.
(b) The powers conferred upon the Trustee by this Article V
are solely to protect the Security Interest and will not impose any duty upon
the Trustee to exercise any such powers except as expressly provided in this
Indenture. The Trustee will be under no duty to the Company or any Subsidiary
whatsoever to make or give any presentment, demand for performance, notice of
nonperformance, protest, notice of protest, notice of dishonor, or other notice
or demand in connection with any Company Collateral or Subsidiaries Collateral
or to take any steps necessary to preserve any rights against prior parties
except as expressly provided in this Indenture. The Trustee will not be liable
to the Company or any Subsidiary for failure to collect or realize upon any or
all of the Company Collateral or the Subsidiaries Collateral, or for any delay
in so doing, nor will the Trustee be under any duty to the Company or any
Subsidiary to take any action, whatsoever with regard thereto. The Trustee has
no duty to the Company or to the Holders to comply with any recording, filing,
or other legal requirements necessary to establish or maintain the validity,
priority, or enforceability of, or the Trustee's rights in or to, any of the
Company Collateral or Subsidiaries Collateral.
ARTICLE VI. DEFEASANCE AND COVENANT DEFEASANCE
SECTION 6.01. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE
The Company may elect, at its option by Board Resolution at
any time, to have either Section 6.02 or Section 6.03 applied to the Outstanding
Securities of any series designated pursuant to Section 2.01 as being defeasible
pursuant to this Article VI (hereinafter called "Defeasible Series"), upon
compliance with the conditions set forth below in this Article VI, provided that
Section 6.02 will not apply to any series of Securities that is convertible into
Common Stock pursuant to Section 2.01(b)(xvi) or convertible into or
exchangeable for any other securities pursuant to Section 2.01(b)(xvii).
SECTION 6.02. DEFEASANCE AND DISCHARGE
Upon the Company's exercise of the option provided in Section
6.01 to have this Section 6.02 applied to the Outstanding Securities of any
Defeasible Series and subject to the proviso to Section 6.01, the Company will
be deemed to have been discharged from its obligations with respect to the
Outstanding Securities of such series as provided in this Section 6.02 on and
after the date the conditions set forth in Section 6.04 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company will be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such series and to have satisfied
all its other obligations under the Securities of such series and this Indenture
insofar as the Securities of such series are concerned (and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging the same),
subject to the following which will survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Securities of such series to
receive, solely from the trust fund described in Section 6.04 and as more fully
set forth in Section 6.04, payments in respect of the principal of and any
premium and interest on such Securities of such series when payments are due,
(b) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 2.07, 7.02, 7.03, and 12.06, (c) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder, and (d) this Article
VI. Subject to compliance with this Article VI, the Company may exercise its
option provided in Section 6.01 to have this Section 6.02 applied to the
Outstanding Securities of any Defeasible Series notwithstanding the prior
exercise of its option provided in Section 6.01 to have Section 6.03 applied to
the Outstanding Securities of such series.
SECTION 6.03. COVENANT DEFEASANCE
Upon the Company's exercise of the option provided in Section
6.01 to have this Section 6.03 applied to the Outstanding Securities of any
Defeasible Series, (a) the Company will be released from its obligations under
Sections 7.04 through 7.06, inclusive, Section 13.01, and such provisions of any
indenture supplemental hereto as may be specified in such indenture supplemental
hereto, and (b) the occurrence of any event specified in Sections 9.01(a)(iii),
9.01(a)(iv) (with respect to any of Sections 7.04 through 7.06, inclusive,
Section 13.01, and such provisions of any Supplemental Indenture as may be
specified in such Supplemental Indenture), Sections 9.01(a)(v), 9.01(a)(vi), and
9.01(a)(ix) will be deemed not to be or result in an Event of Default, in each
case with respect to the Outstanding Securities of such series as provided in
this Section on and after the date the conditions set forth in Section 6.04 are
satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that the Company may omit to comply with and will have
no liability in respect of any term, condition, or limitation set forth in any
such specified Section or provision (to the extent so specified in the case of
Section 9.01(a)(iv)), whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or provision or by reason of any reference
in any such Section or provision to any other provision herein or in any other
document, but the remainder of this Indenture and the Securities of such series
will be unaffected thereby.
SECTION 6.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE
The following will be the conditions to application of either
Section 6.02 or Section 6.03 to the Outstanding Securities of any Defeasible
Series:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee that satisfies the
requirements contemplated by Section 11.08 and agrees to comply with
the provisions of this Article VI applicable to it) as trust funds in
trust for the benefit of the Holders of Outstanding Securities of such
series (i) money in an amount, or (ii) U.S. Government Obligations that
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, without
reinvestment, not later than one day before the due date of any
payment, money in an amount, or (iii) a combination thereof, in each
case sufficient to pay and discharge, and which will be applied by the
Trustee (or any such other qualifying trustee) to pay and discharge,
the principal of and any premium and interest on the Securities of such
series on the respective Stated Maturities or on any earlier date or
dates on which the Securities of such series shall be subject to
redemption and the Company shall have given the Trustee irrevocable
instructions satisfactory to the Trustee to give notice to the Holders
of the redemption of the Securities of such series, all in accordance
with the terms of this Indenture and the Securities of such series.
(b) In the case of an election under Section 6.02, the Company
shall have delivered to the Trustee an Opinion of Counsel (from a
counsel who shall not be an employee of the Company) to the effect that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) 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
shall confirm that, the Holders of the Outstanding Securities of such
series will not recognize gain or loss for federal income tax purposes
as a result of the deposit, Defeasance, and discharge to be effected
with respect to the Securities of such series and will be subject to
federal income tax on the same amount, in the same manner, and at the
same times as would be the case if such deposit, Defeasance, and
discharge were not to occur.
(c) In the case of an election under Section 6.03, the Company
shall have delivered to the Trustee an Opinion of Counsel (from a
counsel who shall not be an employee of the Company) to the effect that
the Holders of the Outstanding Securities of such series will not
recognize gain or loss for federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with respect to the
Securities of such series and will be subject to federal income tax on
the same amount, in the same manner, and at the same times as would be
the case if such deposit and Covenant Defeasance were not to occur.
(d) The Company shall have delivered to the Trustee an Opinion
of Counsel (from a counsel who shall not be an employee of the Company)
stating that the defeasance trust does not violate the Investment
Company Act of 1940.
(e) The Company shall have delivered to the Trustee the
opinion of a nationally recognized independent public accounting firm
certifying the sufficiency of the amount of the moneys, U.S. Government
Obligations, or a combination thereof, placed on deposit to pay,
without regard to any reinvestment, the principal of and any premium
and interest on the Securities on the Stated Maturity thereof or on any
earlier date on which the Securities shall be subject to redemption as
to which the Company has given irrevocable instructions satisfactory to
the Trustee to give notice to the Holders of the redemption of the
Securities of such series, all in accordance with the terms of this
Indenture and the Securities of such series.
(f) The Company shall have delivered to the Trustee an
Officer's Certificate (i) stating that the deposit was not made by the
Company with the intent of preferring the holders of the Securities
over the other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company
or others, and (ii) to the effect that the Securities of such series,
if then listed on any securities exchange, will not be delisted solely
as a result of such deposit.
(g) No Default or Event of Default shall have occurred and be
continuing at the time of such deposit or, with regard to any Event of
Default or any such event specified in Sections 9.01(a)(vii) and
(viii), at any time on or prior to the 124th calendar day after the
date of such deposit (it being understood that this condition will not
be deemed satisfied until after such 124th calendar day).
(h) Such Defeasance or Covenant Defeasance will not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(i) Such Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(j) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 6.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS
(a) Subject to the provisions of Section 7.03(e), all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section
6.05 and Section 6.06, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 6.04 in respect of the
Securities of any Defeasible Series will be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities of such series and
this Indenture, to the payment, either directly or through any such Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of Securities of such series, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.
(b) The Company will pay and indemnify the Trustee against any
tax, fee, or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 6.04 or the principal and interest
received in respect thereof other than any such tax, fee, or other charge that
by law is for the account of the Holders of Outstanding Securities.
(c) Notwithstanding anything in this Article VI to the
contrary, the Trustee will deliver or pay to the Company from time to time upon
a Company Request any money or U.S. Government Obligations held by it as
provided in Section 6.04 with respect to Securities of any Defeasible Series
that are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Defeasance or Covenant Defeasance with respect
to the Securities of such series.
SECTION 6.06. REINSTATEMENT
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article VI with respect to the Securities of any
series by reason of any order or judgment of any court or governmental authority
enjoining, restraining, or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Securities of such series
will be revived and reinstated as though no deposit had occurred pursuant to
this Article VI with respect to Securities of such series until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust pursuant
to Section 6.05 with respect to Securities of such series in accordance with
this Article VI; provided, however, that if the Company makes any payment of
principal of or any premium or interest on any Security of such series following
the reinstatement of its obligations, the Company will be subrogated to the
rights of the Holders of Securities of such series to receive such payment from
the money so held in trust.
ARTICLE VII. PARTICULAR COVENANTS OF THE COMPANY
SECTION 7.01. PAYMENT OF PRINCIPAL, PREMIUM, AND INTEREST ON SECURITIES
The Company, for the benefit of each series of Securities,
will duly and punctually pay the principal of and any premium and interest on
the Securities of that series in accordance with the terms of the Securities and
this Indenture.
SECTION 7.02. MAINTENANCE OF OFFICE OR AGENCY
(a) The Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices, and demands may be made or served at
the Corporate Trust Office, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
(b) The Company may also from time to time designate one or
more other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission will in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 7.03. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST
(a) If the Company shall at any time act as its own Paying
Agent with respect to any series of Securities, it will, on or before each due
date of the principal of or any premium or interest on any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
(b) Whenever the Company shall have one or more Paying Agents
for any series of Securities, it will, prior to each due date of the principal
of or any premium or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
(c) The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent will agree with the Trustee, subject to
the provisions of this Section 7.03, that such Paying Agent will (i) comply with
the provisions of the Trust Indenture Act applicable to it as a Paying Agent and
(ii) during the continuance of any default by the Company (or any other obligor
upon the Securities of that series) in the making of any payment in respect of
the Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
(d) 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 will be released from all further liability with
respect to such money.
(e) 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 on any Security of any series and remaining unclaimed for
two years after such principal, premium, or interest has become due and payable
will be paid to the Company upon a Company Request (or, if then held by the
Company, will be discharged from such trust); and the Holder of such Security
will 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, will 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 will not
be less than 30 calendar days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 7.04. 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, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary of
the Company or upon the income, profits, or property of the Company or any
Subsidiary of the Company, and (b) all lawful claims for labor, materials and
supplies, in each case which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary of the Company and would have a
Material Adverse Effect; provided, however, that (x) the Company will not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge, or claim the amount, applicability, or validity of which is
being contested in good faith by appropriate proceedings, and (y) any failure to
pay any such tax, assessment, charge, or claim shall not constitute a breach of
this Section 7.04 if such failure (i) was not willful and (ii) does not and will
not result in any Material Adverse Effect.
SECTION 7.05. EXISTENCE
Subject to Article XII, the Company will, and will cause each
of its Subsidiaries to, do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (charter and statutory),
and franchises; provided, however, that, except with respect to the preservation
of the Company's existence, nothing in this Section 7.05 will (i) require the
Company to take any action that it determines in good faith to be contrary to
its best interests, so long as the failure to take such action will not have a
Material Adverse Effect, or (ii) prevent the Company from taking any action that
it determines in good faith to be in its best interests, so long as the taking
of such action will not have a Material Adverse Effect.
SECTION 7.06. COMPLIANCE WITH LAWS
The Company will, and will cause each of its Subsidiaries to,
comply with all applicable federal, state, local, or foreign laws, rules,
regulations, or ordinances, including without limitation such laws, rules,
regulations, or ordinances relating to pension, environmental, employee, and tax
matters, to the extent that, in the aggregate, the failure so to comply would
have a Material Adverse Effect.
SECTION 7.07. STATEMENT BY OFFICERS AS TO DEFAULT
The Company will deliver to the Trustee, within 120 calendar
days after the end of each fiscal year of the Company ending after the date
hereof, an officer's certificate signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company
stating whether or not to the knowledge of such person after due inquiry the
Company is 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 is in
default, specifying all such defaults and the nature and status thereof of which
such person may have such knowledge.
SECTION 7.08. WAIVER OF CERTAIN COVENANTS
The Company may omit in any particular instance to comply with
any term, provision, or condition set forth in Sections 7.04 and 7.06, and such
provisions of any Supplemental Indenture as may be specified in such
Supplemental Indenture, with respect to the Securities of any series if the
Holders of a majority in principal amount of the Outstanding Securities of such
series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision, or condition,
but no such waiver will extend to or affect such term, provision, or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision, or condition will remain in full force and
effect.
SECTION 7.09. CALCULATION OF ORIGINAL ISSUE DISCOUNT
The Company will, to the extent applicable, file with the
Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of original issue discount (including daily rates and
accrual periods) accrued on Outstanding Securities as of the end of such year
and (ii) such other specific information relating to such original issue
discount as may then be required under the Internal Revenue Code of 1986, as
amended from time to time.
ARTICLE VIII. SECURITIES HOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 8.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS
The Company will furnish or cause to be furnished to the
Trustee (a) semi-annually, not more than 15 calendar days after the applicable
Regular Record Date, a list for each series of Securities, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Securities of such series as of such Regular Record Date and (b) at such other
times as the Trustee may request in writing, within 30 calendar 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 calendar days prior to the time such list is
furnished; excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
SECTION 8.02. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS
(a) The Trustee will 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 8.01 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 8.01 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
Securities, and the corresponding rights and privileges of the Trustee, will be
as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them will 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 8.03. REPORTS BY TRUSTEE
The Trustee will transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act or any rule or regulation of the Commission promulgated
pursuant thereto at the times and in the manner provided therein. If required by
Section 313(a) of the Trust Indenture Act, the Trustee will, within sixty 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). A copy of each such report will, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission, and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
SECTION 8.04. REPORTS BY COMPANY
The Company will file with the Trustee and the Commission, and
transmit to Holders, such information, documents, and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act or any
rule or regulation of the Commission promulgated pursuant thereto at the times
and in the manner provided therein; provided that any such information,
documents, or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act will be filed with the Trustee within 15
calendar days after the same is so required to be filed with the Commission.
Delivery of such reports, information, and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such will 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 Officer's Certificates).
ARTICLE IX. DEFAULT
SECTION 9.01. EVENT OF DEFAULT
(a) "Event of Default," wherever used herein with respect to
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it may be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree, or order
of any court or any order, rule, or regulation of any administrative or
governmental body):
(i) default in the payment of any interest on any
Security of that series when it becomes due and payable, and
continuance of such default for a period of 10 calendar days;
(ii) default in the payment of principal of (or
premium, if any, on) any Security of that series when it becomes due
and payable, whether by redemption, repurchase, or otherwise;
(iii) default in the making of any sinking fund
payment when and as due by the terms of a Security of that series;
(iv) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty, a default in the performance or breach of which
is elsewhere in this Section 9.01 specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of one
or more series of Securities other than that series), and continuance
of such default or breach for a period of 30 calendar days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder;
(v) any default in the payment at maturity of
principal of any Indebtedness of the Company or any Subsidiary of the
Company in an aggregate principal amount of $10.0 million or more,
which, in any such case, (A) continues beyond any period of grace
provided with respect thereto and (B) results in such Indebtedness
becoming due prior to its stated maturity or occurs at the final
maturity of such Indebtedness; provided, however, that, subject to the
provisions of Section 11.01 and 9.08, the Trustee will not be deemed to
have knowledge of such nonpayment or other default unless either (1) a
Responsible Officer of the Trustee has actual knowledge of nonpayment
or other default or (2) the Trustee has received written notice thereof
from the Company, from any Holder, from the holder of any such
Indebtedness or from the trustee under the agreement or instrument
relating to such Indebtedness;
(vi) the entry of one or more judgments or orders for
the payment of money against the Company, which judgments and orders
create a liability of $25.0 million or more in excess of insured
amounts and have not been stayed (by appeal or otherwise), vacated,
discharged, or otherwise satisfied within 60 calendar days of the entry
of such judgments and orders;
(vii) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law or (B) a decree or order adjudging the Company or any
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Company or any Subsidiary under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official
of the Company or any Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
calendar days;
(viii) the commencement by the Company or any
Subsidiary of a voluntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief with respect to the Company under any
applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law, or the consent by it to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official
of the Company or any Subsidiary or of any substantial part of its
property pursuant to any such law, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Subsidiary in furtherance of
any such action;
(ix) default in the performance, or breach, of any
covenant or warranty of the Company or any Subsidiary, and the
continuance of such default or breach for a period of time that extends
beyond any applicable grace or cure period provided, in any Collateral
Security Document;
(x) the Subsidiaries Guaranty Agreement or any future
guaranty agreement entered into by a Subsidiary of the Company acquired
or created after the date hereof shall be held in a judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Subsidiary guarantor, or any Person acting
on behalf of any Subsidiary guarantor shall deny or disaffirm its
obligations under its subsidiary guarantee agreement; or
(xi) any other Event of Default provided in an
indenture supplemental hereto with respect to Securities of the series
created thereunder.
(b) If an Event of Default (other than an Event of Default
arising under Section 9.01(a)(vii) or (viii)) with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) will become immediately due and payable. If an Event of Default under
Section 9.01(a)(vii) or (viii) occurs, then the principal of, premium, if any,
and accrued interest on the Securities shall become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
(c) At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article IX provided, the Holders of a majority in principal
amount of the outstanding Securities of that series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if (i) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities of that series, (B)
the principal of (and premium, if any, on) any Securities of that series which
have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate or rates prescribed therefor in such Securities, and (D)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements, and advances of the Trustee and its
agents and counsel and (ii) all Events of Default with respect to Securities of
that series, other than the non-payment of the principal of Securities of that
series that has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 9.01(d). No such rescission will affect
any subsequent default or impair any right consequent thereon.
(d) The Holders of a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default (i) in the payment of the
principal of or any premium or interest on any Security of such series or (ii)
in respect of a covenant or provision hereof which under Article XI cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected. Upon any such waiver, such default will cease
to exist, and any Event of Default arising therefrom will be deemed to have been
cured, for every purpose of this Indenture, but no such waiver will extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 9.02. COVENANT OF COMPANY TO PAY TO TRUSTEE WHOLE AMOUNT DUE ON
SECURITIES ON DEFAULT IN PAYMENT OF INTEREST OR PRINCIPAL;
. SUITS FOR ENFORCEMENT BY TRUSTEE
(a) The Company covenants that if (i) default is made in the
payment of any interest on any Security when such interest becomes due and
payable and such default continues for a period of 30 calendar days or (ii)
default is made in the payment of the principal of (or premium, if any, on) any
Security when it becomes due and payable, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal and any premium and
interest and, to the extent that payment of such interest will be legally
enforceable, interest on any overdue principal and premium and on any overdue
interest, at the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as will be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel.
(b) If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall deem
most effectual, including without limitation actions with respect to the Company
Collateral and the Subsidiaries Collateral, 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.
(c) In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its creditors, the
Trustee will 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 will be authorized to collect and receive
any money 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 consents to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements, and advances of the Trustee and its
agents and counsel, and any other amounts due the Trustee under Section 11.06.
(d) No provision of this Indenture will be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment, or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and be a member of a
creditors' or other similar committee.
(e) All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee will be
brought in its own name as trustee of an express trust, and any recovery of
judgment will, after provision for the payment of the reasonable compensation,
expenses, disbursements, and advances of the Trustee and its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 9.03. APPLICATION OF MONEY COLLECTED BY TRUSTEE
Any money collected by the Trustee pursuant to this Article IX
will 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, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 11.06; and
SECOND: To the payment of the amounts then due and unpaid for
interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind (except as provided
by any subordination provisions provided in an indenture
supplemental with respect to the securities of the series
created thereunder pursuant to Section 2.01(b)(xviii)),
according to the amounts due and payable on such Securities
for interest thereon.
THIRD: To the payment of the amounts then due and unpaid for
principal of and any premium on the Securities in respect of
which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind
(except as provided by any subordination provisions provided
in an indenture supplemental with respect to the securities of
the series created thereunder pursuant to Section
2.01(b)(xviii)), according to the amounts due and payable on
such Securities for principal and any premium, respectively.
SECTION 9.04. LIMITATION ON SUITS BY HOLDERS OF SECURITIES
No Holder of any Security of any series will 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 (a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of that
series, (b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder, (c) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expenses, and liabilities to be
incurred in compliance with such request, (d) the Trustee for 60 calendar days
after its receipt of such notice, request, and offer of indemnity has failed to
institute any such proceeding, and (e) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding Securities of that
series, it being understood and intended that no one or more of such Holders
will 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 9.05. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION IN
EXERCISE OF RIGHTS NOT A WAIVER OF EVENT OF DEFAULT
(a) Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost, or stolen Securities in
the last paragraph of Section 2.07, 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 will, 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, will not
prevent the concurrent assertion or employment of any other appropriate right or
remedy.
(b) No delay or omission of the Trustee or of any Holder of
any Securities to exercise any right or remedy accruing upon any Event of
Default will impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article IX 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 9.06. RIGHTS OF HOLDERS OF MAJORITY IN PRINCIPAL AMOUNT OF
OUTSTANDING SECURITIES TO DIRECT TRUSTEE
The Holders of a majority in principal amount of the
Outstanding Securities of any series will have the right to direct the Trustee
with respect to the time, method, and place of conducting any proceeding for any
remedy available to the Trustee and the exercise of any trust or power conferred
on the Trustee, in each case with respect to the Securities of such series,
provided that (a) such direction will not be in conflict with any rule of law or
with this Indenture and (b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 9.07. REQUIREMENT OF AN UNDERTAKING TO PAY COSTS IN CERTAIN SUITS
UNDER THE INDENTURE OR AGAINST THE TRUSTEE
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, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs, including legal fees and expenses, against any such party litigant, in
the manner and to the extent provided in the Trust Indenture Act; provided that
neither this Section 9.07 nor the Trust Indenture Act will be deemed to
authorize any court to require such an undertaking or to make such an assessment
in any suit instituted by the Trustee or by the Company.
SECTION 9.08. NOTICE OF DEFAULTS
If a Default occurs hereunder with respect to Securities of
any series, the Trustee will give the Holders of Securities of such series
notice of such Default actually known to it as and to the extent provided by the
Trust Indenture Act; provided, however, that in the case of any Default of the
character specified in Section 9.01(a)(iv) with respect to Securities of such
series no such notice to Holders will be given until at least 30 calendar days
after the occurrence thereof. The Company will give the Trustee notice of any
uncured Event of Default within 10 days after any Responsible Officer of the
Company becomes aware of or receives actual notice of such Event of Default.
SECTION 9.09. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, AND INTEREST
Notwithstanding any other provision in this Indenture, the
Holder of any Security will have the right, which is absolute and unconditional,
to receive payment of the principal of, premium, if any, and (subject to Section
2.09) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such Holder.
SECTION 9.10. 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 will
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders will continue
as though no such proceeding had been instituted.
SECTION 9.11. TRUSTEE MAY FILE PROOFS OF CLAIMS
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceeding relative to the Company or the
Subsidiaries (or any other obligor upon the Securities), their creditors or
their property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claim and to
distribute the same, and any custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements, and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
ARTICLE X SUBORDINATION OF SECURITIES
SECTION 10.01 SECURITIES SUBORDINATE TO WORKING CAPITAL FACILITY INDEBTEDNESS.
To the extent and in the manner hereinafter set forth in this Article X, the
payment of principal of, premium, if any, and interest on and all other payments
in respect of the Securities of any series issued under this Indenture shall be
subordinate and subject in right of payment to the prior payment in full of all
Indebtedness with respect to any Working Capital Facility, including (without
limitation) all principal thereof and all premium, if any, and interest thereon.
SECTION 10.02 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or
proceeding or other similar case or proceeding under any Federal or state
bankruptcy or similar law, or any receivership, liquidation, arrangement,
relief, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or to its assets, or (b) any liquidation,
dissolution, reorganization, compromise, arrangement, adjustment, protection,
composition, relief or other winding up of the Company or its debts, whether
voluntary or involuntary and whether or not involving any insolvency or
bankruptcy or any case or proceeding of any kind, or (c) any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of the
Company, then, and in each such event, the holders of Indebtedness under any
Working Capital Facility shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all Indebtedness under any
Working Capital Facility, before the Company may make, and before any Holder of
Securities is entitled to receive or retain, any payment or distribution of any
kind or character (whether in cash, property or securities) on account of
Securities, and to that end the Holders of Securities agree to promptly pay
over, or cause to be paid over, to the holders of Indebtedness under any Working
Capital Facility (pro rata to each such holder on the basis of the respective
amounts of such Indebtedness held by such holder) any payment or distribution of
any kind or character, whether in cash, property or securities, received from
the Company to the extent necessary to pay or prepay in full the Indebtedness
under any and all Working Capital Facilities.
SECTION 10.03 PAYMENT PERMITTED.
Nothing contained in this Article X or elsewhere in this
Indenture, any indenture supplemental hereto or in any Securities issued
hereunder shall prevent the Company at any time, except as expressly provided in
Section 10.02, from making payments of principal of or premium, if any, or
interest on Securities of any series in accordance with the terms thereof.
SECTION 10.04 SUBROGATION TO RIGHTS OF HOLDERS OF WORKING CAPITAL FACILITY
INDEBTEDNESS.
Holders of Securities of each series hereunder shall be
subrogated equally and ratably to the rights of the holders of Indebtedness
under any Working Capital Facility at the time outstanding to receive payments
and distributions of cash, property and securities applicable to the
Indebtedness under any Working Capital Facility; provided, however, that no
payment or distribution to any holder or owner of Indebtedness under any Working
Capital Facility pursuant to this Article X shall entitle any Holder of
Securities to exercise any rights of subrogation in respect thereof until all
Indebtedness under any Working Capital Facility shall have been paid in full.
For purposes of such subrogation, no payments or distributions to the holders of
Indebtedness under any Working Capital Facility of any cash, property or
securities to which the Holders of Securities would be entitled except for the
provisions of this Article X, shall, as among the Company, its creditors other
than holders of Indebtedness under any Working Capital Facility and the holders
of Indebtedness under any Working Capital Facility, be deemed to be a payment or
distribution by the Company to or on account of Indebtedness existing under any
Working Capital Facility.
SECTION 10.05 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article X are and are intended solely
for the purpose of defining the relative rights of the Holders of Securities on
the one hand and the holders of Indebtedness under any Working Capital Facility
on the other hand. Nothing contained in this Article X or elsewhere in this
Indenture, any indenture supplemental hereto or in the Securities issued
hereunder is intended to or shall (a) impair, as among the Company, its
creditors (other than holders of Indebtedness under any Working Capital
Facility) and the Holders of Securities, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders of Securities the principal
of, premium, if any, and interest on, and all other amounts payable with respect
to, the Securities as and when the same shall become due and payable in
accordance with their respective terms, (b) affect the relative rights against
the Company of the Holders of Securities and creditors of the Company (other
than the holders of Indebtedness under any Working Capital Faciltiy), (c)
prevent the Holder of any Securities from exercising all remedies otherwise
permitted by applicable law upon a Default or Event of Default under this
Indenture, subject to the rights under the provisions of Section 10.02 hereof of
the holders of Indebtedness under any Working Capital Facility to receive cash,
property or securities otherwise payable or deliverable to the Holders of
Securities or (d) restrict or otherwise impair the right of the Holders of
Securities to, in accordance with the terms of this Indenture, declare the
Securities of any series to be due and payable prior to their respective stated
maturity upon the occurrence of an Event of Default.
SECTION 10.06 AGREEMENT TO EFFECTUATE SUBORDINATION.
(a) Each Holder of Securities by its acceptance thereof agrees
to take such action as may be reasonably necessary or appropriate to effectuate,
as between the holders of Indebtedness under any Working Capital Facility and
such Holder of Securities, the subordination provided in this Article X.
(b) The provisions of this Article X (including, without
limitation, this Section 10.06) may not be amended, modified or waived without
the prior written consent of all the holders of Indebtedness under any and all
Working Capital Facilities that is at the time outstanding. The provisions set
forth in Article X constitute a continuing agreement and shall (i) be and remain
in full force and effect at any time, and from time to time, during which any
Indebtedness under any Working Capital Facility shall remain outstanding, (ii)
be binding upon the Holders of Securities and the Company and its successors,
transferees and assigns, and (iii) inure to the benefit of, and be enforceable,
in accordance with the terms hereof, directly by, each of the holders of the
Indebtedness under any Working Capital Facility and their respective successors,
transferees and assigns, against the Holders of Securities and the Company and
their successors, transferees and assigns.
ARTICLE XI. CONCERNING THE TRUSTEE
SECTION 11.01. CERTAIN DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Trustee will be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture will require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee will be subject to the provisions of this Section 11.01.
SECTION 11.02. CERTAIN RIGHTS OF TRUSTEE
Subject to the provisions of Section 11.01: (a) the Trustee
may conclusively rely and will 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 will be sufficiently
evidenced by a Company Request or Company Order and any resolution of the Board
will 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 Officer's
Certificate; (d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel will 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
will 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
will 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 will be entitled to examine the books, records, and premises
of the Company, personally or by agent or attorney; (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 will 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 Trustee will not be
liable for any action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture, unless it shall be proved
that the Trustee acted, or failed to act, in a negligent manner; and (i) the
Trustee will not be deemed to have notice of any Default or Event of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof or
unless written notice of any event or circumstance which is in fact such a
Default or Event of Default is received by the Trustee at the Corporate Trust
Office of the Trustee, and such notice references the Securities (or the
applicable series thereof) and this Indenture.
SECTION 11.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, may be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent will not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
SECTION 11.04. MAY HOLD SECURITIES
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar, or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 11.07 and 11.12, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar, or such other agent.
SECTION 11.05. MONEY HELD IN TRUST
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required herein or by law. The
Trustee will be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
SECTION 11.06. COMPENSATION AND REIMBURSEMENT
(a) The Company will (i) pay to the Trustee from time to time
such compensation as shall be agreed to in writing between the Company and the
Trustee for all services rendered by it hereunder (which compensation will not
be limited to any provision of law in regard to the compensation of a trustee of
an express trust); (ii) except as otherwise expressly provided herein, reimburse
the Trustee upon its request for all reasonable expenses, disbursements, and
advances incurred or made by the Trustee in accordance with provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of agents and counsel), except any such expense, disbursement, or
advance as may be attributable to its negligence or bad faith; and (iii)
indemnify the Trustee and any predecessor Trustee for, and hold them harmless
against, any and all losses, liabilities, damages, claims and expenses,
including taxes (other than taxes based on the income of the Trustee or
predecessor Trustee and other taxes relating to the Trustee's or predecessor
Trustee's overall business and operations) incurred without negligence or bad
faith on its part arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
(b) The Trustee will have a lien prior to the Securities as to
all property and funds held by it hereunder for any amount owed to it or any
predecessor Trustee pursuant to this Section 11.06, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
(c) When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 9.01(a)(vii) or Section
9.01(a)(viii), such expenses (including the reasonable fees and expenses of its
counsel) and the Trustee's compensation for such services are intended to
constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency, or other similar law.
(d) The provisions of this Section 11.06 will survive the
termination of this Indenture.
SECTION 11.07. DISQUALIFICATION; CONFLICTING INTERESTS
If the Trustee has or acquires a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee will 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 11.08. CORPORATE TRUSTEE REQUIRED ELIGIBILITY
There will at all times be one or more Trustees hereunder with
respect to the Securities of each series, at least one of which will 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 $100,000,000 and its Corporate Trust
Office or principal office in New York City, or any other major city in the
United States that is acceptable to the Company. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of a supervising or examining state or federal authority, then for the purposes
of this Section 11.08, 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 11.08, it will resign
immediately in the manner and with the effect hereinafter specified in this
Article XI.
SECTION 11.09. 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 XI will become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 11.10.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 11.10 shall not have been delivered to the Trustee within 30 calendar
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 Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 11.10 shall not have been delivered to the Trustee within 30 calendar
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 Securities of such
series.
(d) If, at any time, (i) the Trustee fails to comply with
Section 11.07 after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for at least six months, (ii) the
Trustee ceases to be eligible under Section 11.08 and fails to resign after
written request therefor by the Company or by any such Holder, or (iii) the
Trustee becomes incapable of acting or is adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property is appointed or any public officer
takes 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,
(A) the Company by a Board Resolution may remove the Trustee with respect to all
Securities or (B) subject to Section 9.07, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee resigns, is removed, or becomes incapable
of acting, or if a vacancy occurs in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company by a Board
Resolution will promptly appoint a successor Trustee or Trustees with respect to
the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there will be only one Trustee with
respect to the Securities of any particular series) and will comply with the
applicable requirements of Section 11.10. If, within one year after such
resignation, removal, or incapability or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series is appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed will, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 11.10,
become the successor Trustee with respect to the Securities of such series and
to that extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 11.10, any Holder who has been a bona fide Holder of
a Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company will give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all holders of Securities of such series in the manner provided in Section
15.03. Each notice will include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
SECTION 11.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR
(a) In case of the appointment hereunder of a successor
Trustee with respect to all Securities, every such successor Trustee so
appointed will execute, acknowledge, and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee will become effective and such
successor Trustee, without any further act, deed, or conveyance, will 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 will, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers, and duties of the
retiring Trustee and will duly assign, transfer, and deliver to such Trustee all
property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee, and each successor Trustee with respect to the
Securities of one or more series will execute and deliver an indenture
supplemental hereto wherein such successor Trustee will accept such appointment
and which (i) will contain such provisions as may be necessary or desirable to
transfer and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (ii) if the retiring Trustee is not retiring with respect to
all Securities, will contain such provisions as may be deemed necessary or
desirable to confirm that all the rights, powers, trusts, and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring will continue to be vested in the
retiring Trustee, and (iii) will add to or change any of the provisions of this
Indenture as may be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, it being understood that nothing
herein or in such supplemental indenture will constitute such Trustees
co-trustees of the same trust and that each such Trustee will be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustees and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
will become effective to the extent provided therein and each such successor
Trustee, without any further act, deed, or conveyance, will become vested with
all the rights, powers, trusts, and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but on request of the Company or any successor
Trustee, such retiring Trustee will duly assign, transfer, and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
will execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all applicable rights, powers, and trusts
referred to in the preceding paragraphs of this Section 11.10.
(d) No successor Trustee will accept its appointment unless at
the time of such acceptance such successor Trustee is qualified and eligible
under this Article XI.
SECTION 11.11. 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 may be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, will be the successor of the Trustee hereunder,
provided such corporation is otherwise qualified and eligible under this Article
XI, without the execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion, or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 11.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
If and when the Trustee is or becomes a creditor of the
Company (or any other obligor upon the Securities), the Trustee will be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 11.13. APPOINTMENT OF AUTHENTICATING AGENT
(a) The Trustee may appoint an Authenticating Agent or Agents
with respect to one or more series of Securities which will be authorized to act
on behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer, or partial
redemption thereof or pursuant to Section 2.07, and Securities so authenticated
will be entitled to the benefits of this Indenture and will be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference will 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 11.13,
the combined capital and surplus of such Authenticating Agent will 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 11.13, such
Authenticating Agent will resign immediately in the manner and with the effect
specified in this Section 11.13.
(b) 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 may be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, will
continue to be an Authenticating Agent, provided such corporation is otherwise
eligible under this Section 11.13, without the execution or filing of any paper
or any further act on the part of the Trustee or the Authenticating Agent.
(c) 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 this Section 11.13, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and will mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
will become vested with all the rights, powers, and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent will be appointed unless eligible under the
provisions of this Section 11.13.
(d) The Trustee agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under this Section
11.13, and the Trustee will be entitled to be reimbursed for such payments,
subject to the provisions of Section 11.06.
(e) If an appointment with respect to one or more series of
Securities is made pursuant to this Section 11.13, the Securities of such series
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative form of certificate of authentication in the
following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
as Trustee
By:
As Authenticating Agent
By:
Authorized Signatory
ARTICLE XII. SUPPLEMENTAL INDENTURES AND CERTAIN ACTIONS
SECTION 12.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE ENTERED
INTO WITHOUT CONSENT OF HOLDERS
Without the consent of or notice to 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 Securities, all to the extent otherwise
permitted hereunder;
(b) to make any change to the provisions of this Indenture
that would provide any additional rights or benefits to the Holders of
the Securities;
(c) to add to or change any of the provisions of this
Indenture to such extent as may be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form;
(d) to add to, change, or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change, or elimination (i) will neither (A)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (B) modify the rights of the Holder of any such Security
with respect to such provision or (ii) will become effective only when
there is no such Security Outstanding;
(e) to establish the form or terms of Securities of any series
as permitted by Sections 2.01 and 2.02;
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as may be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 11.10; or
(g) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this clause (g) will not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
SECTION 12.02. MODIFICATION OF INDENTURE WITH CONSENT OF HOLDERS OF AT
LEAST A MAJORITY IN PRINCIPAL AMOUNT OF OUTSTANDING SECURITIES
(a) With the consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture will, without the consent of the Holder of
each Outstanding Security affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Sections 9.01(b), or change any Place of Payment where, or
the coin or currency in which, any Security or any premium or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, or the consent
of the Holders of which is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture; or
(iii) modify any of the provisions of this Section 12.02,
Section 9.01(d) or Section 7.08, except to increase the percentage in
principal amount of Holders required under any such Section or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, provided, however, that this
clause (c) will not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant
changes in this Section 12.02 and Section 7.08, or the deletion of this
proviso, in accordance with the requirements of Sections 11.10 and
12.01(f).
(b) A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, will be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
(c) It will not be necessary for any Act of Holders under this
Section 12.02 to approve the particular form of any proposed supplemental
indenture, but it will be sufficient if such Act approves the substance thereof.
SECTION 12.03. EXECUTION OF SUPPLEMENTAL INDENTURES
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article XII or the modifications
thereby of the trusts created by this Indenture, the Trustee will be entitled to
receive, and (subject to Section 11.01) will 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 will 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 12.04. EFFECT OF SUPPLEMENTAL INDENTURES
Upon the execution of any supplemental indenture under this
Article XII, this Indenture will be modified in accordance therewith, and such
supplemental indenture will form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder will be bound thereby.
SECTION 12.05. CONFORMITY WITH TRUST INDENTURE ACT
Every supplemental indenture executed pursuant to this Article
XII will conform to the requirements of the Trust Indenture Act.
SECTION 12.06. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article XII may, and
will if required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the Company
shall so determine, new Securities of any series so modified as to conform, in
the opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series.
ARTICLE XIII. CONSOLIDATION, MERGER, SALE, OR TRANSFER
SECTION 13.01. CONSOLIDATIONS AND MERGERS OF COMPANY AND SALES PERMITTED
ONLY ON CERTAIN TERMS
(a) The Company shall not consolidate with or merge with or
into any other Person, or transfer (by lease, assignment, sale, or otherwise)
its properties and assets substantially as an entirety to another Person unless
(i) either (A) the Company shall be the continuing or surviving Person in such a
consolidation or merger or (B) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company are transferred substantially as an
entirety (the Company or such other Person being referred to as the "Surviving
Person") shall be a corporation organized and validly existing under the laws of
the United States, any state thereof, or the District of Columbia, and shall
expressly assume, by an indenture supplement, all the obligations of the Company
under the Securities and the Indenture, (ii) immediately after the transaction
and the incurrence or anticipated incurrence of any Indebtedness to be incurred
in connection therewith, no Default will exist, and (iii) an Officer's
Certificate has been delivered to the Trustee to the effect that the conditions
set forth in the preceding clauses (i) and (ii) have been satisfied and an
Opinion of Counsel (from a counsel who shall not be an employee of the Company)
has been delivered to the Trustee to the effect that the conditions set forth in
the preceding clause (i) have been satisfied.
(b) The Surviving Person will succeed to and be substituted
for the Company with the same effect as if it had been named herein as a party
hereto, and thereafter the predecessor corporation (if it is not the Surviving
Person) will be relieved of all obligations and covenants under this Indenture
and the Securities.
ARTICLE XIV. SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 14.01. SATISFACTION AND DISCHARGE OF INDENTURE
This Indenture will upon a Company Request cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense the Company, will execute proper instruments acknowledging satisfaction
and discharge of this Indenture, when: (a) either (i) all Securities theretofore
authenticated and delivered (other than (A) Securities which have been
destroyed, lost, or stolen and which have been replaced or paid as provided in
Section 2.07 and (B) Securities for the payment of which money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided in
Section 7.03) have been delivered to the Trustee for cancellation or (ii) all
such Securities not theretofore delivered to the Trustee for cancellation (A)
have become due and payable, (B) will become due and payable at their Stated
Maturity within one year, or (C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company, in the case of clause (A), (B), or (C) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for such purpose
an amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; (b) the Company has paid or caused to be
paid all other sums payable hereunder by the Company; and (c) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 11.06, the obligations
of the Company to any Authenticating Agent under Section 11.13, and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) of this Section 14.01, the obligations of the Trustee under Sections 7.03(e)
and 14.02, will survive.
SECTION 14.02. APPLICATION OF TRUST MONEY
Subject to provisions of Section 7.03(e), all money deposited
with the Trustee pursuant to Section 14.01 will be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and any premium and interest for whose
payment such money has been deposited with the Trustee.
ARTICLE XV. MISCELLANEOUS PROVISIONS
SECTION 15.01. SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE
All the covenants, stipulations, promises, and agreements in
this Indenture contained by or on behalf of the Company will bind its successors
and assigns, whether so expressed or not.
SECTION 15.02. SERVICE OF REQUIRED NOTICE TO TRUSTEE AND COMPANY
Any request, demand, authorization, direction, notice,
consent, waiver, Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with (a) the Trustee
by any Holder or by the Company will, upon receipt, be sufficient for every
purpose hereunder if made, given, furnished, or filed in a writing received by
the Trustee at its Corporate Trust Office (addressed to the attention of:
Corporate Trust Trustee Administration) or (b) the Company by the Trustee or by
any Holder will, upon receipt, be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished, or filed in a
writing received by the Company at its principal executive offices (addressed to
the attention of both its Chief Financial Officer and its General Counsel).
SECTION 15.03. SERVICE OF REQUIRED NOTICE TO HOLDERS; WAIVER
Where this Indenture provides for notice to Holders of any
event, such notice will be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date (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 will 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 will be the equivalent of such notice. Waivers of notice by Holders
will be filed with the Trustee, but such filing will 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 will be impracticable to give such notice by mail, then such
notification as may be made with the approval of the Trustee will constitute a
sufficient notification for every purpose hereunder.
SECTION 15.04. INDENTURE AND SECURITIES TO BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK
This Indenture and the Securities will be deemed to be a
contract made under the laws of the State of New York, and for all purposes will
be construed in accordance with the laws of said State without giving effect to
principles of conflict of laws of such State.
SECTION 15.05. COMPLIANCE CERTIFICATES AND OPINIONS
Upon any application or request by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
will furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion will be given in
the form of an Officer's Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and will comply
with the requirements of the Trust Indenture Act and any other requirements set
forth in this Indenture.
SECTION 15.06. 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. 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 15.07. PAYMENTS DUE ON NON-BUSINESS DAYS
In any case where any Interest Payment Date, Redemption Date,
or Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of the Securities of any series which
specifically states that such provision will apply in lieu of this Section
15.07)) payment of interest or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day 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, and
no interest shall accrue for the intervening period.
SECTION 15.08. PROVISIONS REQUIRED BY TRUST INDENTURE ACT TO CONTROL
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed on any Person by Sections 310 through 317 of
the Trust Indenture Act (including provisions automatically deemed included in
this Indenture pursuant to the Trust Indenture Act unless this Indenture
provides that such provisions are excluded), which are deemed to be a part of
and govern this Indenture, whether or not contained herein, then such imposed
duties will control.
SECTION 15.09. INVALIDITY OF PARTICULAR PROVISIONS
In case any one or more of the provisions contained in this
Indenture or in the Securities is for any reason held to be invalid, illegal, or
unenforceable in any respect, such the validity, illegality, or enforceability
will not affect any other provision of this Indenture or of the Securities, but
this Indenture and such Securities will be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 15.10. INDENTURE MAY BE EXECUTED IN COUNTERPARTS
This instrument may be executed in any number of counterparts,
each of which will be an original, but such counterparts will together
constitute but one and the same instrument.
SECTION 15.11. ACTS OF HOLDERS; RECORD DATES
(a) Any request, demand, authorization, direction, notice,
consent, waiver, or other action provided or permitted 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 will become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent will be sufficient for any
purpose of this Indenture and (subject to Section 11.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section
15.11.
(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 will also constitute sufficient proof of
his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities will be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver, or other Act of the Holder of any Security will bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange thereof or in lieu thereof
in respect of anything done, omitted, or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(e) The Company may, in the circumstances permitted by the
Trust Indenture Act, set any day as the record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to give
or take any request, demand, authorization, direction, notice, consent, waiver,
or other action provided or permitted by this Indenture to be given or taken by
Holders of Securities of such series. With regard to any record date set
pursuant to this paragraph, the Holders of Outstanding Securities of the
relevant series on such record date (or their duly appointed agents), and only
such Persons, will be entitled to give or take the relevant action, whether or
not such Holders remain Holders after such record date. With regard to any
action that may be given or taken hereunder only by Holders of a requisite
principal amount of Outstanding Securities of any series (or their duly
appointed agents) and for which a record date is set pursuant to this paragraph,
the Company may, at its option, set an expiration date after which no such
action purported to be given or taken by any Holder will be effective hereunder
unless given or taken on or prior to such expiration date by Holders of the
requisite principal amount of Outstanding Securities of such series on such
record date (or their duly appointed agents). On or prior to any expiration date
set pursuant to this paragraph, the Company may, on one or more occasions at its
option, extend such date to any later date. Nothing in this paragraph will
prevent any Holder (or any duly appointed agent thereof) from giving or taking,
after any such expiration date, any action identical to, or, at any time,
contrary to or different from, the action or purported action to which such
expiration date relates, in which event the Company may set a record date in
respect thereof pursuant to this paragraph. Nothing in this Section 15.11(e)
will be construed to render ineffective any action taken at any time by the
Holders (or their duly appointed agents) of the requisite principal amount of
Outstanding Securities of the relevant series on the date such action is so
taken. Notwithstanding the foregoing or the Trust Indenture Act, the Company
will not set a record date for, and the provisions of this Section 15.11(e) will
not apply with respect to, any notice, declaration, or direction referred to in
the next paragraph.
(f) Upon receipt by the Trustee from any Holder of Securities
of a particular series of (a) any notice of default or breach referred to in
Section 9.01(a)(iv) or 9.01(a)(v) with respect to Securities of such series, if
such default or breach has occurred and is continuing and the Trustee shall not
have given such notice to the Company, (b) any declaration of acceleration
referred to in Section 9.01(b), if an Event of Default with respect to
Securities of such series has occurred and is continuing and the Trustee shall
not have given such a declaration to the Company, or (c) any direction referred
to in Section 9.06 with respect to Securities of such series, if the Trustee
shall not have taken the action specified in such direction, then a record date
will automatically and without any action by the Company or the Trustee be set
for determining the Holders of Outstanding Securities of such series entitled to
join in such notice, declaration, or direction, which record date will be the
close of business on the tenth calendar day following the day on which the
Trustee receives such notice, declaration, or direction. Promptly after such
receipt by the Trustee, and in any case not later than the fifth calendar day
thereafter, the Trustee will notify the Company and the Holders of Outstanding
Securities of such series of any such record date so fixed. The Holders of
Outstanding Securities of such series on such record date (or their duly
appointed agents), and only such Persons, will be entitled to join in such
notice, declaration, or direction, whether or not such Holders remain Holders
after such record date; provided that, unless such notice, declaration, or
direction shall have become effective by virtue of Holders of the requisite
principal amount of Outstanding Securities of such series on such record date
(or their duly appointed agents) having joined therein on or prior to the 90th
calendar day after such record date, such notice, declaration, or direction will
automatically and without any action by any Person be canceled and of no further
effect. Nothing in this Section 15.11(f) will be construed to prevent a Holder
(or a duly appointed agent thereof) from giving, before or after the expiration
of such 90-day period, a notice, declaration, or direction contrary to or
different from, or, after the expiration of such period, identical to, the
notice, declaration, or direction to which such record date relates, in which
event a new record date in respect thereof will be set pursuant to this Section
15.11(f). Nothing in this Section 15.11(f) will be construed to render
ineffective any notice, declaration, or direction of the type referred to in
this Section 15.11(f) given at any time to the Trustee and the Company by
Holders (or their duly appointed agents) of the requisite principal amount of
Outstanding Securities of the relevant series on the date such notice,
declaration, or direction is so given.
(g) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the principal amount of
such Security 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.
SECTION 15.12. EFFECT OF HEADINGS AND TABLE OF CONTENTS
The Article and Section headings herein and the Table of
Contents are for convenience only and will not affect the construction hereof.
SECTION 15.13. BENEFITS OF INDENTURE
Nothing in this Indenture or in the Securities, express or
implied, will give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy, or claim under this Indenture.
--------------------
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
[Seal] MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
By:
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
Name:
Title:
Attest:
By:
Name:
Title:
STATE OF )
) SS:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of MERCURY FINANCE COMPANY, one of the
entities described in and which executed the above instrument; that he/she knows
the seal of said entity; that the seal or a facsimile thereof affixed to said
instrument is such seal; that it was so affixed by authority of the Board of
Directors of said entity, and that he/she signed his/her name thereto by like
authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF )
) SS.:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
Mercury Finance Company
and
Norwest Bank Minnesota, National Association,
Trustee
First Supplemental Trust Indenture
Dated as of __________, 1999
Supplementing that certain
INDENTURE
Dated as of __________, 1999
Authorizing the Issuance and Delivery of
Senior Secured Securities
consisting of $___________* aggregate principal amount of
10% Senior Secured Notes Due 2001, Series A
* In the execution version, the appropriate amount determined in accordance
with __________________________ of the Plan will be inserted here, in the first
paragraph on page 2 and in Section 1.1(b) hereof.
TABLE OF CONTENTS
Page
RECITALS......................................................................1
[Form of Face of Security]....................................................2
[Form of Reverse of Security].................................................4
ARTICLE I. ISSUANCE OF SENIOR SECURED NOTES..................................7
Section 1.1. Issuance of Senior Secured Notes; Principal Amount;
Maturity................................................7
Section 1.2. Interest on the Senior Secured Notes; Payment of
Interest................................................8
ARTICLE II. CERTAIN DEFINITIONS..............................................8
Section 2.1. Certain Definitions.....................................8
ARTICLE III. CERTAIN COVENANTS..............................................13
Section 3.1. Indebtedness...........................................13
Section 3.2. Liens..................................................13
Section 3.3. Restricted Payments....................................13
Section 3.4. Change of Control......................................14
Section 3.5. Payment Restrictions Affecting Subsidiaries............15
Section 3.6. Issuance of Subsidiary Preferred Stock.................15
Section 3.7. Asset Sales............................................16
Section 3.8. Transactions with Affiliates...........................16
Section 3.9. Change in Business.....................................16
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT....................................16
ARTICLE V. REDEMPTION OF SECURITIES.........................................17
Section 5.1. Right of Redemption....................................17
Section 5.2. Repurchase.............................................17
ARTICLE VI. MISCELLANEOUS...................................................17
Section 6.1. Reference to and Effect on the Indenture...............17
Section 6.2. Waiver of Certain Covenants............................17
Section 6.3. Supplemental Indenture May be Executed in Counterparts.17
FIRST SUPPLEMENTAL INDENTURE, dated as of __________, 1999 (this "First
Supplemental Indenture"), between Mercury Finance Company, a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
and Norwest Bank Minnesota, National Association, a U.S. national banking
association, as Trustee (the "Trustee"), supplementing that certain Indenture,
dated as of __________, 1999, between the Company and the Trustee (the
"Indenture").
RECITALS
A. The Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of its senior secured
notes (the "Securities") to be issued in one or more series as provided for in
the Indenture.
B. The Indenture provides that the Securities of each series shall be
in such form as may be established by or pursuant to a Board Resolution or in
one or more indentures supplemental thereto, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution thereof.
C. The Company and the Trustee have agreed that the Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated "10%
Senior Secured Notes Due 2001, Series A" (the "Senior Secured Notes") pursuant
to the terms of this First Supplemental Indenture and substantially in the form
set forth below, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Indenture
and this First Supplemental Indenture, and with 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
Secured Notes, as evidenced by their execution thereof.
[Form of Face of Security]
MERCURY FINANCE COMPANY
10% SENIOR SECURED NOTE DUE 2001, SERIES A
No. R-__________ $
CUSIP No.
MERCURY FINANCE COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter called the "Company," which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to [_______________], or registered
assigns, the principal sum of $__________ on [the second anniversary of the
Effective Date], subject to earlier redemption or repurchase as described below,
and to pay interest thereon from _______________, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 10% per annum, payable quarterly on ___________ of each year,
commencing on __________, 199_, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in said Indenture,
be computed on the basis of a 360-day year consisting of twelve 30-day months
and paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be ________________________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
calendar days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of and any such interest on this Security
shall be made at the office or agency of the Company maintained for such purpose
in New York, New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address appears in the Security Register.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET FORTH ON THE
REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH IN THIS PLACE.
This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication herein has been signed manually by the
Trustee under said Indenture.
IN WITNESS WHEREOF, this instrument has been duly executed in
accordance with the Indenture.
MERCURY FINANCE COMPANY
By:
Name:
Attest: Title:
By:
[Form of Reverse of Security]
MERCURY FINANCE COMPANY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities") issued and to be issued in one or more
series under an Indenture, dated as of __________, 1999 (herein called the
"Indenture"), between the Company and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $___________.
On the terms and subject to the conditions set forth in the Company
Security Documents, the payment and performance of the obligations of the
Company under the Securities issued under this Indenture, including this
Security, are secured by the Company Collateral and have the benefit of the
Subsidiaries Guaranty Agreement executed by each Subsidiary of the Company.
Payment and performance of the obligations of the Subsidiaries under the
Subsidiaries Guaranty Agreement are secured by the Subsidiaries Collateral. The
Company Collateral and the Subsidiaries Collateral has been pledged to the
Trustee on the terms and subject to the conditions set forth in the Collateral
Security Documents for the equal and ratable benefit of the Holders of
Securities issued under the Indenture. As set forth in the Indenture, the
Company Pledge Agreement, the Company Security Agreement, the Subsidiaries
Guaranty Agreement and the Subsidiaries Security Agreement, to the extent the
Company or a Subsidiary of the Company enters into a Working Capital Facility,
the rights of any party lending money to the Company or a Subsidiary of the
Company pursuant to such Working Capital Facility with respect to certain assets
comprising a portion of the Company Collateral or the Subsidiaries Collateral
will be senior to those rights of the Holders of Securities issued under the
Indenture.
No sinking fund is provided for the Securities. The Securities are
subject to redemption at the option of the Company, at any time and from time to
time, in whole or in part, in increments of not less than $5.0 million, upon not
more than 60 nor less than 30 days' notice to the Holders prior to the
Redemption Date, at the principal amount thereof, plus accrued and unpaid
interest thereon to the date of redemption.
If less than all of the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed will be selected by such method as
the Trustee may deem fair and appropriate. In the event of the redemption of
this Security in part only, a new Security or Securities of this series and of
like tenor for the portion hereof not so redeemed shall be issued in the name of
the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, the Company is required to
repurchase the Securities, at the option of the Holders thereof, at a purchase
price equal to 101% of the outstanding principal amount thereof, plus accrued
and unpaid interest thereon to the Repurchase Date, but interest installments
with a Stated Maturity on or prior to such Repurchase Date shall be payable to
the Holders of such Securities 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 the repurchase of this Security in part only, a
new Security or Securities of this series of like tenor for the portion hereof
not so repurchased shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless (a) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities of this series, (b) the Holders of not less than 25% in
principal amount of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity,
(c) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request and (d) the Trustee shall have failed
to institute such proceeding for 60 calendar days after receipt of such notice,
request, and offer of indemnity. However, the foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or interest hereon on or after the respective due
dates therefor expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium or
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and integral multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like
tenor, of authorized denominations and for the same aggregate principal amount,
shall be issued to the designated transferee or transferees.
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 Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security shall be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security that are defined in the Indenture shall
have the respective meanings assigned to them in the Indenture. This Security,
the Indenture and the Collateral Security Documents shall be construed in
accordance with the laws of the State of New York without giving effect to
principles of conflict of laws of such State.
D. The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: Norwest Bank Minnesota, National Association,
as Trustee
By:
Authorized Signatory
E. All acts and things necessary to make the Senior Secured Notes, when
the Senior Secured Notes have been executed by the Company and authenticated by
the Trustee and delivered as provided in the Indenture and this First
Supplemental Indenture, the valid, binding and legal obligations of the Company
and to constitute these presents a valid indenture and agreement according to
its terms, have been done and performed, and the execution and delivery by the
Company of the Indenture and this First Supplemental Indenture and the issue
hereunder of the Senior Secured Notes have in all respects been duly authorized;
and the Company, in the exercise of the legal right and power in it vested, has
executed and delivered the Indenture and is executing and delivering this First
Supplemental Indenture and proposes to make, execute, issue and deliver the
Senior Secured Notes.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the Senior
Secured Notes are authenticated, issued, and delivered, and in consideration of
the premises and of the purchase and acceptance of the Senior Secured Notes by
the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of the respective Holders from time to time of the Senior Secured Notes,
as follows:
ARTICLE I. ISSUANCE OF SENIOR SECURED NOTES.
Section 1.1. Issuance of Senior Secured Notes; Principal Amount; Maturity.
(a) On __________, 1999, the Company shall issue and deliver to the
Trustee, and the Trustee shall authenticate, Senior Secured Notes substantially
in the form set forth above, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
the Indenture and this First Supplemental Indenture, and with 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 Secured Notes, as evidenced by their execution thereof.
(b) The Senior Secured Notes shall be issued in the aggregate principal
amount of $_________ and shall mature on [the second anniversary of the
Effective Date].
Section 1.2. Interest on the Senior Secured Notes; Payment of Interest.
(a) The Senior Secured Notes shall bear interest at the rate of 10% per
annum from [_________________], or, if later, from the most recent Interest
Payment Date to which interest has been paid or duly provided for.
(b) The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date shall, as provided in the Indenture, be paid to the
Person in whose name a Senior Secured Note (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the ______________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name the Senior Secured Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of the Senior Secured Notes not less than 10
calendar 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 Secured Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture.
(c) Payment of the principal of and any such interest on the Senior
Secured Notes shall be made at the office or agency of the Company maintained
for such purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security Register.
ARTICLE II. CERTAIN DEFINITIONS.
Section 2.1. Certain Definitions.
The terms defined in this Section 2.1 (except as herein otherwise
expressly provided or unless the context of this First Supplemental Indenture
otherwise requires) for all purposes of this First Supplemental Indenture and of
any indenture supplemental hereto have the respective meanings specified in this
Section 2.1. All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP. All other terms used in this First
Supplemental Indenture that are defined in the Indenture or the Trust Indenture
Act, either directly or by reference therein (except as herein otherwise
expressly provided or unless the context of this First Supplemental Indenture
otherwise requires), have the respective meanings assigned to such terms in the
Indenture or the Trust Indenture Act, as the case may be, as in force at the
date of this First Supplemental Indenture as originally executed.
"Affiliate" has the meaning ascribed thereto in Section 3.8.
"Asset Sale" means any sale or other disposition, or series of sales or
other dispositions (including, without limitation, by merger or consolidation
and whether by operation of law or otherwise) of assets by the Company or its
Subsidiaries to any Person except (i) sales of used, worn out or surplus
equipment in the ordinary course of business and (ii) sales, contributions or
transfers of Receivables pursuant to any Working Capital Facility. The
definition of Asset Sale shall include the receipt of funds from any federal or
state income tax refunds.
"Cash Equivalent" means: (a) obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America which are backed by the full
faith and credit of the United States of America; (b) obligations (including,
but not limited to, demand or time deposits, bankers' acceptances and
certificates of deposit) issued by a depository institution or trust company or
a wholly owned subsidiary or branch office of any depository institution or
trust company, provided that (i) such depository institution or trust company
has, at the time of the Company's or any of its Subsidiaries' investment therein
or contractual commitment providing for such investment, capital, surplus or
undivided profits (as of the date of such institution's most recently published
financial statements) in excess of $100 million and (ii) the commercial paper of
such depository institution or trust company, at the time of the Company's or
any of its Subsidiaries' investment therein or contractual commitment providing
for such investment, is rated at least A1 by S&P or P-1 by Moody's; (c) debt
obligations (including, but not limited to, commercial paper and medium-term
notes) issued or unconditionally guaranteed as to principal and interest by any
corporation, state or municipal government or agency or instrumentality thereof
or foreign sovereignty, if the commercial paper of such corporation, state or
municipal government or foreign sovereignty, at the time of the Company's or any
of its Subsidiaries' investment therein or contractual commitment providing for
such investment, is rated at least A1 by S&P or P-1 by Moody's; (d) repurchase
obligations with a term of not more than seven calendar days for underlying
securities of the type described above entered into with a depository
institution or trust company meeting the qualifications described in clause (b)
above; and (e) Investments in money market or mutual funds that invest
predominantly in Cash Equivalents of the type described in clauses (a), (b), (c)
and (d) above; provided, however, that, in the case of clause (a) above, each
such investment has a maturity of one year or less from the date of acquisition
thereof, and, in the case of clauses (b) and (c) above, each such investment has
a maturity of 270 days or less from the date of acquisition thereof.
"Change of Control" means the occurrence of the following event: any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the voting stock of the Company.
"Effective Date" means ______________, 1999.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any capital stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by any other Person. The amount of any
Investment shall be the original cost thereof, plus the cost of all additions
thereto and minus the amount of all reductions therein in the nature of
repayment of principal or return of capital, without any adjustments for
increases or decreases in value, write-ups, write-downs or write-offs with
respect to such Investment.
"Leverage Ratio" means, at any date of determination, the ratio of the
sum of the Indebtedness and the net worth of the Company and its Subsidiaries to
the Indebtedness of the Company and its Subsidiaries, in each case calculated on
a consolidated basis in accordance with GAAP.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, or preference, priority, or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including without limitation
any conditional sale, deferred purchase price or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing, under the Uniform Commercial Code or comparable law
of any jurisdiction, of any financing statement naming the owner of the asset to
which such financing statement relates as debtor.
"Moody's" means Moody's Investors Service, Inc., or any successor to
the rating agency business thereof.
"Permitted Indebtedness" means, without duplication: (a) the Series B
Senior Secured Notes and the Senior Subordinated Notes; (b) Indebtedness under
one or more Working Capital Facilities; (c) Indebtedness between or among the
Company and its wholly owned Subsidiaries; (d) to the extent deemed to be
"Indebtedness," obligations under swap agreements, cap agreements, collar
agreements, insurance arrangements, or any similar agreement or arrangement, in
each case designed to provide a bona fide hedge against fluctuations in interest
rates, the cost of currency, or the cost of goods (other than inventory); (e)
other Indebtedness of the Company or its Subsidiaries in outstanding amounts not
to exceed $5 million in the aggregate at any particular time; (f) liabilities
(other than for or in connection with borrowed money) incurred in the operation
of the Finance Business in the ordinary course thereof and not more than six
months overdue, unless contested in good faith by appropriate proceedings; (g)
Indebtedness evidenced by letters of credit that are issued in the ordinary
course of the business of the Company and its Subsidiaries to secure workers'
compensation and other insurance coverages; (h) deferred taxes and other
deferred obligations incurred in the ordinary course of business and not
evidenced by notes, bonds, debentures or other evidences of indebtedness; and
(i) Indebtedness incurred in connection with any extension, renewal,
refinancing, replacement, or refunding (including successive extensions,
renewals, refinancings, replacements, or refundings), in whole or in part, of
any Indebtedness of the Company or its Subsidiaries; provided, however, that the
principal amount of the Indebtedness so incurred does not exceed the sum of the
principal amount of the Indebtedness so extended, renewed, refinanced, replaced,
or refunded, plus all interest accrued thereon and all related fees and
expenses.
"Permitted Investments" means, without duplication: (a) Cash
Equivalents; (b) Investments in another Person, if as a result of such
Investment (i) such other Person becomes a Subsidiary of the Company or (ii)
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, the Company or a Subsidiary
of the Company; (c) Investments in any Subsidiary of the Company or Investments
in the Company by a Subsidiary of the Company; (d) commissions and advances to
employees of the Company and its Subsidiaries in the ordinary course of
business; (e) Investments representing notes, securities, or other instruments
or obligations acquired in connection with the sale of assets; (f) Investments
represented by that portion of the proceeds from Asset Sales permitted under
Section 3.7 to the extent such Investments are non-cash proceeds; (g)
Investments representing capital stock or obligations issued to the Company or
any Subsidiary of the Company in settlement of claims against any other Person
by reason of a composition or readjustment of debt or a reorganization of any
debtor of the Company or such Subsidiary; and (h) other Investments, the
aggregate amount of which at any one time does not exceed $5 million.
"Permitted Liens" means, without duplication: (a) Liens arising under
the Collateral Security Documents; (b) Liens on new Receivables securing any
Working Capital Facility; (c) Liens incurred and pledges and deposits made in
the ordinary course of business in connection with liability insurance, workers'
compensation, unemployment insurance, old-age pensions, and other social
security benefits other than in respect of employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended; (d) Liens imposed
by law, such as carriers', warehousemen's, mechanics', materialmen's, and
vendor's Liens, incurred in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings; (e) Liens securing the payment of taxes, assessments,
and governmental charges or levies, either (i) not delinquent or (ii) being
contested in good faith by appropriate legal or administrative proceedings and
as to which adequate reserves shall have been established on the books of the
relevant Person in conformity with GAAP; (f) zoning restrictions, easements,
rights of way, reciprocal easement agreements, operating agreements, covenants,
conditions, or restrictions on the use of any parcel of property that are
routinely granted in real estate transactions or do not interfere in any
material respect with the ordinary conduct of the business of the Company and
its Subsidiaries or the value of such property for the purpose of such business;
(f) Liens on property existing at the time such property is acquired; (g)
purchase money Liens upon or in any property acquired or held in the ordinary
course of business to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property; (h) Liens on the assets of any
Subsidiary of the Company at the time such Subsidiary is acquired; (i) Liens
with respect to obligations in outstanding amounts not to exceed $5.0 million at
any particular time and that (i) are not incurred in connection with the
borrowing of money or obtaining advances or credit (other than trade credit in
the ordinary course of business) and (ii) do not in the aggregate interfere in
any material respect with the ordinary conduct of the business of the Company
and its Subsidiaries; (j) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of the business of the Company and its
Subsidiaries; (k) Liens resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which (i) the Company or a Subsidiary of the Company shall in good faith be
prosecuting an appeal or proceeding for a review, (ii) a stay of execution
pending such appeal or proceeding for review shall be in effect, and (iii) the
Company shall have established on its books adequate reserves in accordance with
GAAP; (l) rights of banks to set off deposits against Indebtedness owed to such
banks whether arising by law or pursuant to deposit, cash collateral or similar
agreements; and (m) any extension, renewal or replacement, in whole or in part,
of any Lien described in the foregoing clauses; provided, however, that any such
extension, renewal or replacement Lien is limited to the property or assets
covered by the Lien extended, renewed or replaced or substitute property or
assets, the value of which is not materially greater than the value of the
property or assets for which the substitute property or assets are substituted.
"Plan" means the Plan of Reorganization of Mercury Finance Company
confirmed by the United States Bankruptcy Court for the District of
_______________ pursuant to an order dated ___________ __, 1999.
"Receivables" means (i) consumer installment sale contracts and loans
evidenced by promissory notes secured by new and used automobiles and light
trucks, (ii) other consumer installment sale contracts or lease contracts and
(iii) loans secured by residential mortgages, in the case of each of the clauses
(i), (ii) and (iii), that are purchased or originated in the ordinary course of
business by the Company or any Subsidiary of the Company. All Receivables shall
be valued in accordance with GAAP.
"Repurchase Date" has the meaning ascribed thereto in Section 3.4(a).
"Repurchase Price" has the meaning described thereto in Section 3.4(a).
"Restricted Payments" has the meaning ascribed thereto in Section 3.3.
"Senior Subordinated Notes" means the Company's 11% Senior Subordinated
Notes Due 2002 issued under the Indenture dated as of ______________ __, 1999
between the Company and the trustee thereunder.
"Series B Senior Secured Notes" means the Company's Senior Secured
Notes Due 2001, Series B issued under the Indenture.
"S&P" means Standard & Poor's Ratings Group, or any successor to the
rating agency business thereof.
"Subordinated Indebtedness" means any Indebtedness of the Company which
is expressly subordinated in right of payment to the senior secured notes issued
or to be issued under this Indenture, including without limitation, the Series B
Senior Secured Notes.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
amended or modified from time to time.
ARTICLE III. CERTAIN COVENANTS.
Section 3.1. Indebtedness.
The Company shall not, nor shall it permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become liable with respect to, any Indebtedness other than Permitted
Indebtedness if immediately after incurring such Indebtedness other than
Permitted Indebtedness, the Company's Leverage Ratio, calculated on a pro forma
basis, would be equal to or greater than 2.00:1.00.
Section 3.2. Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Liens upon any of their respective
assets, other than Permitted Liens.
Section 3.3. Restricted Payments.
The Company shall not, and shall not permit any of its Subsidiaries to,
(a) declare or pay any dividend on, or make any other distribution on account
of, the Company's capital stock; (b) purchase, redeem or otherwise acquire or
retire for value any capital stock (including any option, warrant or right to
purchase capital stock) of the Company owned beneficially by a Person other than
a wholly owned Subsidiary of the Company; (c) purchase, redeem or otherwise
acquire or retire for value the principal of any Subordinated Indebtedness prior
to the scheduled maturity thereof other than pursuant to mandatory scheduled
redemptions or repayments; or (d) make any Investment other than Permitted
Investments (all such dividends, distributions, purchases, redemptions, or
Investments being collectively referred to as "Restricted Payments").
Notwithstanding anything in the foregoing to the contrary, the Company may take
the actions described in Clause (a), (b) or (d) above if, at the time of such
action or after giving effect thereto: (i) no Event of Default shall have
occurred and is continuing; (ii) the Company could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) under Section 3.1; and (iii)
the cumulative amount of Restricted Payments made subsequent to the Effective
Date shall not be greater than the sum of: (A) 50% of the Company's cumulative
consolidated net income (or a negative amount equal to 100% of the Company's
cumulative consolidated net loss, if applicable) from the Effective Date through
the end of the Company's fiscal quarter immediately preceding the taking of such
action; and (B) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale of capital stock of the Company (other than redeemable
capital stock), including capital stock issued upon the conversion of
convertible Indebtedness issued on or after the Effective Date, in exchange for
outstanding Indebtedness, or from the exercise of options, warrants, or rights
to purchase capital stock of the Company to any Person other than to a
Subsidiary of the Company subsequent to the Effective Date (with the Company
being deemed, in the case of capital stock issued upon conversion or in exchange
for Indebtedness, to have received net cash proceeds equal to the principal
amount of the Indebtedness so converted or exchanged); provided, however, that
(1) the payment of any dividend within 60 calendar days after the date of
declaration thereof, if such declaration complied with the foregoing redemption
or other acquisition provisions on the date of such declaration, (2) the
purchase, redemption, or other acquisition or retirement for value of any shares
of capital stock of the Company in exchange for, or out of the proceeds of, a
substantially concurrent issue and sale (other than to a Subsidiary of the
Company) of other shares of capital stock (other than redeemable capital stock)
of the Company, and (3) any purchase, redemption or other acquisition or
retirement for value of any capital stock (including any option, warrant, or
right to purchase capital stock) of the Company issued to any employee or
director of the Company pursuant to any employee benefit or similar plan shall
not be deemed to constitute "Restricted Payments" and shall not be prohibited
under this Section.
Section 3.4. Change of Control.
(a) Right to Require Repurchase. In the event that there shall occur a
Change of Control, then each Holder shall have the right, at such Holder's
option, to require the Company to repurchase all or any designated part of such
Holder's Senior Secured Notes on the date (the "Repurchase Date") selected by
the Company that is not more than 75 days after the date the Company gives
notice of the Change of Control as contemplated in paragraph (b) below at a
price (the "Repurchase Price") equal to 101% of the outstanding principal amount
thereof, plus accrued and unpaid interest to the Repurchase Date. Such right to
require the repurchase of Senior Secured Notes shall continue notwithstanding a
discharge of the Company from its obligations with respect to the Senior Secured
Notes in accordance with the provisions of Article VI or Article XIII of the
Indenture.
(b) Notice; Method of Exercising Repurchase Right. On or before the
fifteenth day after the Company knows that a Change of Control has occurred, the
Company or, at the request of the Company, the Trustee (in the name of and at
the expense of the Company), shall give notice of the occurrence of the Change
of Control and of the repurchase right set forth herein arising as a result
thereof by first-class mail, postage prepaid, to each Holder of the Senior
Secured Notes at such Holder's address appearing in the Security Register for
the Senior Secured Notes. The Company shall also deliver a copy of such notice
to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price, and
(4) the instructions a Holder must follow to exercise its
repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise its repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Change of
Control. To exercise a repurchase right, a Holder shall deliver to the Company
(or to an agent designated by the Company for such purpose in the notice
referred to above) on or before the fifth Business Day prior to the Repurchase
Date (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Senior
Secured Note (or portion of the Senior Secured Note) to be repurchased and a
statement that an election to exercise the repurchase right is being made
thereby, and (ii) the Senior Secured Note with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable. If the Repurchase Date falls between any
Regular Record Date and the corresponding succeeding Interest Payment Date,
Senior Secured Notes to be repurchased must be accompanied by payment from the
Holder of an amount equal to the interest thereon which the registered Holder
thereof is to receive on such Interest Payment Date. In the event a repurchase
right shall be exercised in accordance with the terms hereof and the
instructions referred to herein, (x) the Company shall on the Repurchase Date
pay or cause to be paid in cash to the Holder thereof the Repurchase Price for
each Senior Secured Note (or any portion thereof) as to which the repurchase
right has been exercised, and (y) the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such Senior
Secured Note without service charge, a new Senior Secured Note or Notes, as
applicable, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for any portion of the
principal of such Senior Secured Note as to which the repurchase right has not
been exercised. Any questions as to the compliance by a Holder of Senior Secured
Notes with the requirements for a valid exercise of a repurchase right
(including the timely delivery of an exercise notice in proper form) shall be
determined by the Company in its sole discretion, which in all events shall be
exercised in good faith.
(c) Deposit of Repurchase Price. On or prior to the Repurchase 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 7.03 of the Indenture) an amount of money sufficient to pay
the Repurchase Price of the Senior Secured Notes which are to be repurchased on
the Repurchase Date.
(d) Senior Secured Notes Not Repurchased on Repurchase Date. If any
Senior Secured Note (or any portion thereof) surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal of such Senior Secured Note
(or such portion thereof) shall, until paid, bear interest from the Repurchase
Date at the rate borne by such Senior Secured Note.
(e) Compliance. The Company shall comply with all tender offer rules,
including but not limited to Section 14(e) of the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to any repurchase of the Senior Secured
Notes under this Section 3.4.
Section 3.5. Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist any
contractual restriction on the ability of any Subsidiary of the Company to (a)
pay any dividend on, or make any other distribution on account of, its capital
stock or pay any Indebtedness owed to the Company or a Subsidiary of the Company
or (b) make loans or advances to the Company or a Subsidiary of the Company.
Section 3.6. Issuance of Subsidiary Preferred Stock.
The Company shall not permit any Subsidiary of the Company to issue any
shares of preferred stock.
Section 3.7. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, conduct any Asset Sale, except for the sale of the
Company's proprietary credit card receivable portfolio, unless (i) such Asset
Sale is for fair market value (as evidenced by a resolution by the Company's
Board of Directors, certified by an officer of the Company and delivered to the
Trustee) and (ii) at least 85% of the consideration received by the Company in
such Asset Sale is in the form of cash. All net cash proceeds realized from any
Asset Sale (after taxes, reasonable fees and expenses incurred directly
therewith and any Indebtedness secured hereby), including the receipt of funds
from any federal or state income tax refunds, in excess of $40,000,000 in the
aggregate for such Asset Sale or income tax refund and all other Asset Sales or
income tax refunds occurring within the immediately preceding 360 day period
will be paid to the Trustee within 60 days of the receipt of the proceeds to
redeem Securities issued under the Indenture in accordance with the terms of the
Indenture.
Section 3.8. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any transaction with an Affiliate (other than the Company or a wholly
owned Subsidiary thereof) on terms more favorable to the Affiliate than would
have been obtainable in arm's-length dealing. Solely for purposes of this
Section 3.8, an "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, or any other Person that has a
relationship with such specified Person whereby either of such Persons holds or
beneficially owns 10% or more of the equity interest in the other or 10% or more
of any class of voting securities of the other. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Section 3.9. Change in Business.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any material line of business substantially different from the Finance
Business.
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT.
Section 4.1. Immediate Events of Default.
Notwithstanding anything in Section 9.01 of the Indenture to the
contrary, if the Company defaults in the performance of, or breaches any,
covenant set forth in Article III (other than Section 3.8) of this First
Supplemental Indenture or in Section 7.05 of the Indenture, such default or
breach shall immediately constitute an Event of Default, without giving effect
to any passage of time or notice or both.
ARTICLE V. REDEMPTION OF SECURITIES.
Section 5.1. Right of Redemption.
The Senior Secured Notes may be redeemed in accordance with the form of
note set forth herein.
Section 5.2. Repurchase.
The Company may at any time and from time to time purchase Senior
Secured Notes in the open market or otherwise at any price, and any Senior
Secured Notes so purchased shall be promptly surrendered to the Trustee for
cancellation and shall not be reissued.
ARTICLE VI. MISCELLANEOUS.
Section 6.1. Reference to and Effect on the Indenture.
This First Supplemental Indenture shall be construed as supplemental to
the Indenture and all the terms and conditions of this First Supplemental
Indenture shall be deemed to be part of the terms and conditions of the
Indenture. Except as set forth herein, the Indenture heretofore executed and
delivered is hereby (i) incorporated by reference in this First Supplemental
Indenture and (ii) ratified, approved and confirmed.
Section 6.2. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Article III hereof if the Holders of a
majority in principal amount of the Outstanding Senior Secured 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 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.
Section 6.3. Supplemental Indenture May be Executed in Counterparts.
This instrument may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
[Seal] MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
Attest:
By:
Name:
Title:
STATE OF )
) SS:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of MERCURY FINANCE COMPANY, one of the
entities described in and which executed the above instrument; that he/she knows
the seal of said entity; that the seal or a facsimile thereof affixed to said
instrument is such seal; that it was so affixed by authority of the Board of
Directors of said entity, and that he/she signed his/her name thereto by like
authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF )
) SS.:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
Mercury Finance Company
and
Norwest Bank Minnesota, National Association,
Trustee
Second Supplemental Trust Indenture
Dated as of __________, 1999
Supplementing that certain
INDENTURE
Dated as of __________, 1999
Authorizing the Issuance and Delivery of
Senior Secured Securities
consisting of $___________* aggregate principal amount of
Senior Secured Notes Due 2001, Series B
* In the execution version, the appropriate amount determined in accordance
with __________________________ of the Plan will be inserted here, in the first
paragraph on page 2 and in Section 1.1(b) hereof.
TABLE OF CONTENTS
Page
RECITALS......................................................................1
[Form of Face of Security]....................................................2
[Form of Reverse of Security].................................................4
ARTICLE I. ISSUANCE OF SENIOR SECURED NOTES..................................7
Section 1.1. Issuance of Senior Secured Notes; Principal Amount;
Maturity................................................7
Section 1.2. Interest on the Senior Secured Notes; Payment of
Interest................................................8
ARTICLE II. CERTAIN DEFINITIONS..............................................8
Section 2.1. Certain Definitions.....................................8
ARTICLE III. CERTAIN COVENANTS..............................................13
Section 3.1. Indebtedness...........................................13
Section 3.2. Liens..................................................13
Section 3.3. Restricted Payments....................................13
Section 3.4. Change of Control......................................14
Section 3.5. Payment Restrictions Affecting Subsidiaries............16
Section 3.6. Issuance of Subsidiary Preferred Stock.................16
Section 3.7. Asset Sales............................................16
Section 3.8. Transactions with Affiliates...........................16
Section 3.9. Change in Business.....................................17
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT....................................17
ARTICLE V. REDEMPTION OF SECURITIES.........................................17
Section 5.1. Right of Redemption....................................17
Section 5.2. Repurchase.............................................17
ARTICLE VI. MISCELLANEOUS...................................................17
Section 6.1. Reference to and Effect on the Indenture...............17
Section 6.2. Waiver of Certain Covenants............................18
Section 6.3. Supplemental Indenture May be Executed in Counterparts.18
SECOND SUPPLEMENTAL INDENTURE, dated as of __________, 1999 (this
"Second Supplemental Indenture"), between Mercury Finance Company, a corporation
duly organized and existing under the laws of the State of Delaware (the
"Company"), and Norwest Bank Minnesota, National Association, a U.S. national
banking association, as Trustee (the "Trustee"), supplementing that certain
Indenture, dated as of __________, 1999, between the Company and the Trustee
(the "Indenture").
RECITALS
A. The Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of its senior secured
notes (the "Securities") to be issued in one or more series as provided for in
the Indenture.
B. The Indenture provides that the Securities of each series shall be
in such form as may be established by or pursuant to a Board Resolution or in
one or more indentures supplemental thereto, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution thereof.
C. The Company and the Trustee have agreed that the Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated "Senior
Secured Notes Due 2001, Series B" (the "Senior Secured Notes") pursuant to the
terms of this Second Supplemental Indenture and substantially in the form set
forth below, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Indenture
and this Second Supplemental Indenture, and with 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
Secured Notes, as evidenced by their execution thereof.
[Form of Face of Security]
MERCURY FINANCE COMPANY
SENIOR SECURED NOTE DUE 2001, SERIES B No.
R-__________ $
CUSIP No.
MERCURY FINANCE COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter called the "Company," which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to [_______________], or registered
assigns, the principal sum of $__________ on [the second anniversary of the
Effective Date], subject to earlier redemption or repurchase as described below,
and to pay interest thereon from _______________, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at a
floating rate equal to the London interbank offering rate for three months
quoted in The Wall Street Journal on the later of [Effective Date or 91 days
thereafter] and the most recently occurring Interest Payment Date ("LIBOR") plus
___%1 per annum, payable quarterly on ___________ of each year, commencing on
__________, 199_, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in said Indenture, be computed on
the basis of a 360-day year consisting of twelve 30-day months and paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be ________________________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 calendar days
prior to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities of this series may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and any such interest on this Security shall be made
at the office or agency of the Company maintained for such purpose in New York,
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address appears in the Security Register.
- --------
1 * Percentage rate will be equal to 10% minus the percentage rate of LIBOR on
the date of execution of the Indenture minus a percentage rate that represents
the cost to the Company of establishing interest rate protection such that the
effective interest rate to the Company of this offering is 10%.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET FORTH ON THE
REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH IN THIS PLACE.
This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication herein has been signed manually by the
Trustee under said Indenture.
IN WITNESS WHEREOF, this instrument has been duly executed in
accordance with the Indenture.
MERCURY FINANCE COMPANY
By:
Name:
Attest: Title:
By:
[Form of Reverse of Security]
MERCURY FINANCE COMPANY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities") issued and to be issued in one or more
series under an Indenture, dated as of __________, 1999 (herein called the
"Indenture"), between the Company and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to
$-----------.
On the terms and subject to the conditions set forth in the Company
Security Documents, the payment and performance of the obligations of the
Company under the Securities issued under this Indenture, including this
Security, are secured by the Company Collateral and have the benefit of the
Subsidiaries Guaranty Agreement executed by each Subsidiary of the Company.
Payment and performance of the obligations of the Subsidiaries under the
Subsidiaries Guaranty Agreement are secured by the Subsidiaries Collateral. The
Company Collateral and the Subsidiaries Collateral has been pledged to the
Trustee on the terms and subject to the conditions set forth in the Collateral
Security Documents for the equal and ratable benefit of the Holders of
Securities issued under the Indenture. As set forth in the Indenture, the
Company Pledge Agreement, the Company Security Agreement, the Subsidiaries
Guaranty Agreement and the Subsidiaries Security Agreement, to the extent the
Company or a Subsidiary of the Company enters into a Working Capital Facility,
the rights of any party lending money to the Company or a Subsidiary of the
Company pursuant to such Working Capital Facility with respect to certain assets
comprising a portion of the Company Collateral or the Subsidiaries Collateral
will be senior to those rights of the Holders of Securities issued under the
Indenture.
No sinking fund is provided for the Securities. The Securities are
subject to redemption at the option of the Company, at any time and from time to
time, in whole or in part, in increments of not less than $5.0 million, upon not
more than 60 nor less than 30 days' notice to the Holders prior to the
Redemption Date, at the principal amount thereof, plus accrued and unpaid
interest thereon to the date of redemption.
If less than all of the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed will be selected by such method as
the Trustee may deem fair and appropriate. In the event of the redemption of
this Security in part only, a new Security or Securities of this series and of
like tenor for the portion hereof not so redeemed shall be issued in the name of
the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, the Company is required to
repurchase the Securities, at the option of the Holders thereof, at a purchase
price equal to 101% of the outstanding principal amount thereof, plus accrued
and unpaid interest thereon to the Repurchase Date, but interest installments
with a Stated Maturity on or prior to such Repurchase Date shall be payable to
the Holders of such Securities 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 the repurchase of this Security in part only, a
new Security or Securities of this series of like tenor for the portion hereof
not so repurchased shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless (a) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities of this series, (b) the Holders of not less than 25% in
principal amount of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity,
(c) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request and (d) the Trustee shall have failed
to institute such proceeding for 60 calendar days after receipt of such notice,
request, and offer of indemnity. However, the foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or interest hereon on or after the respective due
dates therefor expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium or
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and integral multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like
tenor, of authorized denominations and for the same aggregate principal amount,
shall be issued to the designated transferee or transferees.
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 Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security shall be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security that are defined in the Indenture shall
have the respective meanings assigned to them in the Indenture. This Security,
the Indenture and the Collateral Security Documents shall be construed in
accordance with the laws of the State of New York without giving effect to
principles of conflict of laws of such State.
D. The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: Norwest Bank Minnesota, National
Association, as Trustee
By:
Authorized Signatory
E. All acts and things necessary to make the Senior Secured Notes, when
the Senior Secured Notes have been executed by the Company and authenticated by
the Trustee and delivered as provided in the Indenture and this Second
Supplemental Indenture, the valid, binding and legal obligations of the Company
and to constitute these presents a valid indenture and agreement according to
its terms, have been done and performed, and the execution and delivery by the
Company of the Indenture and this Second Supplemental Indenture and the issue
hereunder of the Senior Secured Notes have in all respects been duly authorized;
and the Company, in the exercise of the legal right and power in it vested, has
executed and delivered the Indenture and is executing and delivering this Second
Supplemental Indenture and proposes to make, execute, issue and deliver the
Senior Secured Notes.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the Senior
Secured Notes are authenticated, issued, and delivered, and in consideration of
the premises and of the purchase and acceptance of the Senior Secured Notes by
the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of the respective Holders from time to time of the Senior Secured Notes,
as follows:
ARTICLE I. ISSUANCE OF SENIOR SECURED NOTES.
Section 1.1. Issuance of Senior Secured Notes; Principal Amount; Maturity.
(a) On __________, 1999, the Company shall issue and deliver to the
Trustee, and the Trustee shall authenticate, Senior Secured Notes substantially
in the form set forth above, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
the Indenture and this Second Supplemental Indenture, and with 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 Secured Notes, as evidenced by their execution thereof.
(b) The Senior Secured Notes shall be issued in the aggregate principal
amount of $_________ and shall mature on [the second anniversary of the
Effective Date].
Section 1.2. Interest on the Senior Secured Notes; Payment of Interest.
(a) The Senior Secured Notes shall bear interest for each period
precedi ng any Interest Payment Date at a floating rate equal to the London
interbank offering rate for three months quoted in The Wall Street Journal on
the later of [Effective Date or 91 days thereafter] and the preceding Interest
Payment Date ("LIBOR") plus ___% per annum from [_________________], or, if
later, from the most recent Interest Payment Date to which interest has been
paid or duly provided for.
(b) The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date shall, as provided in the Indenture, be paid to the
Person in whose name a Senior Secured Note (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the ______________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name the Senior Secured Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of the Senior Secured Notes not less than 10
calendar 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 Secured Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture.
(c) Payment of the principal of and any such interest on the Senior
Secured Notes shall be made at the office or agency of the Company maintained
for such purpose in New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security Register.
ARTICLE II.
CERTAIN DEFINITIONS.
Section 2.1. Certain Definitions.
The terms defined in this Section 2.1 (except as herein otherwise
expressly provided or unless the context of this Second Supplemental Indenture
otherwise requires) for all purposes of this Second Supplemental Indenture and
of any indenture supplemental hereto have the respective meanings specified in
this Section 2.1. All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP. All other terms used in this
Second Supplemental Indenture that are defined in the Indenture or the Trust
Indenture Act, either directly or by reference therein (except as herein
otherwise expressly provided or unless the context of this Second Supplemental
Indenture otherwise requires), have the respective meanings assigned to such
terms in the Indenture or the Trust Indenture Act, as the case may be, as in
force at the date of this Second Supplemental Indenture as originally executed.
"Affiliate" has the meaning ascribed thereto in Section 3.8.
"Asset Sale" means any sale or other disposition, or series of sales or
other dispositions (including, without limitation, by merger or consolidation
and whether by operation of law or otherwise) of assets by the Company or its
Subsidiaries to any Person except (i) sales of used, worn out or surplus
equipment in the ordinary course of business and (ii) sales, contributions or
transfers of Receivables pursuant to any Working Capital Facility. The
definition of Asset Sale shall include the receipt of funds from any federal or
state income tax refunds.
"Cash Equivalent" means: (a) obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America which are backed by the full
faith and credit of the United States of America; (b) obligations (including,
but not limited to, demand or time deposits, bankers' acceptances and
certificates of deposit) issued by a depository institution or trust company or
a wholly owned subsidiary or branch office of any depository institution or
trust company, provided that (i) such depository institution or trust company
has, at the time of the Company's or any of its Subsidiaries' investment therein
or contractual commitment providing for such investment, capital, surplus or
undivided profits (as of the date of such institution's most recently published
financial statements) in excess of $100 million and (ii) the commercial paper of
such depository institution or trust company, at the time of the Company's or
any of its Subsidiaries' investment therein or contractual commitment providing
for such investment, is rated at least A1 by S&P or P-1 by Moody's; (c) debt
obligations (including, but not limited to, commercial paper and medium-term
notes) issued or unconditionally guaranteed as to principal and interest by any
corporation, state or municipal government or agency or instrumentality thereof
or foreign sovereignty, if the commercial paper of such corporation, state or
municipal government or foreign sovereignty, at the time of the Company's or any
of its Subsidiaries' investment therein or contractual commitment providing for
such investment, is rated at least A1 by S&P or P-1 by Moody's; (d) repurchase
obligations with a term of not more than seven calendar days for underlying
securities of the type described above entered into with a depository
institution or trust company meeting the qualifications described in clause (b)
above; and (e) Investments in money market or mutual funds that invest
predominantly in Cash Equivalents of the type described in clauses (a), (b), (c)
and (d) above; provided, however, that, in the case of clause (a) above, each
such investment has a maturity of one year or less from the date of acquisition
thereof, and, in the case of clauses (b) and (c) above, each such investment has
a maturity of 270 days or less from the date of acquisition thereof.
"Change of Control" means the occurrence of the following event: any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the voting stock of the Company.
"Effective Date" means ______________, 1999.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any capital stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by any other Person. The amount of any
Investment shall be the original cost thereof, plus the cost of all additions
thereto and minus the amount of all reductions therein in the nature of
repayment of principal or return of capital, without any adjustments for
increases or decreases in value, write-ups, write-downs or write-offs with
respect to such Investment.
"Leverage Ratio" means, at any date of determination, the ratio of the
sum of the Indebtedness and the net worth of the Company and its Subsidiaries to
the Indebtedness of the Company and its Subsidiaries, in each case calculated on
a consolidated basis in accordance with GAAP.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, or preference, priority, or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including without limitation
any conditional sale, deferred purchase price or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing, under the Uniform Commercial Code or comparable law
of any jurisdiction, of any financing statement naming the owner of the asset to
which such financing statement relates as debtor.
"Moody's" means Moody's Investors Service, Inc., or any successor to
the rating agency business thereof.
"Permitted Indebtedness" means, without duplication: (a) the Series A
Senior Secured Notes and the Senior Subordinated Notes; (b) Indebtedness under
one or more Working Capital Facilities; (c) Indebtedness between or among the
Company and its wholly owned Subsidiaries; (d) to the extent deemed to be
"Indebtedness," obligations under swap agreements, cap agreements, collar
agreements, insurance arrangements, or any similar agreement or arrangement, in
each case designed to provide a bona fide hedge against fluctuations in interest
rates, the cost of currency, or the cost of goods (other than inventory); (e)
other Indebtedness of the Company or its Subsidiaries in outstanding amounts not
to exceed $5 million in the aggregate at any particular time; (f) liabilities
(other than for or in connection with borrowed money) incurred in the operation
of the Finance Business in the ordinary course thereof and not more than six
months overdue, unless contested in good faith by appropriate proceedings; (g)
Indebtedness evidenced by letters of credit that are issued in the ordinary
course of the business of the Compa ny and its Subsidiaries to secure workers'
compensation and other insurance coverages; (h) deferred taxes and other
deferred obligations incurred in the ordinary course of business and not
evidenced by notes, bonds, debentures or other evidences of indebtedness; and
(i) Indebtedness incurred in connection with any extension, renewal,
refinancing, replacement, or refunding (including successive extensions,
renewals, refinancings, replacements, or refundings), in whole or in part, of
any Indebtedness of the Company or its Subsidiaries; provided, however, that the
principal amount of the Indebtedness so incurred does not exceed the sum of the
principal amount of the Indebtedness so extended, renewed, refinanced, replaced,
or refunded, plus all interest accrued thereon and all related fees and
expenses.
"Permitted Investments" means, without duplication: (a) Cash
Equivalents; (b) Investments in another Person, if as a result of such
Investment (i) such other Person becomes a Subsidiary of the Company or (ii)
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, the Company or a Subsidiary
of the Company; (c) Investments in any Subsidiary of the Company or Investments
in the Company by a Subsidiary of the Company; (d) commissions and advances to
employees of the Company and its Subsidiaries in the ordinary course of
business; (e) Investments representing notes, securities, or other instruments
or obligations acquired in connection with the sale of assets; (f) Investments
represented by that portion of the proceeds from Asset Sales permitted under
Section 3.7 to the extent such Investments are non-cash proceeds; (g)
Investments representing capital stock or obligations issued to the Company or
any Subsidiary of the Company in settlement of claims against any other Person
by reason of a composition or readjustment of debt or a reorganization of any
debtor of the Company or such Subsidiary; and (h) other Investments, the
aggregate amount of which at any one time does not exceed $5 million.
"Permitted Liens" means, without duplication: (a) Liens arising under
the Collateral Security Documents; (b) Liens on new Receivables securing any
Working Capital Facility; (c) Liens incurred and pledges and deposits made in
the ordinary course of business in connection with liability insurance, workers'
compensation, unemployment insurance, old-age pensions, and other social
security benefits other than in respect of employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended; (d) Liens imposed
by law, such as carriers', warehousemen's, mechanics', materialmen's, and
vendor's Liens, incurred in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings; (e) Liens securing the payment of taxes, assessments,
and governmental charges or levies, either (i) not delinquent or (ii) being
contested in good faith by appropriate legal or administrative proceedings and
as to which adequate reserves shall have been established on the books of the
relevant Person in conformity with GAAP; (f) zoning restrictions, easements,
rights of way, reciprocal easement agreements, operating agreements, covenants,
conditions, or restrictions on the use of any parcel of property that are
routinely granted in real estate transactions or do not interfere in any
material respect with the ordinary conduct of the business of the Company and
its Subsidiaries or the value of such property for the purpose of such business;
(f) Liens on property existing at the time such property is acquired; (g)
purchase money Liens upon or in any property acquired or held in the ordinary
course of business to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property; (h) Liens on the assets of any
Subsidiary of the Company at the time such Subsidiary is acquired; (i) Liens
with respect to obligations in outstanding amounts not to exceed $5.0 million at
any particular time and that (i) are not incurred in connection with the
borrowing of money or obtaining advances or credit (other than trade credit in
the ordinary course of business) and (ii) do not in the aggregate interfere in
any material respect with the ordinary conduct of the business of the Company
and its Subsidiaries; (j) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of the business of the Company and its
Subsidiaries; (k) Liens resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which (i) the Company or a Subsidiary of the Company shall in good faith be
prosecuting an appeal or proceeding for a review, (ii) a stay of execution
pending such appeal or proceeding for review shall be in effect, and (iii) the
Company shall have established on its books adequate reserves in accordance with
GAAP; (l) rights of banks to set off deposits against Indebtedness owed to such
banks whether arising by law or pursuant to deposit, cash collateral or similar
agreement; and (m) any extension, renewal or replacement, in whole or in part,
of any Lien described in the foregoing clauses; provided, however, that any such
extension, renewal or replacement Lien is limited to the property or assets
covered by the Lien extended, renewed or replaced or substitute property or
assets, the value of which is not materially greater than the value of the
property or assets for which the substitute property or assets are substituted.
"Plan" means the Plan of Reorganization of Mercury Finance Company
confirmed by the United States Bankruptcy Court for the District of
_______________ pursuant to an order dated ___________ __, 1999.
"Receivables" means (i) consumer installment sale contracts and loans
evidenced by promissory notes secured by new and used automobiles and light
trucks, (ii) other consumer installment sale contracts or lease contracts and
(iii) loans secured by residential mortgages, in the case of each of the clauses
(i), (ii) and (iii), that are purchased or originated in the ordinary course of
business by the Company or any Subsidiary of the Company. All Receivables shall
be valued in accordance with GAAP.
"Repurchase Date" has the meaning ascribed thereto in Section 3.4(a).
"Repurchase Price" has the meaning described thereto in Section 3.4(a).
"Restricted Payments" has the meaning ascribed thereto in Section 3.3.
"Senior Subordinated Notes" means the Company's 11% Senior Subordinated
Notes Due 2002 issued under the Indenture dated as of ______________ __, 1999
between the Company and the trustee thereunder.
"Series A Senior Secured Notes" means the Company's Senior Secured
Notes Due 2001, Series A issued under the Indenture.
"S&P" means Standard & Poor's Ratings Group, or any successor to the
rating agency business thereof.
"Subordinated Indebtedness" means any Indebtedness of the Company which
is expressly subordinated in right of payment to the senior secured notes issued
or to be issued under this Indenture, including without limitation, the Series B
Senior Secured Notes.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
amended or modified from time to time.
ARTICLE III. CERTAIN COVENANTS.
Section 3.1. Indebtedness.
The Company shall not, nor shall it permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become liable with respect to, any Indebtedness other than Permitted
Indebtedness if immediately after incurring such Indebtedness other than
Permitted Indebtedness, the Company's Leverage Ratio, calculated on a pro forma
basis, would be equal to or greater than 2.00:1.00.
Section 3.2. Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Liens upon any of their respective
assets, other than Permitted Liens.
Section 3.3. Restricted Payments.
The Company shall not, and shall not permit any of its Subsidiaries to,
(a) declare or pay any dividend on, or make any other distribution on account
of, the Company's capital stock; (b) purchase, redeem or otherwise acquire or
retire for value any capital stock (including any option, warrant or right to
purchase capital stock) of the Company owned beneficially by a Person other than
a wholly owned Subsidiary of the Company; (c) purchase, redeem or otherwise
acquire or retire for value the principal of any Subordinated Indebtedness prior
to the scheduled maturity thereof other than pursuant to mandatory scheduled
redemptions or repayments; or (d) make any Investment other than Permitted
Investments (all such dividends, distributions, purchases, redemptions, or
Investments being collectively referred to as "Restricted Payments").
Notwithstanding anything in the foregoing to the contrary, the Company may take
the actions described in Clause (a), (b) or (d) above if, at the time of such
action or after giving effect thereto: (i) no Event of Default shall have
occurred and is continuing; (ii) the Company could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) under Section 3.1; and (iii)
the cumulative amount of Restricted Payments made subsequent to the Effective
Date shall not be greater than the sum of: (A) 50% of the Company's cumulative
consolidated net income (or a negative amount equal to 100% of the Company's
cumulative consolidated net loss, if applicable) from the Effective Date through
the end of the Company's fiscal quarter immediately preceding the taking of such
action; and (B) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale of capital stock of the Company (other than redeemable
capital stock), including capital stock issued upon the conversion of
convertible Indebtedness issued on or after the Effective Date, in exchange for
outstanding Indebtedness, or from the exercise of options, warrants, or rights
to purchase capital stock of the Company to any Person other than to a
Subsidiary of the Company subsequent to the Effective Date (with the Company
being deemed, in the case of capital stock issued upon conversion or in exchange
for Indebtedness, to have received net cash proceeds equal to the principal
amount of the Indebtedness so converted or exchanged); provided, however, that
(1) the payment of any dividend within 60 calendar days after the date of
declaration thereof, if such declaration complied with the foregoing redemption
or other acquisition provisions on the date of such declaration, (2) the
purchase, redemption, or other acquisition or retirement for value of any shares
of capital stock of the Company in exchange for, or out of the proceeds of, a
substantially concurrent issue and sale (other than to a Subsidiary of the
Company) of other shares of capital stock (other than redeemable capital stock)
of the Company, and (3) any purchase, redemption or other acquisition or
retirement for value of any capital stock (including any option, warrant, or
right to purchase capital stock) of the Company issued to any employee or
director of the Company pursuant to any employee benefit or similar plan shall
not be deemed to constitute "Restricted Payments" and shall not be prohibited
under this Section.
Section 3.4. Change of Control.
(a) Right to Require Repurchase. In the event that there shall occur a
Change of Control, then each Holder shall have the right, at such Holder's
option, to require the Company to repurchase all or any designated part of such
Holder's Senior Secured Notes on the date (the "Repurchase Date") selected by
the Company that is not more than 75 days after the date the Company gives
notice of the Change of Control as contemplated in paragraph (b) below at a
price (the "Repurchase Price") equal to 101% of the outstanding principal amount
thereof, plus accrued and unpaid interest to the Repurchase Date. Such right to
require the repurchase of Senior Secured Notes shall continue notwithstanding a
discharge of the Company from its obligations with respect to the Senior Secured
Notes in accordance with the provisions of Article VI or Article XIII of the
Indenture.
(b) Notice; Method of Exercising Repurchase Right. On or before the
fifteenth day after the Company knows that a Change of Control has occurred, the
Company or, at the request of the Company, the Trustee (in the name of and at
the expense of the Company), shall give notice of the occurrence of the Change
of Control and of the repurchase right set forth herein arising as a result
thereof by first-class mail, postage prepaid, to each Holder of the Senior
Secured Notes at such Holder's address appearing in the Security Register for
the Senior Secured Notes. The Company shall also deliver a copy of such notice
to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price, and
(4) the instructions a Holder must follow to exercise its
repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise its repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Change of
Control. To exercise a repurchase right, a Holder shall deliver to the Company
(or to an agent designated by the Company for such purpose in the notice
referred to above) on or before the fifth Business Day prior to the Repurchase
Date (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Senior
Secured Note (or portion of the Senior Secured Note) to be repurchased and a
statement that an election to exercise the repurchase right is being made
thereby, and (ii) the Senior Secured Note with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable. If the Repurchase Date falls between any
Regular Record Date and the corresponding succeeding Interest Payment Date,
Senior Secured Notes to be repurchased must be accompanied by payment from the
Holder of an amount equal to the interest thereon which the registered Holder
thereof is to receive on such Interest Payment Date. In the event a repurchase
right shall be exercised in accordance with the terms hereof and the
instructions referred to herein, (x) the Company shall on the Repurchase Date
pay or cause to be paid in cash to the Holder thereof the Repurchase Price for
each Senior Secured Note (or any portion thereof) as to which the repurchase
right has been exercised, and (y) the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such Senior
Secured Note without service charge, a new Senior Secured Note or Notes, as
applicable, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for any portion of the
principal of such Senior Secured Note as to which the repurchase right has not
been exercised. Any questions as to the compliance by a Holder of Senior Secured
Notes with the requirements for a valid exercise of a repurchase right
(including the timely delivery of an exercise notice in proper form) shall be
determined by the Company in its sole discretion, which in all events shall be
exercised in good faith.
(c) Deposit of Repurchase Price. On or prior to the Repurchase 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 7.03 of the Indenture) an amount of money sufficient to pay
the Repurchase Price of the Senior Secured Notes which are to be repurchased on
the Repurchase Date.
(d) Senior Secured Notes Not Repurchased on Repurchase Date. If any
Senior Secured Note (or any portion thereof) surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal of such Senior Secured Note
(or such portion thereof) shall, until paid, bear interest from the Repurchase
Date at the rate borne by such Senior Secured Note.
(e) Compliance. The Company shall comply with all tender offer rules,
including but not limited to Section 14(e) of the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to any repurchase of the Senior Secured
Notes under this Section 3.4.
Section 3.5. Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist any
contractual restriction on the ability of any Subsidiary of the Company to (a)
pay any dividend on, or make any other distribution on account of, its capital
stock or pay any Indebtedness owed to the Company or a Subsidiary of the Company
or (b) make loans or advances to the Company or a Subsidiary of the Company.
Section 3.6. Issuance of Subsidiary Preferred Stock.
The Company shall not permit any Subsidiary of the Company to issue any
shares of preferred stock.
Section 3.7. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, conduct any Asset Sale, except for the sale of the
Company's proprietary credit card receivable portfolio, unless (i) such Asset
Sale is for fair market value (as evidenced by a resolution by the Company's
Board of Directors, certified by an officer of the Company and delivered to the
Trustee) and (ii) at least 85% of the consideration received by the Company in
such Asset Sale is in the form of cash. All net cash proceeds realized from any
Asset Sale (after taxes, reasonable fees and expenses incurred directly
therewith and any Indebtedness secured hereby), including the receipt of funds
from any federal or state income tax refund, in excess of $40,000,000 in the
aggregate for such Asset Sale or income tax refunds and all other Asset Sales or
income tax refunds occurring within the immediately preceding 360 day period
will be paid to the Trustee within 60 days of the receipt of the proceeds to
redeem Securities issued under the Indenture in accordance with the terms of the
Indenture.
Section 3.8. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any transaction with an Affiliate (other than the Company or a wholly
owned Subsidiary thereof) on terms more favorable to the Affiliate than would
have been obtainable in arm's-length dealing. Solely for purposes of this
Section 3.8, an "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, or any other Person that has a
relationship with such specified Person whereby either of such Persons holds or
beneficially owns 10% or more of the equity interest in the other or 10% or more
of any class of voting securities of the other. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Section 3.9. Change in Business.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any material line of business substantially different from the Finance
Business.
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT.
Section 4.1. Immediate Events of Default.
Notwithstanding anything in Section 9.01 of the Indenture to the
contrary, if the Company defaults in the performance of, or breaches any,
covenant set forth in Article III (other than Section 3.8) of this Second
Supplemental Indenture or in Section 7.05 of the Indenture, such default or
breach shall immediately constitute an Event of Default, without giving effect
to any passage of time or notice or both.
ARTICLE V. REDEMPTION OF SECURITIES.
Section 5.1. Right of Redemption.
The Senior Secured Notes may be redeemed in accordance with the form of
note set forth herein.
Section 5.2. Repurchase.
The Company may at any time and from time to time purchase Senior
Secured Notes in the open market or otherwise at any price, and any Senior
Secured Notes so purchased shall be promptly surrendered to the Trustee for
cancellation and shall not be reissued.
ARTICLE VI. MISCELLANEOUS.
Section 6.1. Reference to and Effect on the Indenture.
This Second Supplemental Indenture shall be construed as supplemental
to the Indenture and all the terms and conditions of this Second Supplemental
Indenture shall be deemed to be part of the terms and conditions of the
Indenture. Except as set forth herein, the Indenture heretofore executed and
delivered is hereby (i) incorporated by reference in this Second Supplemental
Indenture and (ii) ratified, approved and confirmed.
Section 6.2. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Article III hereof if the Holders of a
majority in principal amount of the Outstanding Senior Secured 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 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.
Section 6.3. Supplemental Indenture May be Executed in Counterparts.
This instrument may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
[Seal] MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
Attest:
By:
Name:
Title:
STATE OF )
) SS:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of MERCURY FINANCE COMPANY, one of the
entities described in and which executed the above instrument; that he/she knows
the seal of said entity; that the seal or a facsimile thereof affixed to said
instrument is such seal; that it was so affixed by authority of the Board of
Directors of said entity, and that he/she signed his/her name thereto by like
authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF )
) SS.:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
NOTICE OF HEARING TO CONSIDER CONFIMATION OF THE
DEBTOR'S SECOND AMENDED PLAN OF REORGANIZATION
AND DEADLINE FOR FILING OBJECTIONS THERETO
NOTICE IS HEREBY GIVEN THAT:
1. Mercury Finance Company, the above referenced debtor and
debtor-in-possession ("Mercury"), the Official Committee of Unsecured Creditors
(the "Creditors' Committee"), the Official Committee of Holders of Securities
Fraud Claims (the "Securities Claimants' Committee") and the Official Committee
of Equity Holders (the "Equity Committee") have reached an agreement for the
consensual restructuring of the Debtor, the terms of which are embodied in the
Debtor's Second Amended Disclosure Statement dated December 29, 1998 (the
"Second Amended Disclosure Statement") and the Debtor's proposed Second Amended
Plan of Reorganization dated December 29, 1998 (the "Second Amended Plan"). The
Debtor's First Amended Disclosure Statement and First Amended Plan and Ballots
related thereto, which you may have received in 1998, are no longer operative
documents.
2. On December 30, 1998, the Bankruptcy Court entered an order
("Disclosure Statement Order") (i) approving the Second Amended Disclosure
Statement as containing "adequate information" pursuant to section 1125 of the
United States Bankruptcy Code, (ii) approving the procedures for solicitation of
votes to accept or reject the Second Amended Plan, (iii) fixing February 12,
1999 at 5:00 p.m. (EST) as the date and time by which all votes to accept or
reject the Second Amended Plan must be received by the Balloting Agent ("Voting
Deadline"), (iv) fixing February 12, 1999 as the last date for filing objections
to confirmation to the Second Amended Plan.
3. Pursuant to the Disclosure Statement Order, the following holders of
impaired Claims against and impaired Interests in Mercury shall have the right
to vote to accept or reject the Second Amended Plan by using the enclosed
Ballot.
Class 4 Holders of Senior Debt Claims
Class 5 Holders of Subordinated Note Claims
Class 6 Holders of Indemnification Claims
Class 7A Holders of Equity Interests
Class 7B Holders of Securities Fraud Claims and Divided Claims
FOR YOUR VOTE TO COUNT, THE BALLOT MUST BE RETURNED TO AND RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M. (EST) ON FEBRUARY 12, 1999. If you received a
return envelope addressed to a Bank, Broker or Investment Institution, you must
return your Ballot to your Bank or Broker early enough for your vote to be
processed and then forwarded to and received by the Balloting Agent by 5:00 p.m.
February 12, 1999.
4. A hearing to consider confirmation of the Second Amended Plan, any
objections that may be interposed and any other matter that may properly come
before the Court will commence in the United States District Court for the
Northern District of Illinois, 219 South Dearborn Street, Room 2341, Chicago,
Illinois, on February 22, 1999 at 10:00 a.m. (CST) or as soon thereafter as
counsel may be heard (the "Confirmation Hearing"). A status hearing will be held
before the Honorable Erwin I. Katz in Room 680 of the United States Bankruptcy
Court on February 17, 1999 at 11:00 a.m. (CST). You may, but are not required
to, attend the Confirmation Hearing or status hearing related thereto. The
Confirmation Hearing may be adjourned from time to time without further notice
other than an announcement of the adjourned date or dates at the Confirmation
Hearing.
5. Objections, if any, to confirmation of the Second Amended Plan must
be in writing and must (a) state the name and address of the objector, (b) the
objector's interest in the Chapter 11 case, (c) if appropriate, the amount and
nature of the objector's claim or interest, (d) the grounds for the objection
and the legal basis therefor, (e) be filed with the Clerk of the Bankruptcy
Court, with two (2) copies to chambers, and (f) be served upon and received by
the parties listed below on or before February 12, 1999 at 4:00 p.m. (CST):
<TABLE>
<CAPTION>
<S> <C>
Counsel to Debtor and Debtor in Possession: Counsel for the United States Trustee:
McDermott, Will & Emery United States Trustee's Office
227 West Monroe Street U.S. Department of Justice
Chicago, IL 60606 227 West Monroe Street, Suite 3350
Attn: Lewis S. Rosenbloom Chicago, IL 60606
David D. Cleary Attn: Ira Bodenstein
Debra A. Riley Kathryn M. Gleason
Facsimile No.: (312) 984-7700 Facsimile No.: (312) 886-5794
Co-Counsel to Creditors' Committee: Co-Counsel to Creditor's Committee:
Cleary, Gottlieb, Steen & Hamilton Jones, Day, Reavis & Pogue
One Liberty Plaza 77 West Wacker Drive
New York, NY 10006 Chicago, IL 60601
Attn: James E. Millstein Attn: David S. Kurtz
Lindsee P. Granfield Jeffrey W. Linstrom
Facsimile No.: (212) 225-3999 Facsimile No.: (312) 782-8585
Co-Counsel to Securities Claimants' Committee: Co-Counsel to Securities Claimants' Committee:
Barbakoff, Zazove & Glick Holper Welsh & Mitchell
20 North Clark Street; Suite 1000 Esplanade III, Suite 700
Chicago, IL 60602 2415 East Camelback Road
Attn: Daniel A. Zazove Phoenix, AZ 85016
Facsimile No.: (312) 641-5017 Attn: Richard D. Holper
Facsimile No.: (602) 508-6036
Co-Counsel to Equity Committee: Co-Counsel to Equity Committee:
Berlack, Israels & Liberman, LLP Gordon Glickman & Flesch
120 West 45th Street 140 South Dearborn Street - Suite 404
New York, NY 10036 Chicago, IL 60603
Attn: Edward S. Weisfelner Attn: James S. Gordon
Facsimile No.: (212) 704-0196 Facsimile No.: (312) 346-3708
Debtor: Debtor's Interim Management:
Mercury Finance Company Development Specialists, Inc.
100 Field Drive - Suite 340 Three First National Plaza
Lake Forest, IL 60045 Chicago, IL 60602
Attn: Mark E. Dapier Attn: William A. Brandt, Jr.
Facsimile No.: (847) 295-8785 Fred C. Caruso
Patrick J. O'Malley
Facsimile No.: (312) 263-1180
</TABLE>
6. Due to the voluminous nature of Exhibits to the Second Amended
Disclosure Statement, only Exhibit A, the Second Amended Plan, has been provided
to you. Those parties interested in receiving copies of Exhibits B through U to
the Second Amended Disclosure Statement should contact the Debtor's Information
Agent at the address or telephone number set forth below.
7. Any questions or requests for assistance with respect to the Second
Amended Plan, Ballots or Master Ballots or requests for additional copies of the
Second Amended Disclosure Statement, Ballots or Master Ballots may be directed
to the Information Agent:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
Dated: December 30, 1998
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
NOTICE OF HEARING ON MERCURY'S
OMNIBUS OBJECTION TO DIVIDEND CLAIMS
TO ALL HOLDERS OF MERCURY'S COMMON STOCK ON FEBRUARY 17, 1997:
NOTICE IS HEREBY GIVEN that Mercury Finance Company, the above
referenced debtor and debtor-in-possession ("Mercury"), hereby objects to the
claims of holders for declared but unpaid dividends (the "Dividend Claims") on
the grounds that the dividends are voidable under applicable Delaware law based
upon the determination that Mercury was insolvent at the time such dividends
were declared. A copy of the Omnibus Objection can be obtained from Mercury's
information agent, Corporate Investor Communications, Inc. at 1-888-296-3797 or
the Omnibus Objection is on file with the Clerk of the Bankruptcy Court, 219
South Dearborn Street, 7th Floor, Chicago, Illinois 60604 and may be reviewed
during the Court's regular business hours.
NOTICE IS FURTHER GIVEN that a hearing to consider the Omnibus
Objection, and any responses related thereto, will commence before the Honorable
Erwin I. Katz in the United States Court for the Northern District of Illinois,
219 South Dearborn Street, Room 2341, Chicago, Illinois, on February 22, 1999 at
10:00 a.m. (CST) or as soon thereafter as counsel may be heard.
NOTICE IS FURTHER GIVEN that unless you file a response to this Omnibus
Objection and file it together with proof of service, with the Clerk for the
United States Bankruptcy Court for the Northern District of Illinois, Eastern
Division, and serve it upon Lewis S. Rosenbloom of McDermott, Will & Emery at
the address listed below such that the response is actually received no later
than Friday, February 12, 1999 at 4:00 p.m. (CST), your Dividend Claim will be
disallowed and the objection will be sustained against you.
Dated: December 30, 1998 Lewis R. Rosenbloom (Reg. No. 02386321)
David D. Cleary (Reg. No. 06202970)
Debra A. Riley (Reg. No. 06212193)
McDERMOTT, WILL & EMERY
227 West Monroe Street
Chicago, IL 60606-5096
Telephone: (312) 372-2000
Facsimile: (312) 984-7700
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
SECOND AMENDED DISCLOSURE STATEMENT
PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE
WITH RESPECT TO SECOND AMENDED PLAN OF REORGANIZATION
OF MERCURY FINANCE COMPANY
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Plan Proponent - MERCURY FINANCE COMPANY
Lewis S. Rosenbloom, Esq.
David D. Cleary, Esq.
MCDERMOTT, WILL & EMERY
227 W. Monroe Street
Chicago, Illinois 60606
(312) 372-2000
COUNSEL FOR
MERCURY FINANCE COMPANY
SOLICITATION OF VOTES WITH RESPECT
TO SECOND AMENDED PLAN OF REORGANIZATION
OF
MERCURY FINANCE COMPANY
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
This Disclosure Statement solicits acceptances of the Plan from holders
of certain Claims and Interests in classes 4, 5, 6, 7A and 7B. Class 8 is deemed
to have rejected the Plan and will not be solicited for acceptances or
rejections of the Plan. Because Class 8 is deemed to have rejected the Plan, the
Debtor intends to seek confirmation of the Plan, notwithstanding such rejection,
pursuant to the cram down provisions of Section 1129(b) of the Bankruptcy Code.
THE DEBTOR, THE CREDITORS' COMMITTEE, THE SECURITIES CLAIMANTS'
COMMITTEE AND THE EQUITY HOLDERS' COMMITTEE ALL BELIEVE THAT CONFIRMATION OF THE
PLAN IS IN THE BEST INTERESTS OF CREDITORS AND EQUITY HOLDERS. ACCORDINGLY,
HOLDERS OF CLAIMS AND EQUITY INTERESTS SOLICITED ARE ENCOURAGED TO VOTE IN FAVOR
OF THE PLAN. VOTING INSTRUCTIONS ARE SET FORTH AT PAGES 63 TO 64 OF THIS
DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED,
EXECUTED AND ACTUALLY RECEIVED NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME,
ON FEBRUARY 12, 1999. HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE ENCOURAGED TO
READ AND CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN
ATTACHED HERETO AS EXHIBIT A. A BALLOT CAST IN FAVOR OF THE PLAN DOES NOT RESULT
IN AUTOMATIC ALLOWANCE OF A CLAIM OR INTEREST. THE DEBTOR (AND OTHER PARTIES)
HAVE RESERVED THE RIGHT TO OBJECT TO CLAIMS AND INTERESTS AT A LATER DATE.
HOLDERS OF CLAIMS AND HOLDERS OF INTERESTS SHOULD NOT CONSTRUE THE
CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS,
FINANCIAL OR TAX ADVICE. EACH HOLDER SHOULD CONSULT WITH ITS OWN LEGAL,
BUSINESS, FINANCIAL AND TAX ADVISORS WITH RESPECT TO ANY SUCH MATTERS CONCERNING
THIS DISCLOSURE STATEMENT, THE SOLICITATION, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.
On December 30, 1998, this Disclosure Statement was approved by the
Court as containing adequate information, as required by Section 1125 of the
Bankruptcy Code, to permit holders of Claims and Equity Interests to make an
informed judgment in exercising their right to vote to accept or reject the
Plan. The Court, however, has not conducted an independent review or
investigation of the factual and financial matters described herein, nor has the
Court approved or ruled on the merits of the Plan.
The Debtor, the Creditors' Committee, the Securities Claimants'
Committee and the Equity Holders' Committee endorse the Plan and this Disclosure
Statement.
NEITHER THE SECURITIES OFFERED NOR THE PLAN HAVE 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 APPROVED OR DISAPPROVED OF THIS DISCLOSURE STATEMENT OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN ADDITION, THE
BANKRUPTCY COURT HAS APPROVED THIS DISCLOSURE STATEMENT AS CONTAINING "ADEQUATE
INFORMATION" AS PROVIDED IN 11 U.S.C. SS. 1125, BUT THE BANKRUPTCY COURT MAY NOT
AND HAS NOT EITHER ENDORSED OR NOT ENDORSED THE PLAN.
The Plan provides for, among other things, (a) the issuance and
distribution to the holders of Senior Debt Claims of a pro rata share of Excess
Cash, New Senior Secured Notes, and 95% of the New Common Stock, and, (b)
consistent with the Debtor's valuation, upon which the Plan is based, the
voluntary allocation of value, otherwise distributable to holders of Senior Debt
Claims, to holders of other Claims and Equity Interests in the form of: (i) the
issuance and distribution of New Junior Subordinated Notes to the Debtor's
Subordinated Noteholders; (ii) the issuance and distribution of a pro rata share
of 5% of New Common Stock and all of the New Warrants to certain holders of
Equity Interests, (iii) the assumption and settlement of certain indemnification
obligations by the funding of the Indemnification Settlement Fund and the
provision for limited continuing indemnification obligations; (iv) the
settlement of Allowed Indemnification Claims against the Reliance Policies; and
(v) the payment of five million dollars and the transfer of the Company KPMG
Claims into a Class 7B Liquidating Trust for the benefit of the holders of
Securities Fraud Claims.
It is presently anticipated that the confirmation Expiration Date will
be 5:00 p.m. eastern standard time on February 12, 1999 and that the
confirmation hearing will occur on February 22, 1999. The confirmation and
effectiveness of the Plan are subject to material conditions precedent, some of
which may not be satisfied. There can be no assurance that those conditions will
be satisfied. The Debtor presently intends to consummate the Plan and to cause
the Effective Date to occur. There can be no assurance, however, as to whether
or when the Effective Date actually will occur. Procedures for the distribution
of cash and securities pursuant to the Plan, including matters that are expected
to affect the timing of the receipt of distributions by holders of Claims and
Equity Interests in certain classes and that could affect the amount of
distributions ultimately received by such holders, are described in Section VII.
The Disclosure Statement contains projected financial information
regarding the Debtor, the Reorganized Debtor and certain other forward-looking
statements, all of which are based on various estimates and assumptions and will
not be updated to reflect events occurring after the date hereof. Such
information and statements are subject to inherent uncertainties and to a wide
variety of significant business, economic and competitive risks, including,
among others, those described herein. Consequently, actual events,
circumstances, effects and results may vary significantly from those included in
or contemplated by such projected financial information and such other
forward-looking statements. The projected financial information contained herein
is therefore not necessarily indicative of the future financial condition or
results of operations of the Debtor or the Reorganized Debtor, which may vary
significantly from those set forth in such projected financial information.
Consequently, the projected financial information and other forward-looking
statements contained herein should not be regarded as representations by the
Debtor, the Debtor's advisors, or any other person that the projected financial
condition or results can or will be achieved. All creditors are encouraged to
read and carefully consider the entire Disclosure Statement, including the Plan
attached as Exhibit A, prior to submitting Ballots pursuant to this
solicitation.
No person is authorized by the Debtor in connection with the Plan or
the solicitation of votes for the Plan to give any information or to make any
representation other than as contained in this Disclosure Statement and the
Exhibits attached hereto or incorporated by reference or referred to herein,
and, if given or made, such information or representation may not be relied upon
as having been authorized by the Debtor.
The delivery of this Disclosure Statement will not under any
circumstances imply that the information herein is correct as of any time
subsequent to the date hereof. Any estimates of Claims or Interests set forth in
this Disclosure Statement may vary from the final amounts of Claims or Equity
Interests allowed by the Court.
The summaries of the Plan and other documents contained in this
Disclosure Statement are qualified in their entirety by reference to the Plan
itself, the Exhibits and all documents described therein. The information
contained in this Disclosure Statement, including the information regarding the
history, businesses and operations of the Debtor, the historical and projected
financial information of the Debtor (including the projected results of
operations of the Reorganized Debtor), and the liquidation analysis relating to
the Debtor, is included herein for purposes of soliciting acceptance of the
Plan. As to contested matters, however, such information is not to be construed
as admissions or stipulations, but rather as statements made in settlement
negotiations.
All capitalized terms used in this Disclosure Statement and not
otherwise defined herein have the meanings ascribed thereto in the Plan.
TABLE OF CONTENTS
Page
I. INTRODUCTION AND SUMMARY OF SECOND AMENDED PLAN OF REORGANIZATION....1
A. INTRODUCTION................................................1
B. SUMMARY OF CLASSIFICATION CLAIMS............................2
C. SUMMARY OF DISTRIBUTIONS UNDER THE PLAN.....................2
Administrative Claims.......................................2
Tax Claims ..........................................2
D. PRINCIPAL ATTRIBUTES OF THE NEW SECURITIES..................5
1. New Senior Secured Notes...........................5
a. General...................................5
b. Security For The New Senior Secured Notes.6
2. New Junior Subordinated Notes......................6
3. New Collateral Documents...........................6
4. Registration Rights--New Senior Secured Notes......6
5. Registration Rights--New Common Stock..............7
6. New Warrants and the New Warrant Agreement.........7
E. SETTLEMENT AND COMPROMISE...................................8
F. SUMMARY OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS...................................9
G. MANAGEMENT INCENTIVE PLANS..................................10
H. VALUATION...................................................10
I. ALLOCATION OF CONSIDERATION BY HOLDERS OF SENIOR
DEBT CLAIMS OR, ALTERNATIVELY, CRAM DOWN....................10
J. INDEMNIFICATION CLAIMS......................................11
K. MODIFICATION OR REVOCATION OF THE PLAN; SEVERABILITY........11
L. ADMINISTRATION OF THE CLASS 7B LIQUIDATING TRUST............11
II. DESCRIPTION OF THE DEBTOR AND PAST OPERATIONS........................16
A. CORPORATE STRUCTURE.........................................16
1. Branch Office Network/Operation....................17
2. Loan and Contract Origination and Marketing........18
3. Insurance Operations...............................19
4. Changes in Accounting Treatment and Methodology....19
a. Allowance and Provision For Finance
Credit Losses.............................19
b. Nonrefundable Dealer Reserves.............20
5. Source of Funds....................................20
6. Competition........................................21
7. Employees..........................................21
8. Government Regulation..............................21
B. ANNOUNCEMENT OF ACCOUNTING IRREGULARITIES AND
SUBSEQUENT EVENTS...........................................21
C. PREPETITION LEGAL PROCEEDINGS...............................23
D. STABILIZATION AND PREPETITION PLAN NEGOTIATIONS.............24
1. January to September 1997..........................25
2. November 1997 to February 1998.....................25
3. May to August 1998.................................26
E. POST-PETITION ACTIVITIES OF THE DEBTOR......................27
1. Motions............................................27
2. Appointment of Committees..........................27
3. Operations.........................................29
III. DEBT AND EQUITY STRUCTURE OF THE DEBTOR..............................31
A. DESCRIPTION OF DEBT STRUCTURE OF THE DEBTOR.................31
B. EQUITY STRUCTURE OF THE DEBTOR..............................32
IV. THE REORGANIZED DEBTOR...............................................32
A. BUSINESS OF THE REORGANIZED DEBTOR..........................32
B. MANAGEMENT OF THE REORGANIZED DEBTOR........................32
V. IMPLEMENTATION OF THE PLAN...........................................32
A. NEW SECURITIES AND NEW COLLATERAL DOCUMENTS.................32
B. CANCELLATION OF SECURITIES AND AGREEMENTS...................32
C. MARKET AND TRADING INFORMATION..............................33
1. Market Information.................................33
2. Dividends..........................................33
D. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS..........33
E. BANKRUPTCY CODE EXEMPTIONS FROM REGISTRATION
REQUIREMENTS AND TRANSFER RESTRICTIONS......................33
1. Initial Offer and Sale of Securities...............33
2. Subsequent Transfers Under Federal Securities Laws.34
3. Subsequent Transfers Under State Law...............35
F. CERTAIN TRANSACTIONS BY STOCKBROKERS........................35
G. FRACTIONAL SHARES - DISTRIBUTION OF NEW COMMON
STOCK AND NEW WARRANTS......................................35
VI. CONDITIONS PRECEDENT TO THE PLAN.....................................36
A. CONDITIONS TO CONFIRMATION..................................36
B. CONDITIONS TO THE EFFECTIVE DATE............................37
C. WAIVER OF CONDITIONS........................................37
VII. DISTRIBUTIONS UNDER THE PLAN.........................................37
A. GENERAL.....................................................37
1. Distribution Date..................................37
2. Distribution Record Date--Senior Debt Claims and
Subordinated Noteholder Claims.....................37
3. Exchange Agent.....................................37
4. Surrender of Instruments and Receipt of
Distributions - Senior Debt Claims and
Subordinated Noteholder Claims.....................38
5. Distribution Record Date--Old Common Stock.........38
6. Accrual of Interest................................38
7. Unclaimed Distributions............................38
8. Tax Provisions.....................................38
9. Setoffs............................................38
B. PROVISIONS FOR TREATMENT OF DISPUTED, CONTINGENT
AND UNLIQUIDATED CLAIMS AND ADMINISTRATIVE EXPENSES.........39
1. Characterization of Disputed Claims................39
2. Resolution of Contested Claims and Interests.......39
VIII. ACCEPTANCE OR REJECTION OF THE PLAN..................................39
A. PRESUMED ACCEPTANCE OF PLAN.................................39
B. DEEMED NON-ACCEPTANCE OF PLAN...............................39
C. VOTING CLASSES..............................................39
D. ACCEPTANCE BY IMPAIRED CLASSES..............................39
E. NON-CONSENSUAL CONFIRMATION.................................39
IX. EFFECTS OF PLAN CONFIRMATION.........................................40
A. DISCHARGE AND RELEASE.......................................40
B. RELEASE BY THE DEBTOR OF DIRECTORS, OFFICERS AND
EMPLOYEES...................................................40
C. TERM OF INJUNCTIONS OR STAYS................................40
D. EXCULPATION.................................................40
E. REVESTING...................................................41
F. RETENTION OF CAUSES OF ACTION/RESERVATION OF RIGHTS.........41
G. POST-CONSUMMATION EFFECT OF EVIDENCES OF CLAIMS OR
INTERESTS...................................................41
X. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES................42
A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES......................................................42
B. CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS
OR UNEXPIRED LEASES.........................................42
C. LIMITED ASSUMPTION AND SURVIVAL OF THE DEBTOR'S
CORPORATE INDEMNITIES.......................................42
XI. MISCELLANEOUS........................................................43
A. RETENTION OF JURISDICTION...................................43
B. FAILURE OF COURT TO EXERCISE JURISDICTION...................43
C. RETIREE BENEFITS............................................43
D. MODIFICATION OF PLAN........................................44
E. WITHDRAWAL OF PLAN..........................................44
XII. HISTORICAL FINANCIAL STATEMENTS OF THE DEBTOR AND FINANCIAL
PROJECTIONS OF THE REORGANIZED DEBTOR................................45
XIII. SUMMARY OF CERTAIN RISK FACTORS RELATING TO THE PLAN.................45
1. Risks Relating to the Projections..................45
2. Assumptions Regarding Value of Debtor's Assets.....45
3. Noncomparability of Historical Financial
Information........................................46
4. Certain Risks Associated with the Reorganization
Case...............................................46
5. Capital Requirements...............................46
6. Certain Risks Associated With the Warrants.........46
7. Lack of Trading Market; Volatility.................46
a. The New Securities........................46
8. Restricted Resale of Securities Distributed Under
the Plan...........................................47
9. Dividend Restrictions..............................47
10. Certain U.S. Federal Income Tax Considerations.....47
11. Certain Risks of Non-Confirmation..................47
12. Disruption of Operations Relating to Bankruptcy
Filing.............................................48
13. Business and Competition...........................48
XIV. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS.......................48
A. TAX CONSEQUENCES TO CREDITORS...............................49
1. General............................................49
2. Holders of Senior Debt Claims......................49
3. Subordinated Noteholders...........................50
4. Installment Sale Rules.............................51
5. Market Discount on an Exchange of Old Securities...51
6. Treatment of Initial Interest on New Senior
Secured Notes.....................................51
7. Disposition of the New Common Stock................51
8. Publicly Traded Status; Original Issue Discount....52
9. Sale, Exchange or Other Disposition of New Senior
Secured Notes or New Junior Subordinated Notes.....52
B. TAX CONSEQUENCES TO EQUITYHOLDERS...........................53
1. Receipt of New Common Stock and New Warrants.......53
2. Exercise, Disposition or Lapse of New Warrants.....53
C. TAX CONSEQUENCES TO SECURITIES FRAUD CLAIM HOLDERS..........53
D. TAX CONSEQUENCES TO DIVIDEND CLAIM HOLDERS..................54
E. BACKUP WITHHOLDING..........................................54
F. TAX CONSEQUENCES TO THE DEBTOR..............................54
1. Cancellation of Indebtedness Income................54
2. Potential Availability of Net Operating Loss
Carryovers.........................................54
3. Reduction in Asset Basis...........................55
XV. VOTING AND CONFIRMATION OF THE PLAN..................................56
A. CLASSIFICATION OF CLAIMS AND INTERESTS UNDER THE
BANKRUPTCY CODE.............................................56
B. IMPAIRMENT OF CLAIMS AND INTERESTS: IMPAIRED CLASSES........57
C. SOLICITATION OF IMPAIRED CLASSES AND VOTING
REQUIREMENTS................................................57
D. POSSIBLE POST-SOLICITATION, PRE-CONFIRMATION EVENTS.........58
E. CONFIRMATION PROCEDURES AND REQUIREMENTS....................58
1. Confirmation Where Sufficient Acceptances Are
Obtain.............................................58
2. Chapter 7 Liquidation Analysis and "Best Interest
of Creditors" Test.................................58
3. Feasibility Test...................................60
4. "Cram Down"--Fair and Equitable Test; Unfair
Discrimination.....................................60
F. BAR DATE....................................................61
G. LETTERS OF TRANSMITTAL AND BOOK-ENTRY
CONFIRMATION................................................61
H. VOTING PROCEDURES, BALLOTING AND CONFIRMATION
HEARING.....................................................63
XVI. ADDITIONAL INFORMATION...............................................65
XVII. RECOMMENDATION AND CONCLUSION........................................65
TABLE OF EXHIBITS
Second Amended Plan of Reorganization............................Exhibit A
New Senior Secured Notes.........................................Exhibit B
New Senior Secured Notes Indenture...............................Exhibit C
New Collateral Documents.........................................Exhibit D
Includes Company Security Agreement,
Company Pledge Agreement,
Subsidiaries Guaranty Agreement, and
Subsidiaries Security Agreement
New Junior Subordinated Note.....................................Exhibit E
New Junior Subordinated Note Indenture...........................Exhibit F
Registration Rights Agreement....................................Exhibit G
New Warrant Agreement............................................Exhibit H
Amended and Restated Certificate of Incorporation and By-laws....Exhibit I
List of Directors of Reorganized Debtor..........................Exhibit J
Fairness Opinion of Salomon Smith Barney.........................Exhibit K
Consent Agreement................................................Exhibit L
Projected Financial Information..................................Exhibit M
Historical Financial Statements..................................Exhibit N
Liquidation Analysis.............................................Exhibit O
Consulting Agreement and Employment Agreement....................Exhibit P
Certificate of Incorporation ....................................Exhibit Q
Indemnification Agreements.......................................Exhibit R
Operating Report ................................................Exhibit S
Class Action Documents...........................................Group Exhibit T
Class 7B Liquidating Trust Agreement Documents...................Group Exhibit U
I.
INTRODUCTION AND SUMMARY OF SECOND AMENDED PLAN OF REORGANIZATION
A. INTRODUCTION
This Disclosure Statement relates to the Plan for the Debtor. THE
DEBTOR'S NONDEBTOR SUBSIDIARIES HAVE NOT COMMENCED REORGANIZATION CASES AND ARE
NOT IN BANKRUPTCY. CREDITORS OF THE DEBTOR'S NONDEBTOR SUBSIDIARIES ARE NOT
AFFECTED BY THE DEBTOR'S REORGANIZATION CASE.
The overall purpose of the Plan is to provide for the restructuring of
the Debtor's liabilities in a manner designed to maximize recoveries to all
stakeholders and to enhance the financial viability of the Reorganized Debtor.
In general, the Plan provides for, among other things, (a) issuance and
distribution of Excess Cash, New Senior Secured Notes and 95% of the New Common
Stock to the holders of Allowed Senior Debt Claims, and, (b) consistent with the
Debtor's valuation, upon which the Plan is based, the voluntary allocation of
value, otherwise distributable to holders of Senior Debt Claims, to holders of
other Claims and Equity Interests in the form of: (i) the issuance and
distribution of New Junior Subordinated Notes to the Debtor's Subordinated
Noteholders; (ii) the issuance and distribution of 5% of the New Common Stock
and all of the New Warrants to holders of Equity Interests; (iii) the assumption
and settlement of certain indemnification obligations by the funding of the
Indemnification Settlement Fund and the provision for limited continuing
indemnification obligations; (iv) the settlement of Allowed Indemnification
Claims against the Reliance Policies; and (v) the payment of five million
dollars and the assignment of the Company KPMG Claim into a Class 7B Liquidating
Trust for the benefit of holders of Securities Fraud Claims and Dividend Claims
as part of the compromise and settlement set forth in Section 8.05 of the Plan.
The Debtor intends to continue operating its businesses in the
Reorganization Case in the ordinary course and to pay its employees, trade and
other ordinary course creditors in full and on time. The claims of the Debtor's
employees (other than Indemnification Claims), holders of Trade Claims, Benefits
Claims and Unsecured Claims are not impaired under the Plan. Therefore, as such
claims are not impaired, the votes of the holders of such claims shall not be
solicited with respect to the Plan.
The Bankruptcy Code provides that only holders who vote on the Plan
will be counted for purposes of determining whether the requisite acceptances of
the classes of Claims and Equity Interests have been received. Failure by a
holder of a Claim or Equity Interest to deliver a duly completed and signed
Ballot by the Expiration Date will constitute an abstention by such holder with
respect to a vote on the Plan. Abstentions will not be counted as votes to
accept or reject the Plan and, therefore, will have no effect on the voting with
respect to the Plan. The requirements for confirmation of the Plan, including
the vote of creditors and equity security holders to accept the Plan and certain
of the statutory findings that must be made by the Court, are described below
under the caption "Voting and Confirmation of the Plan." If the Debtor does not
receive the requisite acceptances by the Expiration Date or if the Court
declines to confirm the Plan, the Debtor will evaluate other available options.
Confirmation of the Plan and the occurrence of the Effective Date are
subject to a number of material conditions precedent, which are summarized in
Section VI. There can be no assurance that these conditions will be satisfied or
waived.
THE DEBTOR BELIEVES THAT THE PLAN IS IN THE BEST INTERESTS OF ALL
CREDITORS AND EQUITY SECURITY HOLDERS. ALL HOLDERS OF CLASSES 4, 5, 6, 7A AND 7B
CLAIMS AND INTERESTS ENTITLED TO VOTE IN CONNECTION WITH THIS SOLICITATION ARE
URGED TO VOTE IN FAVOR OF THE PLAN. TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED
NOT LATER THAN THE VOTING DEADLINE OF 5:00 P.M. EASTERN STANDARD TIME, FEBRUARY
12, 1999.
The following is an overview of certain material provisions of the
Plan. The following summaries of the material provisions of the Plan do not
purport to be complete and are qualified in their entirety by reference to all
the provisions of the Plan, including all exhibits and documents described
therein and the definitions therein of certain terms used below. WHEREVER
DEFINED TERMS OF THE PLAN NOT OTHERWISE DEFINED IN THIS DISCLOSURE STATEMENT ARE
USED, SUCH DEFINED TERMS SHALL HAVE THE MEANINGS ASCRIBED THERETO IN THE PLAN.
B. SUMMARY OF CLASSIFICATION CLAIMS.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CLASS DESCRIPTION STATUS
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class 1 Priority Claims Unimpaired; deemed to have accepted the
Plan
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 2 Secured Claims Unimpaired; deemed to have accepted the
Plan
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 3 Trade Claims, Consumer Litigation Claims, Benefits Unimpaired; deemed to have accepted the
Claims and Unsecured Claims Plan
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 4 Senior Debt Claims Impaired; entitled to vote
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 5 Subordinated Noteholder Claims Impaired; entitled to vote
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 6 Indemnification Claims Impaired; entitled to vote
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 7A Equity Interests Impaired; entitled to vote
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 7B Securities Fraud Claims and Dividend Claims Impaired; entitled to vote
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Class 8 Old Options Impaired; deemed to have rejected the Plan
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
C. SUMMARY OF DISTRIBUTIONS UNDER THE PLAN.
In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims and Tax Claims, as described below, have not been
classified.
ADMINISTRATIVE CLAIMS. Unless otherwise agreed to by the parties, each
holder of an Allowed Administrative Claim shall receive Cash equal to the unpaid
portion of such Allowed Administrative Claim on the later of (a) the Effective
Date and (b) the date on which such Claim becomes an Allowed Administrative
Claim; provided, however, that the Administrative Claims that represent
liabilities incurred by the Debtor in the ordinary course of its business during
the Reorganization Case shall be paid in the ordinary course of business and in
accordance with any terms and conditions of any agreements relating thereto.
Other than ordinary course of business expenses, including the fees of William
A. Brandt, Jr. and Development Specialists, Inc., the Debtor's interim
management, the Debtor believes that Administrative Claims consist of
professional fees for the Debtor and the various committees appointed in the
Reorganization Case. Such fees are difficult to estimate and will vary depending
on the length of the Reorganization Case and the litigation, or lack thereof, of
the parties involved. The Debtor has budgeted approximately $5.1 million.
TAX CLAIMS. Unless otherwise agreed to by the parties, each holder of a
Tax Claim will receive cash equal to the unpaid portion of such Tax Claim on or
as soon as practical after the later of (i) the Effective Date, and (ii) the
date on which such Claim becomes an Allowed Claim; provided, however, that at
the option of the Reorganized Debtor, the Reorganized Debtor may pay Tax Claims
over a period not exceeding six (6) years after the date of assessment of the
Tax Claims as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code. If
the Reorganized Debtor elects this option as to any Tax Claim, then the payment
of such Tax Claim shall be made in equal semiannual installments with the first
installment due on the latest of: (i) the Effective Date, (ii) 30 calendar days
after the date on which an order allowing such Tax Claim becomes a Final Order,
and (iii) such other time as may be agreed to by the holder of such Tax Claim
and the Reorganized Debtor. Each installment shall include simple interest on
the unpaid portion of such Tax Claim, without penalty of any kind, at the
statutory rate. The Reorganized Debtor reserves the right to pay any Tax Claim,
or any remaining balance of such Tax Claim in full at any time on or after the
Effective Date, without premium or penalty. The Debtor is not aware of any Tax
Claims and instead expects a refund, subject to filing amended tax returns,
audit of such returns and potential litigation relating thereto. Schedule E of
the Debtor's Schedules lists a disputed and unliquidated claim that arose from a
Department of Labor investigation relating to wage disputes. The Debtor does not
believe it has any liability as such claim arises from activities of a Nondebtor
Subsidiary.
The following is a brief summary of each class of Claims and Interests
under the Plan and of the distributions to be made under the Plan to holders of
Claims and Interests.
CLASS 1 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF PRIORITY CLAIMS.
Under the Plan, Class 1 consists of all Priority Claims not otherwise
treated as unclassified. Unless otherwise agreed to by the parties, each holder
of an Allowed Claim in Class 1 will be paid the allowed amount of such Claim in
full in Cash on the later of (a) the Effective Date, or (b) the date such Claim
becomes an Allowed Claim. Pursuant to an order dated July 17, 1998, the Court
authorized payment of certain debts, which qualified as Priority Claims, to be
paid in the ordinary course of business. The Debtor therefore believes that
there will be no Allowed Priority Claims.
CLASS 2 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF SECURED CLAIMS.
Under the Plan, Class 2 consists of all holders of Secured Claims. Each
Class 2 Claimant shall retain, unaltered, the legal, equitable and contractual
right, including, without limitation, any liens that secure such Allowed Claims,
to which such Allowed Claim entitles Claimant; provided however, that each
Claimant holding an Allowed Claim may only exercise such rights and remedies
with respect to the assets and property that secure such Allowed Claim, without
recourse of any kind against the Debtor. Any Allowed Claim based on any
deficiency claim by a Class 2 Claimant shall become, and shall be treated for
purposes under the Plan as an Allowed Trade Claim and shall be classified as a
Class 3 Claim. The Debtor is aware of only one Secured Claim which is held by
NationsBank, N.A. NationsBank, N.A.'s claim arises from a check clearing
agreement with the Debtor under which NationsBank, N.A. honors payment of
nondepository checks payable to the Debtor's customers and dealers. In
connection with the agreement, the Debtor has pledged $130,000 in the form of
two certificates of deposits. In the ordinary course, there is no outstanding
balance owed to NationsBank, N.A.
CLASS 3 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF TRADE CLAIMS,
CONSUMER LITIGATION CLAIMS, BENEFITS CLAIMS AND UNSECURED
CLAIMS.
Under the Plan, Class 3 consists of all holders of Trade Claims,
Consumer Litigation Claims, Benefits Claims and Unsecured Claims. Allowed Claims
in Class 3 will not be affected by the Reorganization Case. Holders of Allowed
Claims in Class 3 shall be entitled to payment of the full amount of their
Allowed Claims in complete settlement, satisfaction and discharge of their Class
3 Claims. The Trade Claims, Benefits Claims, Claims arising from rejection of
executory contracts and unexpired leases, Consumer Litigation Claims and Other
Unsecured Claims are unliquidated, contingent and subject to dispute and,
therefore, the Debtor cannot estimate the value of such Claims as of the
Petition Date. There are approximately fifty (50) holders of Class 3 Claims. Due
to the nature of these Claims, the Debtor is unable to state with certainty the
aggregate amount of these Claims. There are no Trade Claims in the usual sense
of the term trade claim. There are two Claims aggregating approximately $10,000
asserted by two banks for fees associated with a prepetition line of credit. In
February 1997, a consortium of banks, including the banks referenced above,
terminated the Debtor's use of the line of credit after learning of the
accounting irregularities described in Section II.B. The Debtor disputes any
amounts are owed the banks. Also included in Class 3 is the Claim of Progressive
Insurance Company for approximately $7,000,000. This Claim represents a reserve
on the Debtor's books for premiums for forced-placed insurance. Under the
contract with Progressive, the reserve amount varies from month to month and
would only be due upon termination of the contract. The Debtor intends to assume
the contract with Progressive. In addition, the officers and directors of the
Debtor hold Class 3 Claims aggregating $342,000 for accrued but unpaid director
and board meeting fees. Class 3 Claims also include sixteen (16) Consumer
Litigation Claims arising from lawsuits in which the Debtor is a defendant. In
most, if not all, of these lawsuits, the plaintiffs have also sued a Nondebtor
Subsidiary. The Nondebtor Subsidiaries are defending these lawsuits. There are
also the Claims of two former employees alleging EEOC violations within Class 3.
These Claims are currently pending before an administrative agency of the U.S.
government. Again, the Debtor disputes any amounts are due. Finally, Class 3
Claims include the Claim, if any, of KPMG Peat Marwick. KPMG was the Debtor's
accountants during the period of the accounting irregularities described in
Section II.B. To the extent any Claim is asserted by KPMG, the Debtor intends to
dispute it.
Pursuant to the Order authorizing the Debtor to continue to utilize its
cash management and intercompany system entered on July 17, 1998, there are no
Claims of Nondebtor Subsidiaries. Also, pursuant to the Order authorizing the
payment of prepetition employee Benefit Claims, there are no Benefit Claims. To
the extent the Debtor rejects any of its executory contracts or unexpired
leases, the Claims associated with such rejections would be treated as Class 3
Claims.
CLASS 4 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF SENIOR DEBT CLAIMS.
Under the Plan, Class 4 consists of all holders of Senior Debt Claims.
Each holder of an Allowed Claim in Class 4 will receive: (i) its pro rata share
of Excess Cash, (ii) New Senior Secured Notes in the principal amount of 75% of
its amount of the Net Senior Debt Claims; (iii) its pro rata share of 9,500,000
shares of the New Common Stock. The Debtor estimates that Senior Debt Claims
total approximately $678,000,000 as of the Petition Date and that Excess Cash
will total approximately $100,000,000, as outlined in the financial projections
attached as Exhibit M to the Disclosure Statement.
CLASS 5 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF SUBORDINATED
NOTEHOLDER CLAIMS.
Under the Plan, Class 5 consists of all Subordinated Noteholder Claims.
Each holder of an Allowed Claim in Class 5 will receive its pro rata share of
the New Junior Subordinated Notes. The Debtor estimates that Subordinated
Noteholder Claims, including principal and accrued interest, total approximately
$24,574,000 as of the Petition Date.
CLASS 6 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF INDEMNIFICATION
CLAIMS.
Under the Plan, Class 6 consists of all holders of Indemnification
Claims. Each holder of an Allowed Indemnification Claim shall be entitled to (i)
continue to assert such Claims against the Debtor to the extent of coverage
under the Reliance Policies, and (ii) the Debtor's cooperation in aiding the
Class 6 Claimants in pursuing their rights under the Reliance Policies. The
Indemnification Claims are unliquidated, contingent, subject to dispute and
subordination and, therefore, the Debtor cannot estimate the value of such
Claims as of the Petition Date.
CLASS 7A - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF EQUITY INTERESTS.
Under the Plan, Class 7A consists of all holders of Equity Interests.
Subject to Section 8.14, each holder of an Allowed Equity Interest shall be
enjoined from pursuing any Claim against the Debtor (including any Securities
Fraud Claim) or Reorganized Debtor and will receive its pro rata share of (i)
500,000 of the shares of New Common Stock and (ii) all of the New Warrants
subject to the terms and conditions of the New Warrant Agreement. The Debtor
currently has 172,497,714 outstanding shares of Old Common Stock. Because
fractional New Warrants will not be issued, holders of less than approximately
298 shares of Old Common Stock will not receive a distribution of New Warrants.
Because fractional New Common Stock will not be issued, holders of less than
approximately 345 shares of Old Common Stock will not receive a distribution of
New Common Stock.
CLASS 7B - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF SECURITIES FRAUD
CLAIMS AND DIVIDEND CLAIMS.
Under the Plan, Class 7B consists of all holders of Securities
Fraud Claims and Dividend Claims. Each holder of an Allowed Claim in Class 7B,
as determined by procedures set forth in Section 8.15 and in the Class 7B
Liquidating Trust Agreement attached to the Disclosure Statement as Exhibit U,
shall be enjoined from pursuing any Claim against the Debtor (including any
Securities Fraud Claim) or Reorganized Debtor and shall receive in complete
settlement, satisfaction of its Class 7B Claims, a share of the beneficial
interests in the Class 7B Liquidating Trust. On the Effective Date, the Debtor
shall transfer to the Class 7B Liquidating Trust: (i) $5 million in cash (to be
deducted from the ending book cash balance of the Debtor on a consolidated
basis); (ii) the Company KPMG Claims; and (iii) $250,000 in cash for fees and
costs to be incurred in connection with the administration of the Class 7B
Liquidating Trust.
The Securities Fraud Claims are unliquidated, contingent, and subject
to dispute and, therefore, the Debtor cannot estimate the value of such Claims
as of the Petition Date. There are currently over 40 lawsuits pending against
the Debtor which demand in excess of two billion dollars ($2,000,000,000) in
damages in the aggregate. There also may be Dividend Claims in Class 7B, which
arise from ownership of Old Common Stock. The Debtor intends to object to the
allowance of the Dividend Claims, if any. Class 7B may also contain claims by
those who also currently hold Equity Interests, but also believe they have a
Class 7B Claim. Such holders may participate in both classes to the extent they
have allowed Claims or Interests in either or both of the classes.
CLASS 8 - SUMMARY OF DISTRIBUTIONS TO HOLDERS OF OLD OPTIONS.
Under the Plan, Class 8 consists of all holders of Old Options. Holders
of Old Options shall receive no distribution under the Plan. On the Effective
Date, all of the Old Options shall be cancelled and extinguished pursuant to the
Plan.
D. PRINCIPAL ATTRIBUTES OF THE NEW SECURITIES.
As previously described, the Plan provides for a capital structure of
the Reorganized Debtor comprised of New Senior Secured Notes, New Junior
Subordinated Notes, New Common Stock and New Warrants. The principal features of
the New Securities are summarized below.
1. NEW SENIOR SECURED NOTES.
A. GENERAL.
The New Senior Secured Notes will be issued to holders of Class 4
Claims in an amount of 75% of the Net Senior Debt Claims, after giving effect to
the payment of Excess Cash to the Senior Debt Claims. A copy of the New Senior
Secured Note is attached to the Disclosure Statement as Exhibit B. The New
Senior Secured Notes will be issued under the New Senior Secured Note Indenture
between the Reorganized Debtor and a trustee to be selected by the Reorganized
Debtor. A copy of the New Senior Secured Note Indenture is attached to the
Disclosure Statement as Exhibit C. The New Senior Secured Note Indenture shall
meet the requirements of the Trust Indenture Act of 1939, as amended, but the
New Senior Secured Notes need not be registered securities. The New Senior
Secured Notes will be secured senior obligations of the Reorganized Debtor.
There is approximately $678,000,000 of Senior Debt Claims (commercial
paper and senior notes) including accrued interest as of the Petition Date.
Under the Plan, the holders of Senior Debt Claims have waived certain claims to,
inter alia, additional interest payments or fees and make-whole payments against
the Debtor for enforcement and collection, but such holders have reserved the
right to include the amounts of such claims in connection with calculation of
their claims for purposes of allocation and distribution by and between the
holders of Class 4 Claims. The limited reservation does not impact the Debtor or
effect any distribution to other Classes.
Under the Plan, the holders of Senior Debt Claims will receive (i) a
payment of their pro rata share of the Excess Cash accumulated throughout the
case; (ii) New Senior Secured Notes in the amount of 75% of the Net Senior Debt
Claims; and (iii) 95% of the New Common Stock of the Reorganized Debtor.
The New Senior Secured Notes will mature two years after the Effective
Date of the Plan and be issued in two series. Holders of the Senior Debt Claims
will have the option to receive a combination of Series A or Series B Secured
Notes. The New Senior Secured Notes Series A will have a 10 percent annual fixed
rate of interest payable quarterly. The New Senior Secured Notes Series B will
have a floating rate of interest based on 3 month LIBOR (which shall mean the
London interbank offering rate) and will be payable quarterly. The initial rate
on the New Senior Secured Notes Series B will equal 3 month LIBOR as of the
Effective Date plus the spread over 3 month LIBOR which will equate to 10
percent less the cost of a two year interest rate cap agreement which will be
entered into by the Reorganized Debtor. By deducting the cost of the interest
rate cap from the initial interest rate spread, the Reorganized Debtor will
insure that the highest all in rate it will pay on the New Senior Secured Notes
Series B will be 10 percent. For example, 3 month LIBOR is currently
approximately 5.3 percent which would result in a rate of LIBOR + 470 basis
points to equate to 10 percent. If the two year interest rate cap costs 30 basis
points depending on the size of the Series B issue, then the rate on the Series
B Notes would be LIBOR + 440 basis points for the life of the Series B Notes
with the 10 percent maximum rate insured by the interest rate cap. Depending on
the interest rate environment during the life of these notes it is possible that
the Reorganized Debtor will be incurring a lower cost on these notes if rates go
down. A series of floating rate notes will allow the Reorganized Debtor to
benefit in a lower interest rate environment, increase the market for the New
Senior Secured Notes, and not provide any additional cost to the Reorganized
Debtor in excess of the 10 percent fixed rate. Pursuant to the terms of the New
Senior Secured Note Indenture, interest on the New Senior Secured Notes shall
begin to accrue at the respective rates set forth in the New Senior Secured
Notes, on the ninety first day following the Petition Date and shall be payable
as set forth therein
In the event the New Senior Secured Notes are not paid when due, the
holders thereof will be entitled to exercise their rights and remedies pursuant
to the New Senior Secured Note Indenture, the New Collateral Documents, and
applicable law.
B. SECURITY FOR THE NEW SENIOR SECURED NOTES.
In order to recapitalize the Debtor and permit it to return to the
marketplace, the holders of Senior Debt Claims have agreed to a distribution of
seventy-five percent (75%) of their Net Senior Debt Claims in the form of New
Senior Secured Notes and a pro rata share of 95% of the New Common Stock. As a
result of arm's length negotiations and recognizing the holders of Senior Debt
Claim's risk of converting their debt and voluntarily allocating value to other
constituents, the Debtor has agreed to provide security for the instruments in
order to assure payment of the New Senior Secured Notes, and, therefore, the New
Senior Secured Notes shall be secured on a first priority basis pursuant to the
New Collateral Documents. Copies of the New Collateral Documents, which include
the Company Security Agreement, Company Pledge Agreement, Subsidiaries Guaranty
Agreement and Subsidiaries Security Agreement are attached to the Disclosure
Statement as Group Exhibit O.
2. NEW JUNIOR SUBORDINATED NOTES.
The New Junior Subordinated Notes in the amount of $22.5 million shall
be issued to holders of Class 5 Claims. A copy of the New Junior Subordinated
Note is attached to the Disclosure Statement as Exhibit E. The New Junior
Subordinated Notes will be issued under the New Junior Subordinated Note
Indenture. The New Junior Subordinated Note Indenture shall meet the
requirements of the Trust Indenture Act of 1939. A copy of the New Junior
Subordinated Note Indenture is attached to the Disclosure Statement as Exhibit
F. The New Junior Subordinated Notes will bear interest, payable quarterly, at
the rate per annum of 11% until maturity. Payment of interest is subject to the
subordination provisions set forth in the New Junior Subordinated Note
Indenture. The New Junior Subordinated Notes are unsecured. The New Junior
Subordinated Notes will mature on the third anniversary of the Effective Date.
The New Junior Subordinated Notes shall be paid through a combination of cash
flow from business operations, refinancing of indebtedness and other sources of
cash available to the Reorganized Debtor. In the event that the New Junior
Subordinated Notes are not paid when due, the holders thereof will be entitled
to exercise their rights and remedies pursuant to the New Junior Subordinated
Note Indenture and applicable law. Pursuant to the terms of the New Junior
Subordinate Note Indenture, interest on the New Junior Subordinated Notes shall
begin to accrue at the respective rates set forth in the New Junior Subordinated
Notes, on the ninety first day following the Petition Date and shall be payable
as set forth therein.
3. NEW COLLATERAL DOCUMENTS.
The New Senior Secured Notes shall have a first lien on the assets of
the Reorganized Debtor and will be guaranteed by the Nondebtor Subsidiaries
under the New Collateral Documents. The Nondebtor Subsidiaries will secure their
guarantees through a pledge of their assets. The New Junior Subordinated Notes
will be unsecured.
4. REGISTRATION RIGHTS--NEW SENIOR SECURED NOTES.
The Debtor shall use its reasonable best efforts to register the New
Senior Secured Notes pursuant to the Registration Rights Agreement attached as
Exhibit G to the Disclosure Statement.
5. REGISTRATION RIGHTS--NEW COMMON STOCK.
The Debtor shall use its reasonable best efforts to register the New
Common Stock pursuant to the Registration Rights Agreement attached as Exhibit G
to the Disclosure Statement.
6. NEW WARRANTS AND THE NEW WARRANT AGREEMENT.
New Warrants will be issued to holders of Equity Interests in Class 7A.
The New Warrants will be issued under the New Warrant Agreement. A copy of the
New Warrant Agreement is attached to the Disclosure Statement as Exhibit H.
Three series of Warrants (the "Series A Warrants", the "Series B
Warrants" and "Series C Warrants" and collectively, the "New Warrants") will be
issued to holders of Equity interests, pursuant to a Warrant Agreement (the "New
Warrant Agreement") between the Debtor and the Warrant Agent (as defined below).
Each series of New Warrants shall have identical terms except that each series
will have a different exercise price and Warrant Exercise Period (as defined
below). The following summary of the New Warrants does not purport to be
complete and is qualified in its entirety by reference to the New Warrant
Agreement.
Each of the three series of warrants will represent the right to
purchase an aggregate of 580,000 shares of the New Common Stock, which are
subject to dilution. The exercise price of the Series A Warrants will be $15.34,
the exercise price of the Series B Warrants will be $21.81 and the exercise
price for the Series C Warrants will be $28.27. The exercise period for each
series of the New Warrants shall begin at 9:00 a.m., central standard time, on
the Effective Date, and shall expire at 5:00 p.m., central standard time, on the
date which is three, four and five years from the Effective Date for the Series
A Warrants, the Series B Warrants and the Series C Warrants, respectively (the
"Warrant Exercise Period"). Each New Warrant not exercised prior to the
expiration of the applicable Warrant Exercise Period will become void, and all
rights thereunder will terminate.
Pursuant to the Plan, the Debtor has agreed to use its reasonable best
efforts to have each series of the Warrants listed for trading on the Nasdaq
National Market. Listing criteria of the Nasdaq National Market will not be
satisfied and it is unlikely that such listing will initially be authorized. In
addition, the New Warrant Agreement requires the Reorganized Debtor to use
commercially reasonable efforts to quote and to maintain the quotation of each
series of the New Warrants on the Nasdaq National Market, and requires the
Reorganized Debtor to use such efforts to cause each series of the New Warrants
to be quoted on alternative exchanges or to include them in alternative
quotation systems if quotation on the Nasdaq National Market is not (or is no
longer) available.
The number and kind of securities purchasable upon the exercise of the
New Warrants and the exercise price therefor will be subject to adjustment upon
the occurrence of certain events as set forth in the New Warrant Agreement,
including, without limitation, the issuance of capital stock as a dividend or
distribution on the New Common Stock; subdivisions, reclassifications and
combinations of the New Common Stock; the distribution to holders of New Common
Stock of indebtedness or assets of the Reorganized Debtor or any entity
controlled by the Reorganized Debtor (excluding cash dividends or cash
distributions from consolidated earnings or surplus legally available for such
dividends or distributions) or shares of capital stock of any entity controlled
by the Reorganized Debtor; the issuance of shares of New Common Stock, or other
securities convertible into or exchangeable or exercisable for shares of New
Common Stock, for a consideration that is less than the then-current market
price of the New Common Stock. Although the Plan provides for issuance of three
series of New Warrants, each in the amount of 5.8% of the Reorganized Debtor on
the Effective Date, the New Warrants are subject to dilution, along with the New
Common Stock. For instance, the issuance of options under the Employment
Agreement and the Management Incentive Plan described in Section I. G. will
dilute the New Warrants.
No adjustment in such shares or exercise price will be required in
connection with the issuance of New Common Stock, rights, warrants or other
securities pursuant to: the Plan; any plan adopted by the Reorganized Debtor or
any entity controlled by the Reorganized Debtor for the benefit of its employees
or directors; an underwritten public offering satisfying specified criteria; a
plan adopted by the Reorganized Debtor for the reinvestment of dividends or
interest; provided that the issuance of such shares are not at a discount of
more than 20% to the then current market price; the issuance of shares of New
Common Stock to shareholders of any corporation which is acquired by, merged
into or made a part or subsidiary of, the Reorganized Debtor in an arm's length
transaction; or, a change in the par value of the New Common Stock. In addition,
no adjustment will be required, (a) if in connection with any of the events
otherwise giving rise to an adjustment the holders of the New Warrants receive
such rights, securities or assets as such holders would have been entitled had
the New Warrants been exercised immediately prior to such event; or (b) unless
such adjustment would require at least a 1% change in the aggregate number of
shares of New Common Stock issuable upon the hypothetical exercise of a New
Warrant (but any adjustment requiring a change of less than 1% will be carried
forward and taken into account in any subsequent adjustment).
The Reorganized Debtor may at its option, at any time during the term
of the New Warrant, reduce the then current exercise price of such New Warrant
and/or increase the number of warrant shares issuable upon the exercise of such
New Warrants to any amount deemed appropriate by the Board of Directors of the
Reorganized Debtor. The Reorganized Debtor and the New Warrant Agent may from
time to time supplement or amend the New Warrant Agreement without approval of
any holder to cure, among other things, any ambiguity or to correct or
supplement any provision, or to comply with the requirements of The Nasdaq
National Market or any national securities exchange, if applicable. Any other
supplement or amendment to the New Warrant Agreement will require the approval
of the holders of a majority of the outstanding New Warrants of each series,
with the series voting separately as three classes. Notwithstanding the
foregoing, any amendment or supplement which (i) increases the exercise price;
(ii) decreases the number of shares of New Common Stock issuable upon exercise
of a New Warrant; or (iii) shortens the period during which the New Warrants may
be exercised, requires the consent of the holder of the New Warrant affected
thereby.
Under the New Warrant Agreement, the Reorganized Debtor is not
obligated to furnish any holders of the New Warrants with quarterly, annual or
other reports regarding the Reorganized Debtor, although it intends to do so to
the extent required by applicable law or any securities exchange on which the
New Warrants may be listed or any quotation system in which they may be
included.
The Debtor expects that Harris Trust & Savings Bank will serve as
registrar and New Warrant Agent. To the Debtor's knowledge, Harris Trust &
Savings Bank is not a holder of any indebtedness of the Debtor and is not an
affiliate of any such holder. If such firm is unwilling or unavailable to serve
or if otherwise determined by the Reorganized Debtor, an alternative firm
satisfactory to the Reorganized Debtor will be selected as New Warrant Escrow
Agent.
E. SETTLEMENT AND COMPROMISE.
The Plan constitutes a settlement and compromise of (i) the Securities
Fraud Claims against the Debtor and (ii) the Indemnification Claims and assumed
indemnification obligations by the Beneficiaries against the Debtor.
On the Effective Date, the Debtor shall contribute $5 million and the
Company KPMG Claims to the Class 7B Liquidating Trust in exchange for the
discharge of all Securities Fraud Claims against the Debtor and the Reorganized
Debtor. The Nondebtor Subsidiaries shall also assign their claims against KPMG
Peat Marwick to the Class 7B Liquidating Trust.
On the Effective Date, in exchange for the D&O Company Release, (i) the
Debtor shall create the Indemnification Settlement Fund, to be established and
administered in accordance with the provisions of the Confirmation Order; (ii)
the Debtor shall create the Outside Directors Reserve, to be established and
administered in accordance with the provisions of the Confirmation Order; (iii)
the Debtor shall assume the indemnification obligations set forth in Section
12.03 of the Plan, subject to the limits stated therein, and (iv) shall grant
the release set forth in Section 11.03. The entry of the Confirmation Order
shall constitute the Court's finding that such compromise or settlement is in
the best interest of the Debtor, and is fair, equitable and reasonable and that
is made in good faith. Both the Reliance Policies and the proceeds of the
Indemnification Settlement Fund shall be deposited into an escrow, subject to
the terms of the Class Settlement Agreement, as described below.
In order to further implement a global settlement, a mandatory non-opt
class action (the "Class Action") is being sought against both the Debtor and
the Debtor's officers and directors by the Securities Claimants Committee on
behalf of all holders of Securities Fraud Claims. This matter is presently
pending in the United States District Court of the Northern District of
Illinois. The Creditors' Committee has agreed to use its best efforts to
facilitate the assignment to the holders of Securities Fraud Claims of any and
all claims the Senior Debt Holders possess which arise from the purchase or sale
of debt securities against the Debtor. Pursuant to the district court's order, a
class has been preliminarily certified, the members of the Securities Claimants'
Committee have been appointed to act as the representative of the class on
behalf of which the Class Action was filed (the "Class Representative") by and
through the Securities Claimants' Committee and the court has preliminarily
approved the Class Representative's entry into the Class Settlement Agreement
implementing the Class Settlement Agreement (which Class Settlement Agreement is
attached to the Disclosure Agreement as Exhibit T), subject to a final fairness
hearing to be conducted by the court contemporaneously with, or as soon as
thereafter, the hearing on confirmation of the Plan. Notice of the Settlement
and scheduled fairness hearing has been approved and is attached as Exhibit T to
the Disclosure Statement.
Upon final approval of the Class Settlement Agreement, the officers and
directors of the Debtor who are Beneficiaries of the Indemnification Settlement
Fund shall contribute the proceeds of the Indemnification Settlement Fund and
the holders of Allowed Indemnification Claims shall contribute the proceeds of a
certain directors' and officers' liability policy with Reliance Insurance
Company (in an amount up to $10 million) to the Class 7B Liquidating Trust in
exchange for a release and waiver of all Securities Fraud Claims against them as
provided for in the Class Settlement Agreement. Accordingly, upon final approval
of the Class Settlement Agreement and upon confirmation of the Plan, the Class
7B Liquidating Trust shall receive up to $28 million, plus the Company KPMG
Claims. If such mandatory non-opt out class action is not approved, the Class
Settlement Agreement provides for the disbursement of such funds to the
Indemnification Settlement Fund and the Class 7B Liquidating Trust, each to be
used for settlement or distribution in accordance with the terms of the
applicable agreements governing the respective Indemnification Settlement Fund
and the Class 7B Liquidating Trust.
F. SUMMARY OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
BY-LAWS.
A copy of the Amended and Restated Certificate of Incorporation and
By-laws are attached to the Disclosure Statement as Exhibit I. The following is
a brief summary of the principal provisions of the Amended and Restated
Certificate of Incorporation and By-laws.
The Reorganized Debtor will be authorized to issue 25 million shares of
New Common Stock. On the Effective Date, 10 million shares of New Common Stock
are expected to be issued and outstanding. Each share of New Common Stock held
of record as of the record date of any meeting shall be entitled to vote on each
matter submitted to a vote of the stockholders.
The Amended and Restated Certificate of Incorporation provides that all
dividends, whether cash, property or stock, shall be shared ratably among all
holders of New Common Stock. Similarly, in the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Reorganized Debtor,
the holders of New Common Stock shall be entitled to share in all of the
remaining assets of the Reorganized Debtor of whatever kind available for
distribution to stockholders. The Amended and Restated Certificate of
Incorporation will among other things, provide (to the extent necessary to
effect the terms of the Plan) for (i) the prohibition of the issuance of
non-voting equity securities, and (ii) the authorization of 25,000,000 shares of
the New Common Stock, which allows sufficient shares to be issued if all of the
New Warrants are exercised.
The board of directors of the Reorganized Debtor will be comprised of
eleven directors, one of whom shall be the Chief Executive Officer. Seven of
such board members are being nominated by the Creditors' Committee, one board
member, reasonably acceptable to the Creditors' Committee and the new Chief
Executive Officer, shall be nominated by the Equity Holders' Committee and two
board members, reasonably acceptable to the Creditors' Committee, shall be
nominated by the Chief Executive Officer. The individuals listed on Exhibit J to
the Disclosure Statement, which shall be provided prior to the confirmation
hearing, as directors of the Reorganized Debtor shall serve as directors of the
Reorganized Debtor and their elections to the board of directors shall be deemed
to have occurred and be effective on and after the Effective Date without any
requirement of further action by stockholders of the Debtor or the Reorganized
Debtor. All directors shall receive director's fees as determined by the board
of directors of the Reorganized Debtor.
The Amended and Restated Certificate of Incorporation and By-laws shall
be adopted and effected in accordance with Section 109 of the Delaware General
Corporation Law.
G. MANAGEMENT INCENTIVE PLANS.
The board of directors of the Reorganized Debtor shall implement a
management incentive plan with a portion of the plan designed to grant stock
options representing five percent (5%) of the New Common Stock, on a fully
diluted basis, to senior management, excluding the New CEO. The parameters of
such plan shall be determined by the Reorganized Debtor's board of directors
after the Effective Date.
H. VALUATION.
The Debtor, based on management's business plan and its consultations
with its financial advisor, estimates that the treatment of the Senior Debt
Claims under Class 4 are valued at less than 100% of the claim amount. It is the
Debtor's opinion that the Debtor's Market Exploration process, which is
discussed at pages 24 to 27, further validates that Debtor's valuation. The
Market Exploration failed to produce an offer which would pay the Senior Debt
Claims in full in cash and/or equity.
I. ALLOCATION OF CONSIDERATION BY HOLDERS OF SENIOR DEBT CLAIMS OR,
ALTERNATIVELY, CRAM DOWN.
In connection with the evaluation of all potential restructuring, sale
and/or refinancing alternatives, the Debtor engaged Salomon Smith Barney
("Salomon") to provide financial advisory and investment banking services. At
the request of the Debtor's board of directors, Salomon issued a written
fairness opinion dated as of May 13, 1998. The fairness opinion states Salomon's
opinion that, as of the date of the fairness opinion, the consideration to be
received by the holders of the Old Common Stock under the Plan is fair to such
holders from a financial point of view. The full text of Salomon's opinion,
which sets forth the assumptions made, matters considered and limits on the
review undertaken by Salomon, is attached as Exhibit K to the Disclosure
Statement. The Debtor submits the Salomon fairness opinion in support of its
position that the Debtor was insolvent as of the date of the opinion. Further,
since the date of the opinion, the Creditors' Committee has agreed, in the
context of negotiations of a consensual Plan, including the settlement and
compromise set forth in Section 8.05 of the Plan, to support a plan with
enhanced distributions to be received by the holders of Securities Fraud Claims
and Old Common Stock. If the Debtor's position is correct and the priority
scheme of the Bankruptcy Code is followed, holders of Claims and Interest in
Classes 5, 6, 7A, 7B and 8 are not entitled to any distribution without the
consent of holders of Senior Debt Claims. However, the Creditors' Committee has
agreed to recommend the Plan to all holders of Senior Debt Claims pursuant to
which value shall be distributable to junior classes.
The so-called "cram down" provisions of section 1129(b) of the
Bankruptcy Code permit confirmation of a chapter 11 plan of reorganization in
certain circumstances even if the Plan is not accepted by all impaired classes
of claims and interests. Because holders of Class 8 Interests will not receive
or retain any property on account of such Interests, they are deemed not to have
accepted the Plan pursuant to section 1126(a) of the Bankruptcy Code. The Debtor
will seek confirmation of the Plan under section 1129(b) of the Bankruptcy Code
in view of the deemed non-acceptance by Class 8 and the possible non-acceptance
by other classes in connection with this solicitation. THE PLAN, AS PROPOSED,
PROVIDES DISTRIBUTIONS TO CLASSES 5 THROUGH 7B BECAUSE THE HOLDERS OF SENIOR
DEBT CLAIMS AGREED UNDER THE TERMS OF THE CONSENT AGREEMENT AND THE CREDITORS'
COMMITTEE AGREED PURSUANT TO SUBSEQUENT NEGOTIATIONS WITH THE DEBTOR AND THE
OTHER COMMITTEES, AND CONSISTENT WITH THE DEBTOR'S VALUATION, UPON WHICH THE
PLAN IS BASED, TO ALLOCATE DISTRIBUTIONS OF VALUE OTHERWISE ATTRIBUTABLE TO
HOLDERS OF CLASS 4 CLAIMS. HOWEVER, BECAUSE THE DISCLOSURE STATEMENT WAS NOT
APPROVED BY SEPTEMBER 15, 1998, AND BECAUSE THE PLAN WILL NOT BE CONFIRMED BY
MID-NOVEMBER, THE CONSENT AGREEMENT IS TERMINABLE BY THE HOLDERS OF THE SENIOR
DEBT CLAIMS. NEVERTHELESS, THE CREDITORS' COMMITTEE (ALL OF WHOSE MEMBERS SIGNED
THE CONSENT AGREEMENT) HAS AGREED TO RECOMMEND THE SECOND AMENDED PLAN TO ALL
HOLDERS OF SENIOR DEBT CLAIMS. THE DEBTOR, THEREFORE, HOPES TO OBTAIN TIMELY
ACCEPTANCE OF THE PLAN BY CLASSES 5, 6, 7A AND 7B SO AS TO ENSURE THAT SUCH
CLASSES RECEIVE THE DISTRIBUTIONS UNDER THE PLAN TO WHICH THEY WOULD OTHERWISE
NOT BE ENTITLED IN THE ABSENCE OF THE ACCEPTANCE OF THE PLAN BY CLASS 4.
J. INDEMNIFICATION CLAIMS.
Under the Plan, the holders of Indemnification Claims which have been
allowed and are not subject to subordination shall be entitled to (i) continue
to assert such Claims against the Debtor to the extent of coverage under the
Reliance Policies, and (ii) the Debtor's cooperation in aiding such claim
holders in pursuing their rights under the Reliance Policies. Pursuant to
Section 12.03 of the Plan, the Debtor shall assume indemnification obligations
of the Beneficiaries and settle such claims as set forth in Section 8.05.
The Reliance Policies are directors' and officers' liability policies
purchased for the Debtor's directors and officers, and specifically identifies
them as beneficiaries of the policies. Generally, the Indemnification Claims
arise from the indemnification provisions contained in the Debtor's Certificate
of Incorporation, which is attached as Exhibit Q to the Disclosure Statement,
and the General Corporation Laws of the State of Delaware. The Certificate of
Incorporation sets forth both the standard for entitlement to indemnification
and limitations thereon. To the extent such limitations apply, the directors,
officers and employees who have received reimbursement for indemnification
obligations have also executed undertaking agreements which provide for, inter
alia, the repayment to the Debtor of all reimbursed amounts to the extent such
party is found not to be entitled to indemnification. Additionally, three
officers, John N. Brincat, Steve Gould and John Pratt, and several directors
have written indemnification agreements. Copies of the agreements are attached
as Group Exhibit R to the Disclosure Statement. The Debtor disputes the estate
of James A. Doyle and John N. Brincat's entitlement to indemnification and will
object to those claims.
As described above, in exchange for the treatment provided, the Debtor
is extinguishing potential claims against it in excess of $2 billion, which
holders of Allowed Indemnification Claims could assert against the Debtor if
liquidated through a judgment entered in or settlement of the actions set forth
in Section II.C. As of the Petition Date, the Debtor had made indemnification
payments to the officers and directors in the amount of approximately
$600,000.00 and indemnification payments to employees in the approximate amount
of $450,000.00.
K. MODIFICATION OR REVOCATION OF THE PLAN; SEVERABILITY.
Subject to the restrictions on modifications set forth in section 1127
of the Bankruptcy Code and any applicable notice requirements, the Debtor
reserves the right to alter, amend or modify the Plan before its substantial
consummation or to revoke or withdraw the Plan prior to the Confirmation Date.
If the Debtor revokes or withdraws the Plan, or if confirmation does not occur,
then the Plan will be null and void in all respects, and nothing contained in
the Plan will (a) constitute a waiver or release of any Claims by or against, or
any Interests in the Debtor, or (b) prejudice in any manner the rights of the
Debtor. If the Debtor modifies the Plan in any material respect and does not
obtain the consent of the holders of the Senior Debt Claims to such
modification, the Consent Agreement may be terminated by the holders of the
Senior Debt Claims, who will no longer be bound to support the Plan and the
distributions to Classes 5 through 7B. The Consent Agreement may also be
terminated for other reasons.
If, prior to confirmation, any term or provision of the Plan is held by
the Court to be invalid, void or unenforceable, the Court will have the power,
solely upon the request of the Debtor, to alter and interpret such term or
provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be
invalid, void or unenforceable, and such term or provision will then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration or interpretation, the remainder of the terms and provisions of the
Plan will remain in full force and effect and will in no way be affected,
impaired or invalidated by such holding, alteration or interpretation. The
Confirmation Order will constitute a judicial determination and will provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.
L. ADMINISTRATION OF THE CLASS 7B LIQUIDATING TRUST.
On the Effective Date: (i) the Debtor shall duly execute two originals
of the Class 7B Liquidating Trust Agreement, a copy of which is attached to the
Disclosure Statement as Exhibit U, (ii) deliver one signed original thereof to
the Trustees identified below, thereby establishing a trust which shall be known
as the Class 7B Liquidating Trust , and (ii) file one fully executed original of
the Class 7B Liquidating Trust Agreement with the clerk of the Court.
The provisions of the Class 7B Liquidating Trust Agreement are
incorporated into the Plan, as if the same were fully set forth herein. The
operation of the Class 7B Liquidating Trust shall be governed by the provisions
of the Class 7B Liquidating Trust Agreement and this Section 8.15 of the Plan.
Reference should be made to the Class 7B Liquidating Trust Agreement for a
complete statement of the terms and conditions governing the operation of the
Class 7B Liquidating Trust and the administration of the assets of the Class 7B
Liquidating Trust since not all of such terms and conditions are set forth in
this Section 8.15. It is the intent of the Plan that the provisions of the Class
7B Liquidating Trust Agreement shall be consistent with the provisions of this
Section 8.15 of the Plan. To the extent, if any, that the provisions of the
Class 7B Liquidating Trust Agreement and the provisions of this Section 8.15 of
the Plan may be inconsistent, the provisions of this Section 8.15 of the Plan
shall govern.
The Trustees. Initially the current members of the Securities
Claimants' Committee shall serve as Trustees. The Trustees shall serve for the
duration of the Class 7B Liquidating Trust, subject to earlier death,
resignation, mandatory disqualification, or removal. If at any time subsequent
to the Effective Date there are less than three (3) Trustees, within ten (10)
days thereof the remaining Trustees shall elect a successor Trustee or Trustees,
subject to the Court's approval. For purposes of the Class 7B Liquidating Trust
Agreement, "mandatory disqualification" of a Trustee will occur in the event
that the Class 7B Claim asserted by such Trustee is disallowed in its entirety
or is allocated a distribution in an amount less than Fifteen Thousand Dollars
($15,000), whether by virtue of a consensual allowance/allocation approved by
the Court or a decision by the Arbitrator.
Initial Trust Assets. On the Effective Date, the Reorganized Debtor
shall transfer and assign to the Class 7B Liquidating Trust, to be held in
trust, for the holders of Allowed Class 7B Claims all of the Debtor's, the
Reorganized Debtor's, and the Estate's rights, title, and interest in and to all
of the following (collectively, the "INITIAL TRUST ASSETS"): (a) the sum of Five
Million Dollars ($5,000,000) in cash which sum shall be transferred pursuant to
the wire transfer instructions provided by the Securities Claimant's Committee;
and (b) the Company KPMG Claims, as that term is defined above in Article I.A.
of the Plan, together with complete and exclusive control of the prosecution
and/or settlement of the Company KPMG Claims and (c) $250,000 in cash for fees
and costs to be incurred in connection with the administration of the Class 7B
Liquidating Trust. The Company KPMG Claims and attendant prosecution rights
shall be deemed to be assets of the Class 7B Liquidating Trust as of the
Effective Date. Upon delivery of the distributions to the Class 7B Liquidating
Trust required to be made by the Debtor pursuant to Section 5.05 and this
paragraph, the Debtor and the Reorganized Debtor shall have no obligation or
liability to the Trust or any of the Beneficiaries of the Trust, other than to
cause the claims administrator to forward Requests for Allowance to the Class 7B
Claims Administrator and to cooperate with the Trustees, as set forth in Section
2.04 of the Class 7B Liquidating Trust, in the prosecution of the Company KPMG
Claims.
Subsequent Trust Assets. In addition to the Initial Trust Assets, other
assets may be transferred to the Class 7B Liquidating Trust. These assets may
and shall include any proceeds received by the Class 7B Liquidating Trust as a
result of the Company KPMG Claims as well as any proceeds or claims received by
the Class 7B Liquidating Trust pursuant to the settlement agreement which is
attached as Exhibit T to the Disclosure Statement ("Class Settlement Agreement")
or otherwise pursuant to the Plan or agreements implementing the Plan. All
assets transferred to the Class 7B Liquidating Trust which are not included
within the definition of the Initial Trust Assets are referred to herein as the
"Subsequent Trust Assets." The Initial Trust Assets and the Subsequent Trust
Assets are collectively referred to herein as the "Trust Assets."
Powers of Trustees. Pursuant to the Class 7B Liquidating Trust
Agreement, the Trustees will have the power and authority to do, among other
actions, the following:
A. Receive and hold the Trust Assets and invest the same, from time to
time, in accordance with the parameters set forth in the Class 7B Liquidating
Trust Agreement;
B. Take such actions on behalf of the Class 7B Liquidating Trust as may
be required in connection with the Class Settlement Agreement;
C. Devise, implement, supervise, modify, and administer procedures for
the allowance of Class 7B Claims and the allocation of the assets of the Class
7B Liquidating Trust among the holders of Allowed Class 7B Claims, subject to
the limitations imposed by Class 7B Liquidating Trust Agreement or the Plan;
D. Utilize and distribute the Trust Assets to satisfy Allowed Class 7B
Claims in accordance with procedures set forth in the Class 7B Liquidating Trust
Agreement and the Plan;
E. Hire such employees, administrative personnel or claims
administrators and engage such legal, financial, accounting, investment, and
other advisors, custodians of assets, including without limitation the
Arbitrator and a Mediator, if any, as those terms are defined in the Class 7B
Liquidating Trust Agreement, and agents as the business of the Class 7B
Liquidating Trust requires, and to delegate to such Persons such powers,
authority, and discretion as the Trustees in their discretion deem advisable or
necessary to carry out the terms of the Class 7B Liquidating Trust (this
provision E. is not intended to, and shall not, include the hiring of any legal,
financial, accounting, or any other type of advisors or experts, by any Class 7B
claimant or group of Class 7B claimants for purposes of proving a Claim,
defending objections thereto, or asserting objections thereto);
F. Compensate, utilizing the Trust Assets, such employees, legal,
financial, accounting, investment, and other advisors, and agents, described in
E. above, provided, however, that accountants, lawyers, and investment advisors
engaged by the Trustees on behalf of the Class 7B Liquidating Trust to represent
interests of the Class 7B Liquidating Trust shall be compensated only with the
approval of the Court after such notice and hearing as the Court may require
(this provision F is not intended to, and shall not, include the utilization of
any Trust Assets to compensate any legal, financial, accounting, or any other
type of advisors or experts, retained by any Class 7B claimant, any group of
Class 7B claimants, any individual members of the Securities Claimants'
Committee, or individual Trustees for the purpose(s) of representing their own
respective interests);
G. Make such decisions as they may deem appropriate, and in accordance
with the voting procedures set forth in Section 4.03 of the Class 7B Liquidating
Trust Agreement, in connection with the prosecution, non-prosecution, or
resolution of the Company KPMG Claims or claims constituting Trust Assets; and
H. Apply to the Court for instructions to the Trustees as they may deem
proper or necessary in connection with the administration of the Class 7B
Liquidating Trust or the performance of their duties.
Except as otherwise provided by applicable law: (i) no Trustee shall be
liable to the Class 7B Liquidating Trust or to any Person holding a Class 7B
Claim, except for his, her, or its own willful misconduct; and (ii) except to
the extent any act or failure to act on the part of a Trustee shall constitute
willful misconduct; (a) no Trustee shall be liable for any act or omission of
any Co-Trustee or any officer, agent, or employee of the Class 7B Liquidating
Trust; (b) the Trustees shall be entitled to rely upon the advice of counsel or
other advisors to the Class 7B Liquidating Trust or the Trustees, reports
prepared by the Class 7B Claims Administrator, and information provided by any
other Person employed by the Class 7B Liquidating Trust; and (c) all actions
taken and determinations made by the Trustees, unless otherwise expressly
provided in the Class 7B Liquidating Agreement, the Plan, or an order of the
Court, shall be final and binding upon all Persons having any interest in the
Class 7B Liquidating Trust.
Each Trustee shall be reimbursed by the Class 7B Liquidating Trust for
his, her, or its reasonable expenses incurred in the performance of his, her, or
its duties ad Trustee under the Class 7B Liquidating Trust Agreement, provided
that any request for such reimbursement is approved by the Court after such
notice and hearing as the Court may require, and provided, further, that any
legal fees and costs incurred by an individual Trustee, or any other Class 7B
claimant, on its own account and not on behalf of the Class 7B Liquidating Trust
shall not be paid from Trust Assets but shall be paid from the allocation such
Trustee or Class 7B claimant receives pursuant to the allowance/allocation
procedures set forth in the Class 7B Liquidating Trust Agreement.
Company KPMG Claims-Other Claims Constituting Subsequent Trust Assets.
The Debtor will use its best efforts to obtain a tolling of the statute of
limitations for the Company KPMG Claims until sixty (60) days after the
allowance and allocation process set forth below and in the Class 7B Liquidating
Trust Agreement has become final. Thereafter, control and all decisions
regarding the Company KPMG Claims or other claims constituting Subsequent Trust
Assets, including without limitation the filing (or non-filing), prosecution,
and settlement thereof, shall be made by the vote of the representative(s) of
the holders of Allowed Class 7B Claims holding at least a majority in dollar
amount of all Allowed Class 7B Claims (singly a "REPRESENTATIVE" or collectively
"REPRESENTATIVES") which Representative(s) may be, but is/are not required to
be, a Trustee or Trustees of the Class 7B Liquidating Trust, provided, however,
that any decision (i) to release, or (ii) to settle the Company KPMG Claims or
claim constituting a Subsequent Trust Asset, in whole or in part, or (iii) to
dismiss such claims, if suit has been filed, shall be submitted to the Court for
approval after notice and hearing as the Court may require, and provided,
further, that all proceeds recovered, if any, as a result of the resolution of
the Company KPMG Claims or claims constituting Subsequent Trust Assets shall
remain Trust Assets and be distributed in accordance with Section 6.04 of the
Class 7B Liquidating Trust Agreement, all of which remains subject to the
judgment reduction provisions contained within the Class Settlement Agreement.
The Representative(s) shall provide status reports to the Trustees no less
frequently than semi-annually regarding actions taken and decisions made with
respect to the Company KPMG Claims and claims constituting Subsequent Trust
Assets.
Procedures for Claims' Allowance and Allocation.
Request for Allowance/Allocation. In connection with confirmation of
the Plan, the Debtor shall seek approval of the Court for the form of notice to
be sent to parties who may hold Claims in Class 7B ("Notice"), as well as the
form, the timing, and the place for publication of such notice, and shall cause
such notice to be sent and published as ordered by the Court. Prior to seeking
such approval from the Court, the Debtor shall obtain the review and approval
from the Securities Claimants' Committee of the forms of notice and the place
for publication hereof. The forms of notice, among other things, shall advise
Class 7B claimants that to be eligible to participate in the consensual
allowance process described below or obtain any allocation or distribution from
the Class 7B Liquidating Trust, they, or their representatives (if they are a
member of a class described in a class action pending against the Debtor on the
Petition Date or are individual holders of Class 7B claims whose claims arise
from their purchase of Old Common Stock before January 29, 1997 and who continue
to hold such Old Common Stock as of the Distribution Record Date (the "Old and
Cold Holders")) must submit a Request for Allowance/Allocation prior to the date
set forth below and in accordance with procedures set forth below. In addition,
the Notice shall advise Class 7B Claimants that if they are members of a group
included within the Class set forth in the Notice: (1) there is no need to take
any affirmative steps or submit any information at this time to participate in
the partial settlement, (2) their rights are already being represented in the
allowance process by the designated counsel for the group in which the class
member's claim falls, (3) a representative of that group will be permitted to
file a Request for Allowance on behalf of that entire group, (4) counsel for the
designated class representative of each group within the class receiving an
allocation from the settlement fund will, subject to approval of the court in
which the claims asserted by that group were initiated, issue a supplemental
Notice to members of the group which will provide information regarding the
outcome of the allocation procedure, the estimate of the average per share
recovery that will be achieved by members of the group as a result of the
settlement, and (5) the plan of allocation approved by the court pursuant in
which the proceeds of the settlement will be ultimately distributed to members
of the group.
Date before which Request for Allowance/Allocation must be Filed. In
addition to the provisions which the Court may require, the notice shall notify
such parties that in order to be eligible for any allocation or distribution
from the Class 7B Liquidating Trust, (i) they (or their representatives if they
are either a member of a class described in a class action pending against the
Debtor on the Petition Date or an Old and Cold Holder) must file a Request for
Allowance/Allocation in the form approved by the Court (a "REQUEST FOR
ALLOWANCE") with the Claims Center on or before April 9, 1999. For purposes of
the filing of a Request for Allowance, a representative of a class may include
the class representative, or if the class has not been certified or no such
representative has been appointed, lead counsel for plaintiffs in such class
action. For purposes of the filing of a Request for Allowance except to the
extent that the Court determines at the time of the confirmation of the Plan
that the interests of the Old and Cold Holders are represented in pending class
actions, a representative of the Old and Cold Holders shall be approved by the
Court at the time of confirmation of the Plan and may file a Request for
Allowance on behalf of the class of Old and Cold Holders.
Evidence to Accompany Request for Allowance. Any Request for Allowance
filed on behalf of an individual holder of a Class 7B Claim shall be accompanied
by true and correct copies of confirmations, brokerage account statements, or
other sufficient evidence of: (i) the date(s) of purchase(s), (ii) the purchase
price(s), (iii) the date(s) of sale(s), (iv) the sale price(s), and (v) the
number of shares of stock purchased or sold on such date(s) and at such
price(s). Any Request for Allowance filed on behalf of a class of holders of
Class 7B Claims or by the representative of the Old and Cold Holders shall be
accompanied by evidence sufficient to allow the Arbitrator described below to
determine the basis for an award with respect to allowance and/or allocation of
the Class 7B Claims contained in such class.
No Priority; No Automatic Allowance. The filing of a Request for
Allowance will not automatically result in the allowance of the Class 7B Claim
described therein. No Allowed Class 7B Claim shall be afforded any priority over
any other Allowed Class 7B claim in distribution. All Claims for which a Request
for Allowance is filed shall be subject to objection and the claims allowance
and allocation process in accordance with the procedures established by the
Trustees.
Forwarding Requests for Allowance. As soon as practicable after April
9, 1999, the Reorganized Debtor shall cause the Claims Center to forward copies
of all Requests for Allowance filed on behalf of claimants asserting a right to
be included in Class 7B to the Trustees, c/o the Class 7B claims administrator
selected by the Securities Claimants' Committee (the "CLASS 7B CLAIMS
ADMINISTRATOR"). Prior to or on the Confirmation Date, the Securities Claimants'
Committee will select the Class 7B Claims Administrator and provide notice of
the selection to the Debtor, the United States Trustee, counsel for the
Creditors' Committee, and counsel for the Equity Committee.
Selection of Arbitrator. Prior to or on the Confirmation Date, the
Securities Claimants' Committee (i) will select an arbitrator (the "ARBITRATOR")
to serve in connection with allowance of Class 7B Claims and the allocation of
the Trust Assets among the various classes of claimants represented in class
actions which were pending against the Debtor on the Petition Date and other
holders of Allowed Claims in Class 7B, and (ii) will provide notice of the
selection to the Debtor, the United States trustee, counsel for the Unsecured
Creditors' Committee, and counsel for the Equity Committee. At confirmation of
the Plan, the selection of the Arbitrator will be presented to the Court for
approval. The reasonable expenses of the Arbitrator as well as such fees as may
be agreed upon between the Arbitrator and the Trustees in writing shall be paid
first from the funds provided by this Section 8.15 of the Plan and, if such
funds have been exhausted, then from the Trust Assets. The arrangements relating
to the compensation and reimbursement of the Arbitrator will be presented to the
Court for approval at the hearing on confirmation of the Plan.
Allowance/Allocation/Arbitration Procedures. Within fifteen (15) days
of the Confirmation Date, the Trustees shall establish: (i) a procedure for
resolving, on a consensual basis, the allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims, and
(ii) a process for the arbitration of allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims in the
event that there is no resolution on a consensual basis. If the Trustees
determine that the services of a mediator (a "MEDIATOR") would be of assistance
in the efforts to attain a consensual allowance ad allocation, they may engage a
Mediator for that purpose.
Consensual Allowance and Allocation. If, as a result of the efforts of
the Trustees, a Mediator if any, and any claimants who indicated on their
Request for Allowance a desire to provide input regarding a consensual
allowance, a proposal with respect to a consensual allowance of Class 7B Claims
and allocation of Trust Assets on account of such Claims is accepted by a
unanimous vote of the Trustee then in office, in accordance with procedures
adopted by the Trustees, then the agreement shall be submitted by the Trustees
to the Court for approval, upon such notice as the Court shall order.
No Consensus; Arbitration. If, on or before May 14, 1999, or such later
date as the Trustees shall establish, no motion is filed with the Court seeking
approval of a consensual allowance of Class 7B Claims and allocation of Trust
Assets on account of such Claims, then an arbitration of any unresolved issues
relating to the allowance of Claims in Class 7B and the allocation of Trust
Assets shall be conducted by the Arbitrator as soon as practicable, in
accordance with such rules as the Arbitrator shall establish to the extent that
the Trustees have not done so. The arbitration shall be completed on or before
July 31, 1999.
Binding Arbitration. The arbitration shall be binding in nature, and
the only grounds of any application to vacate or modify any decision or award of
the Arbitrator shall be that the Arbitrator was other than a neutral party, that
the award was obtained by fraud, or that the award constituted an abuse of
discretion or violated public policy.
Post-Award Proceedings. Any application to vacate or modify an award of
the Arbitrator shall be only to the Court, and any notice of appeal from such an
award must be filed within fourteen (14) days after the Arbitrator shall have
provided a copy of his award to the Trustees and any party to the arbitration,
via facsimile to each of the Trustees and via overnight delivery service in a
method requiring a receipt therefor or via certified mail return receipt
requested to any other party to the arbitration. In the event such an
application is filed, with respect thereto the Arbitrator may, utilizing Trust
Assets, engage counsel to defend the award in connection with any such
application.
Expenses of Post-Award Proceedings. A party filing an application to
vacate or modify the award of the Arbitrator shall be responsible for his, her,
or its own costs, expenses and attorneys' fees. In addition, if an application
is unsuccessful in that the party making the application does not obtain a
modification or the vacation of the award of the Arbitrator, that party shall
bear all expenses of the application, including the reasonable fees and expenses
incurred in connection therewith by the Arbitrator.
Distribution. The Trustees shall distribute the Trust Assets then held
in the Class 7B Liquidating Trust, net of costs and expenses properly chargeable
to the Trust Assets under the Plan or the Class 7B Liquidating Trust Agreement,
as soon as practicable after either the award of the Arbitrator or order of the
Court approving a consensual allocation of Trust Assets has become final and not
subject to modification, reversal or appeal, and shall make such distribution in
accordance with such arbitration award or such order of the Court. If,
subsequent to such distribution, the Class 7B Liquidating Trust shall acquire
additional Trust Assets, then as soon as practicable after receipt by the Class
7B Liquidating Trust, the Trustees shall distribute those additional Trust
Assets, net of costs and expenses properly chargeable to the Trust Assets under
the Plan or the Class 7B Liquidating Trust Agreement (including net of
attorneys' fees and costs incurred in connection with such additional assets)
according to the same allocation determined previously by consensus or
arbitration, as the case may be. With respect to any distribution of Trust
Assets to Allowed Class 7B Claims which are included within a class action
against the Debtor which was pending on the Petition Date, the Trustees shall
make such distribution by delivering it to an escrow account designated by lead
counsel for that class in such class action and such distribution shall remain
in that escrow account until such time as (i) such lead counsel has been able to
apply to the court in which the respective class action is pending as to the
matter of a method of final distribution and an award of attorneys' fees and
costs, and (ii) any order on such application has become final.
Termination. Following (i) a final determination of the Company KPMG
Claims and other claims constituting Trust Assets, whether by virtue of
prosecution or settlement thereof, or (ii) a decision by the Trustees not to
take any action with respect to the Company KPMG Claims and other claims
constituting Trust Assets, at such time as all Trust Assets, including any and
all sums resulting from prosecution or settlement of the Company KPMG Claims, or
other claims constituting Trust Assets, have been fully and finally distributed,
the Trustees shall apply to the Court for an order of the Court terminating the
Class 7B Liquidating Trust, upon such notice as the Court shall order. Upon the
Court's order terminating the Class 7B Liquidating Trust becoming final, the
Class 7B Liquidating Trust shall be terminated, and the Trustees shall be
discharged of all responsibilities with respect to the Trust.
II.
DESCRIPTION OF THE DEBTOR AND PAST OPERATIONS
A. CORPORATE STRUCTURE.
The Debtor is a consumer finance concern engaged, through its wholly
owned operating subsidiaries or Nondebtor Subsidiaries, in the business of
acquiring installment sales finance contracts from automobile dealers and retail
vendors, extending short-term installment loans directly to consumers and
selling credit insurance and other related products. The Nondebtor Subsidiaries'
borrowers represent a broad cross section of the consumer market. Approximately
6% of the borrowers are military personnel. The loans and acquired retail
installment contracts generally have terms of 3 months to 48 months at annual
interest rates ranging, with minor exception, from 18% to 40%. Generally, all
loans and acquired retail installment contracts are repayable in monthly
installments.
The Debtor was organized in 1988, as a wholly-owned subsidiary of First
Illinois Corporation (an Evanston, Illinois based bank holding company). On
April 24, 1989, First Illinois Corporation distributed to its stockholders one
share of Debtor's stock for each two shares of First Illinois Corporation stock
held.
The Debtor's Nondebtor Subsidiaries commenced operations in February
1984 for the purpose of penetrating the market for small dollar amount consumer
loans (average of $3,000 or less). The initial focus was toward small, short
term, direct installment loans made to U.S. military servicemen. Building from
this direct lending niche, the Debtor has also built a substantial, diversified
consumer finance portfolio by purchasing, through the Nondebtor Subsidiaries,
individual installment sales finance contracts from retail vendors and
automobile dealers. Substantially all of the borrowers are "non-prime"
borrowers. These are borrowers which generally would not be expected to qualify
for traditional financing such as that provided by commercial banks or
automobile manufacturers' captive finance companies.
The Debtor, through the operating subsidiaries, had 173 operating
branches at August 31, 1998 versus 287 at December 31, 1996. The Debtor closed
28 branches during 1997 that were considered to be duplicative or
underperforming. The costs related to the closings, consisting primarily of
lease settlements and write off of leasehold improvements, aggregated at
$325,000. In December 1997, the Debtor announced the implementation of a
business plan that included the closing of approximately 70 additional operating
branches. The number of additional branch closings was subsequently increased to
86. The branches are being closed because they are either unprofitable or
considered redundant in view of the location of nearby branches. The closings
are estimated to result in a decrease in the outstanding portfolio of
approximately $250 million over the next twelve to eighteen months. The closings
will not be treated as discontinued operations, however, a provision was
recorded in the fourth quarter of 1997 to cover the costs of the closings, which
are estimated to be $3.4 million.
1. BRANCH OFFICE NETWORK/OPERATION.
In December 1997, the Debtor announced the implementation of its
business plan for 1998 which provided for the exit of non-profitable market
areas and the closing of branches as described above. The existing portfolios of
the 86 branches to be closed have either been transferred to nearby continuing
branches or will remain in 5 branches that will continue to exist for up to
eighteen months in order to collect the existing portfolio.
The continuing branch operations are divided into 21 geographically
organized districts, with each district headed by a regional director. A
regional director is generally responsible for six to twelve offices (depending
on size and geographical dispersion). Regional directors report to four Group
Vice Presidents. A summary of the projected operating branches by state after
giving effect to the planned closures is as follows:
<TABLE>
<CAPTION>
STATE OFFICE LOCATIONS STATE OFFICE LOCATIONS
<S> <C> <C> <C>
Alabama 1 Nevada 2
Arizona 3 New Mexico 1
Colorado 1 New York 2
Delaware 1 North Carolina 8
Florida 20 Ohio 11
Georgia 6 Oklahoma 1
Illinois 14 Pennsylvania 5
Indiana 5 South Carolina 4
Kansas 1 Tennessee 2
Kentucky 2 Texas 15
Louisiana 33 Virginia 11
Michigan 4 Washington 2
Mississippi 11 Wisconsin 4
-
Missouri 3
TOTAL 173
</TABLE>
In addition, Midland Finance Co. has one operating office located in
Chicago, Illinois.
Management has developed its workforce by attempting to train
experienced consumer lending professionals. The training program includes actual
training at branch offices and personal interviews by senior operating
management. The training program, which is called the "Pride Program," is
administered by the branch managers and regional directors and is a requirement
for all branch personnel. In addition, the Debtor also conducts a Manager's
Qualification Program for prospective managers.
Beginning in 1994, the Nondebtor Subsidiaries began to experience a
significant level of turnover in their branch staff as a result of increased
demand for experienced personnel by competitors. After the announcement of the
accounting irregularities discussed in Section II.B., the Nondebtor Subsidiaries
experienced further difficulty in retaining and hiring qualified consumer
lending professionals. The rate of turnover in management positions has declined
and, although still a cause for concern, management believes that the turnover
rate is no greater than that experienced by the Nondebtor Subsidiaries prior to
discovery of the accounting irregularities.
The business mix of Debtor's branch office network between sales
finance receivables (which constitutes 86% of total gross receivables) and
direct consumer loans (which constitutes 14% of total gross receivables) is
generally consistent within the 21 supervisory districts of the country (except
for Mississippi, Louisiana and East Texas which reflect a business mix of
50/50). With the exception of Gulfco, the business mix in any one branch office
is dependent upon the location of the office and the background of an office's
loan personnel.
2. LOAN AND CONTRACT ORIGINATION AND MARKETING.
Historically, the Nondebtor Subsidiaries originated loans and acquired
individual sales finance contracts through their office network based upon a
decentralized approval process tailored to the market in which their specific
offices operated. All credit extensions were reviewed and approved at the branch
level with extensions of credit in excess of preset limits requiring approval by
a regional director.
In 1998, the Debtor initiated 16 regional centralized purchasing offices
("CPO's") that review and approve the acquisitions of sales finance contracts
for a majority of the Nondebtor Subsidiaries' volume. Through this process,
management believes that underwriting criteria will be applied more consistently
while still allowing for flexibility to be responsive to local market
conditions. In addition, the realignment will release branch personnel from
making credit decisions and will allow for greater emphasis to be placed on cash
collections and expanding dealer relationships. Installment sales finance
receivables which originate with local dealers (household goods, appliance and
automobile) are subjected to the same credit review and credit worthiness
policies as direct consumer loans. A specific installment sales finance contract
is acquired only after objective investigations of the credit worthiness of the
borrower and a determination of the underlying value of the asset through use of
industry publications, combined with the subjective assessment by underwriters.
Every sales finance contract is reviewed individually and extensions of credit
are made based upon the credit worthiness of each contract.
Individual sales finance contracts are acquired pursuant to formal
agreements with local merchants. The Nondebtor Subsidiaries acquire sales
finance contracts from local franchised and independent used car dealers with
which the Nondebtor Subsidiaries have established ongoing relationships. A
relationship with a dealer begins only after analysis of the soundness of their
business is completed. The Nondebtor Subsidiaries acquire a majority of their
sales finance contracts from dealers at a discount. The Nondebtor Subsidiaries
negotiate the amount of the discounts with the dealers based upon various
criteria, one of which is the credit risk associated with the sales finance
contracts being acquired.
The Debtor encourages a decentralized marketing approach which allows
each office to pursue and develop business leads which are unique to individual
markets. The Debtor and its Nondebtor Subsidiaries does no national advertising.
Branch offices may advertise in local publications and most branch offices rely
on the endorsements of customers to build a client base. The Debtor believes
that client service in the form of local access to dealers and quick turnaround
of the application process to dealers is the most cost-effective primary
marketing tool.
3. INSURANCE OPERATIONS.
In conjunction with their lending practices, the consumer finance
subsidiaries offer credit life, accident and health and property insurance to
borrowers who obtain financing directly from the consumer finance subsidiaries,
and to borrowers under sales finance contracts and financing contracts acquired
from merchants and automobile dealers.
Throughout 1997, the Debtor attempted to maximize value by divesting
non-core assets and refocusing on core business units. Divestiture of certain
assets also provided the Debtor with cash necessary to fund operations and make
payments to senior and subordinated noteholders.
On March 28, 1997, Debtor entered into a Stock Purchase Agreement with
Frontier Insurance Group, Inc. to sell the stock of Lyndon for $92 million in
cash. Lyndon was acquired by the Debtor in October, 1995, from ITT for $72.5
million and the assumption of their net liabilities. Since then, other smaller
insurance operations of the Debtor had been combined with Lyndon. In 1997, the
state of Missouri had placed Lyndon under administrative supervision, thereby
reducing, if not eliminating, the potential value of Lyndon if a sale was not
achieved. The sale which closed on June 3, 1997, resulted in a loss to Debtor of
approximately $30 million that was recorded in the first quarter of 1997. In
addition, the earnings of Lyndon from the date of the agreement through the date
of sale aggregating approximately $2 million accrued to the benefit of the
buyer. As the Lyndon subsidiary had been operated on a stand-alone basis, its
divestiture did not have a significant effect on the Debtor's ability to operate
the Debtor's core consumer finance business and to continue to offer insurance
products to its consumer finance customers. Management has determined that it is
in the best interest of the Debtor to remain in the insurance business and
formed a new captive insurance subsidiary during 1997, MFN Insurance Company. As
a result, the sale of Lyndon is not considered to be discontinuation of a
business. The loss associated with the sale of Lyndon will not be tax deductible
to the Debtor as a loss on the sale of a consolidated subsidiary is, under
certain circumstances, not deductible for tax purposes.
4. CHANGES IN ACCOUNTING TREATMENT AND METHODOLOGY.
A. ALLOWANCE AND PROVISION FOR FINANCE CREDIT LOSSES.
The operating subsidiaries originate direct consumer loans, acquires
individual sales finance contracts from third party dealers and provides
revolving credit to individuals through a Visa affiliated program. The Debtor
continues to maintain an allowance for the direct and credit card receivables to
cover finance credit losses that are expected to be incurred on receivables that
have demonstrated a risk of loss based upon delinquency or bankruptcy status.
The sales finance contracts are generally acquired at a discount from
the principal amount. This discount is normally referred to as a non-refundable
dealer reserve. The amount of the discount is based upon the credit risk of the
borrower, the note rate of the contract and competitive factors. In 1994 and
prior, the non-refundable dealer reserve was considered to be adequate to absorb
the majority of losses on the acquired receivables. However, as the sub-prime
market has evolved and become more competitive, the dealer reserve has proven to
be inadequate to absorb all of the credit losses. In 1995 and prior, the Debtor
maintained a balance of the combined non-refundable dealer reserves and
allowance for finance credit losses in an amount sufficient to cover losses that
were expected to be incurred on receivables that had demonstrated a risk of loss
based upon delinquency or bankruptcy status.
The provision for finance credit losses in the income statement results
from the combination of a) an estimate by management of loan losses that
occurred during the current period and b) the ongoing adjustment of prior
estimates of losses occurring in prior periods. As the specific borrower and
amount of a loan loss is confirmed by gathering additional information, taking
collateral in full or partial settlement of the loan, bankruptcy of the
borrower, etc., the loan is charged off, reducing the allowance for finance
credit losses. If, subsequent to a charge off, the Debtor is able to collect
additional amounts from the borrower or obtain control of collateral worth more
than earlier estimated, a recovery is recorded, decreasing current period charge
offs.
In the third quarter of 1996, the Debtor adopted a loss reserving
methodology commonly referred to as "static pooling." The static pooling
methodology provides that the company stratify the components of its sales
finance receivable portfolio (i.e. dealer reserve, principal loan balances and
related chargeoffs) into separately identified pools based upon the period the
loans were acquired. The Debtor defines a pool as loans acquired within a given
month. The application of the static pooling methodology as described above
increased the 1996 provision for credit losses by $89 million.
Reserve requirements for sales finance, direct and credit card
receivables are calculated based on the estimated losses inherent in each
category of delinquency (i.e. 30, 60, 90 and 120 days past due). These assumed
losses are utilized to determine the projected cash flows from each impaired
category. The projected cash flow is then discounted at the loan's original
yield to estimate the net present value of the impaired loans. A reserve is
established in an amount sufficient to reduce the book value of the impaired
receivable to its net present value. Repossessed collateral is valued at an
estimate of its net realizable value.
B. NONREFUNDABLE DEALER RESERVES.
The operating subsidiaries acquire a majority of its sales finance
contracts from dealers at a discount. The Nondebtor Subsidiaries negotiate the
amount of the discount with the dealers based on various criteria, one of which
is the credit risk associated with the sales finance contracts being acquired.
Under the static pooling methodology utilized in 1996 and 1997, the
balances of nonrefundable dealer reserves are not available to offset current
finance credit losses, but are amortized and made available to absorb credit
losses over the life of the corresponding pool of receivables. The balance of
nonrefundable dealer reserves at December 31, 1995 was computed under the
previous reserving methodology wherein nonrefundable dealer reserves acquired
were available to offset current losses.
The discount acquired on new volume decreased in 1997 from 1996 as a
result of lower volume levels. The discount acquired on new volume decreased in
1996 versus 1995 as a result of both lower volume and lower percentage of
discount on new volume.
5. SOURCE OF FUNDS.
The Debtor funds the Nondebtor Subsidiaries' operations primarily
through the sale of debt securities and the repayment of advances to the
Nondebtor Subsidiaries through collections of principal and interest from
finance receivables of the Nondebtor Subsidiaries. At May 31, 1998, the Debtor
had total debt of approximately $700 million. Of this total, 48.6% was in
commercial paper and notes, 48.2% was in fixed rate senior term notes and 3.29%
was in fixed rate subordinated term notes. The Debtor filed its statements and
schedules on August 14, 1998, including Schedule F, which lists, inter alia, the
holders as of the Petition Date of the Senior Debt Claims as set forth in the
Debtor's books and records. Certain assignments of the Senior Debt Claims have
occurred both before and after the Petition Date and may continue to occur
through the Effective Date of the Plan, including pursuant to the Claims
Purchase. As far as the Debtor is aware, the holders of the Debtor's Senior Debt
Claims, which are principally financial institutions, investment funds, and an
insurance company, hold such claims for investment purposes and will continue to
make decisions regarding their Senior Debt Claims and the New Senior Secured
Notes and New Common Stock they receive under the Plan as investments in the
future. In 1989, shortly after the Debtor became a public company, the Debtor
issued Subordinated Notes to several insurance companies in the principal amount
of $35 million. In accordance with the terms of the debt, the Debtor paid $12.5
million. The outstanding principal balance as of the Petition Date was
$22,500,000. Subsequent to issuance, the Subordinated Notes have been sold by
the original holder. As of the Petition Date, the Debtor believes the holder of
the Subordinated Notes was Franklin Mutual Advisors, Inc. or one or more of the
funds it advises. The Debtor knows of no agreement by the Subordinated
Noteholders to dispose of such claims and believes the Subordinated Notes to be
held for investment purposes. In addition, the Debtor previously had a $50
million credit facility which expired by its own terms in January 1998, with no
amounts then outstanding thereunder.
As indicated below, as a result of the accounting irregularities, the
Debtor's credit rating has been downgraded and, consequently, the Debtor does
not have access to the commercial paper markets and is not now obtaining
additional financing. Proceeds from the collection of existing sales finance
contracts have provided and are expected to continue to provide sufficient
working capital for operation, since collections exceed originations. Lower
amounts are being spent on new sales finance contracts due to the reduction in
the number of operating branches and the stricter underwriting criteria.
Reductions in the sale finance portfolio have funded operating losses.
6. COMPETITION.
The consumer finance business is intensely competitive. The Debtor's
operating subsidiaries compete with other consumer finance companies, personal
loan departments of commercial banks, federally insured credit unions,
industrial banks, credit card issuers and companies which finance the sales of
their own merchandise or the merchandise of others.
In recent months, a number of the Debtor's competitors have announced
that they have exited the sub-prime sales finance industry, have no funds
available to acquire additional sales finance contracts or have tightened credit
standards resulting in lower volumes. While this may be a sign that competitive
pressures should be easing, there still appears to be no shortage of
alternatives for auto dealers attempting to sell sales finance contracts.
7. EMPLOYEES.
As of September, 1998, Debtor, and on behalf of its Nondebtor
Subsidiaries, had approximately 1,320 employees. Approximately 1,270 employees
work at branch offices maintained by the Nondebtor Subsidiaries, and 50
employees work for the Debtor at its corporate headquarters. The employees are
paid every two weeks. The Debtor is responsible for processing the payroll for
all employees. The Debtor, however, allocates the expense associated with
payroll to the respective Nondebtor Subsidiaries. None of the employees are
represented by a collective bargaining agreement.
8. GOVERNMENT REGULATION.
All consumer finance operations are subject to federal and state
regulations. Personal loan lending laws generally require licensing of the
lender, limitations on the amount, duration and charges for various categories
of loans, adequate disclosure of certain contract terms and limitations on
certain collection policies and creditor remedies. Federal consumer credit
statutes primarily require disclosure of credit terms in consumer finance
transactions. In general, the business is conducted under licenses issued by
individual states. Each licensed office is subject to periodic examination by
state regulatory authorities. The state licenses are revocable for cause. The
Debtor believes that its current operations comply in all material respects with
these regulations. The Debtor is also subject to the provisions of the Federal
Consumer Credit Protection Act and its related regulations.
Credit insurance offered in connection with the direct lending and
sales finance activities of the Debtor and the premiums by credit customers and
commissions payable by insurers to the originators of such insurance are also
subject to state laws and regulations.
B. ANNOUNCEMENT OF ACCOUNTING IRREGULARITIES AND SUBSEQUENT EVENTS.
On January 29, 1997, the Debtor announced the discovery of accounting
irregularities which caused a material overstatement of the previously released
earnings for 1995 and 1996. The accounting irregularities were the result of
unauthorized entries being made to the accounting records of the Debtor by its
Chief Financial Officer. Immediately following the discovery of the accounting
irregularities, the board of directors established a Special Committee for the
purpose of investigating the circumstances surrounding these activities. The
investigation was undertaken with the assistance of special legal counsel and
forensic accounting experts.
Shortly after the announcement of the accounting irregularities, the
Debtor's board of directors named William A. Brandt, Jr., the President and
Chief Executive Officer of the Debtor. Mr. Brandt is the President and Chief
Executive Officer of Development Specialists, Inc. ("DSI"), a firm specializing
in providing management, consulting and turnaround assistance to reorganizing
businesses. Fred C. Caruso is Acting Chief Operating Officer and Patrick J.
O'Malley is Acting Chief Accounting Officer, both of DSI. The Debtor's former
President and Chief Executive Officer, John N. Brincat, resigned from both
positions in February 1997. Mr. Brincat also resigned as a director of the
Debtor as of December 1, 1997. The Debtor's Chief Financial Officer before the
Debtor's announcement of the accounting irregularities, James A. Doyle, was
relieved of his duties in January 1997. Mr. Doyle subsequently died in June
1997.
In February 1997, the Debtor entered into an Employment Agreement with
Mr. Brandt, employing Mr. Brandt as President and Chief Executive Officer of the
Debtor. The annual salary under the employment contract is $750,000. At the same
time, the consulting firm of DSI, owned by Mr. Brandt, was engaged to fill
certain positions of executive management, including Chief Operating Officer,
Chief Accounting Officer and Chief Credit Officer. In addition, DSI staff
members have provided additional support in the accounting and finance area.
These services are being provided based upon time spent performing such
functions at the individuals' customary hourly billing rates. For the year ended
December 31, 1997, the Debtor paid $2,400,000 of fees relating to services
rendered by DSI.
Brandt's amended employment agreement provides for a $1.0 million
dollar bonus payable upon confirmation of the Plan and in accordance with
section 1129(a)(4) of the Bankruptcy Code. The Debtor's amended retention
agreement with DSI also provides for a fee totaling $1.6 million dollars payable
by the Nondebtor Subsidiaries for a noncompetition agreement and transition
services, including continued availability during the transition, in addition to
fees and expenses. The fee is to be paid by the Nondebtor Subsidiaries upon the
Debtor's retention of DSI and approval by the Court. Motions to assume both
amended retention agreements have been continued pending resolution of the
matter.
The Securities and Exchange Commission is investigating the events
giving rise to the accounting irregularities. These same events are also under
investigation by the United States Attorney for the Northern District of
Illinois and the Federal Bureau of Investigation. The Debtor is cooperating
fully in those investigations. The Debtor cannot predict the outcome of any of
the investigations, the potential for sanctions or fines imposed, or the impact
on the Debtor or its operating subsidiaries, if any.
As a result of the accounting irregularities, the Debtor violated and
was in default of its senior note and subordinated debt agreements. In addition,
the Debtor did not have access to commercial paper or other public debt markets,
which historically provided a significant portion of the Debtor's financing.
Consequently, the Debtor was unable to repay maturing debt and has not repaid
the principal of any debt subsequent to announcement of the accounting
irregularities, except as described below. The Debtor is now current on all
interest payments, other than certain portions deferred by agreement, and is not
now obtaining additional financing.
In order to conduct a complete investigation of the Debtor's
operations, the prospects of rehabilitation and the value of the Debtor, the
Debtor endeavored to obtain alternative interim financing. On February 7, 1997,
the Debtor and all of its subsidiaries, other than its insurance subsidiaries
(the "Subsidiary Borrowers") entered into a Loan and Security Agreement (the
"Loan Agreement") with certain financial institutions, including BankAmerica
Business Credit, Inc. ("Bank America"), which provided the Debtor with a $50
million secured credit facility. Amounts outstanding under the Loan Agreement
were secured by substantially all of the property and assets of the Debtor and
its Subsidiary Borrowers other than equipment and real estate. In addition, the
Debtor pledged to BankAmerica all of the capital stock of each Subsidiary
Borrower. This facility, combined with daily cash flows, provided the Debtor
with sufficient working capital to operate the business, discharge significant
expenses resulting from the accounting irregularities, and pay interest on its
debt obligations. The facility terminated according to its terms on January 6,
1998, at which time no amounts were due thereunder. In connection with the Loan
Agreement, the Debtor received covenant waivers from its other lenders
permitting the Debtor to pledge its Assets as collateral as required by the Loan
Agreement.
On February 18, 1997, the Debtor advised KPMG Peat Marwick LLP
("KPMG"), its independent accountants, that the Debtor was discontinuing KPMG's
services. The Debtor then engaged Arthur Andersen LLP as the Debtor's new
independent accountants. Arthur Andersen LLP was also engaged by the Special
Committee of the Board of Directors to investigate the circumstances surrounding
the discovery of the accounting irregularities.
The Debtor continued its stabilization of business operations, analysis
of operations, determination of value, and market exploration process which, if
successful, would provide the mechanism best suited for obtaining maximum value
for the Debtor. In order to assure its ability to complete these processes, the
Debtor requested formal forbearance from the senior lenders. Certain holders of
Senior Debt Claims agreed to extend the covenant waivers in order to continue
the process, in exchange for a formal forbearance agreement. Thus, effective
July 11, 1997, the Debtor and a number of its holders of Senior Debt Claims
signed a Forbearance Agreement (the "Forbearance Agreement") and Waivers (the
"Waivers"). Under the Forbearance Agreement, the Senior Lenders (as defined in
the Forbearance Agreement) agreed not to take actions against the Debtor for
defaults under the applicable debt agreements prior to October 1, 1997, subject
to certain termination events enumerated in the Forbearance Agreement. The
Forbearance Agreement also provided for certain interest payments and principal
payments based on excess cash flow on the amount due under the existing
agreements based on the Senior Lenders' rights under such agreements or if a
liquidation was conducted. See Section III.A. The Debtor made a $70 million
payment, principally from the sale of Lyndon, to reduce principal and brought
its interest payments current. Subsequent interest payments (at the greater of 7
percent per annum or the stated non-default rate) were made on the last business
day of July, August and September of 1997, with a $6 million escrow established
to insure payment of the September 30th interest payment. The Debtor also agreed
to make additional cash payments to reduce principal to its lenders (i) on July
16, 1997, August 5, 1997, September 4, 1997, and October 3, 1997, if the
Debtor's cash balances exceeded certain threshold amounts, and (ii) at such
other times from the proceeds of an asset sale with a book value in excess of $5
million or from tax refunds received. The additional principal payments
aggregated $31 million under this agreement. The Debtor also paid default
interest subject to a cap of 9% on September 30, 1997.
On November 6, 1997, the Forbearance Agreement was amended (the
"Amended Forbearance Agreement") such that the Senior Lenders agreed to not take
action against the Debtor prior to March 2, 1998, unless the Forbearance
Agreement was breached or otherwise terminated early. The Amended Forbearance
Agreement provided for principal repayments based on excess cash balances at
each month end during the duration of the agreement, a $7.0 million escrow fund
to be used to pay any due and unpaid interest at the end of the forbearance
period and payment of principal and interest from cash proceeds arising from the
occurrence of certain significant events. Pursuant to the Amended Forbearance
Agreement, the Debtor paid additional principal payments aggregating $154
million through June 3, 1998, bringing total principal repayments to $307
million since the Debtor entered into the forbearance agreements. Subsequent to
June 3, 1998, no payments of principal have been made to the Senior Lenders.
Effective March 2, 1998, the Debtor and its Senior Lenders agreed to
extend the Amended Forbearance Agreement until June 3, 1998 (the "Second Amended
Forbearance Agreement"). Under the Second Amended Forbearance Agreement, the
Debtor agreed to continue to keep interest current and make periodic payments to
reduce the principal of the outstanding debt as cash flow permitted. The holders
of the subordinated debt did not participate in the Second Amended Forbearance
Agreement.
On May 14, 1998, the Debtor entered into an agreement with
substantially all of the holders of its Senior Debt Claims and with its
subordinated debt holder providing for the financial restructuring and
recapitalization of the Debtor embodied in the Plan. See Subsection D below. The
Debtor and its holders of Senior Debt also entered into a Third Amendment to
Forbearance Agreement extending the Forbearance Agreement until July 15, 1998
and made a forbearance payment in the amount of approximately $14.5 million. In
addition, the Debtor entered into a Subordinated Debt Forbearance Agreement with
its subordinated debt holder as of May 14, 1998, also effective until July 15,
1998.
C. PREPETITION LEGAL PROCEEDINGS.
During 1997 and 1998, a number of lawsuits were filed against the
Debtor and its subsidiaries. The Debtor has been named as a defendant in a
variety of lawsuits generally arising from the Debtor's announcement on January
29, 1997 that it would restate its earnings for certain prior periods as a
result of accounting irregularities. A list of such actions is attached as
Exhibit 2 to the Plan. To date, forty-five actions have been filed against the
Debtor in the United States District Court for the Northern District of
Illinois, six cases are pending against the Debtor in Illinois Chancery Court,
and nine cases are pending in Delaware Chancery Court. The complaints seek
compensatory damages, attorneys' fees and costs in excess of two billion dollars
($2,000,000,000).
Forty-one of the lawsuits filed in the Northern District of Illinois
are class actions which generally allege claims under Sections 10 and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. These
lawsuits name one or more officers or directors of the Debtor as additional
defendants. One case pending in the Northern District of Illinois alleges
derivative claims seeking to recover damages on behalf of the Debtor from
certain of the Debtor's officers and directors. Thirty-nine of the
non-derivative cases pending in the Northern District of Illinois were
consolidated pursuant to a Stipulation entered on April 30, 1997. Seven of those
cases were dismissed in the third and fourth quarters of 1998. In November 1997,
the Minnesota State Board of Investment was appointed as lead plaintiff in the
federal class cases. One of the cases pending in the Northern District of
Illinois seeks to represent a class of participants in Debtor's employee
retirement plan and alleges ERISA violations arising out of the plan's
investment in Debtor's allegedly overvalued stock. Participants in the proposed
class may include certain officers and former officers of the Debtor. One case
pending in the Northern District of Illinois alleges non-class securities fraud
and common law claims. A second case alleging similar claims was dismissed on
September 9, 1998. The ERISA action and the two non-class securities fraud cases
were consolidated in February 1998, with the cases in which the Minnesota State
Board of Investment is lead plaintiff. Three of the Illinois state court actions
are class actions alleging claims under the Illinois Securities Act, the
Illinois Consumer Fraud and Deceptive Business Practices Act and common law
claims of fraud and negligent misrepresentation. The other Illinois state court
actions are derivative actions which seek to recover damages on behalf of the
Debtor from certain of the Debtor's officers and directors. One of the
derivative actions was amended to include allegations of RICO violations. Each
of the Delaware state court actions is a derivative action which seeks to
recover damages on behalf of the Debtor from certain of the Debtor's officers
and directors. The United States District for the Northern District of Illinois
formed a global settlement negotiation committee composed of representatives of
all pending litigation, except Consumer Litigation.
On January 10, 1997, the Debtor entered into an agreement (the
"Agreement") with BankBoston Corporation ("BankBoston") pursuant to which the
Debtor was to acquire all of the outstanding stock of Fidelity Acceptance
Corporation, a subsidiary of BankBoston, in return for the issuance of
approximately 32.7 million shares of the Debtor's common stock. On January 30,
1997, BankBoston notified the Debtor that it was terminating the Agreement as a
result of breaches of the Agreement resulting from the accounting irregularities
described above. On July 10, 1997, BankBoston notified the Debtor that
BankBoston intended to seek appropriate compensation for its damages resulting
from such breaches. Such claims were settled for a cash payment of $1,600,000 in
January 1998, which sum was accrued and reserved in December 1997.
In the normal course of its business, the Debtor and its subsidiaries
are named as defendants in legal proceedings. A number of such actions are
pending in the various states in which subsidiaries of the Debtor do business
(the "Consumer Claims"). Such Claims are contingent, unliquidated, and subject
to dispute and are listed on Exhibit 1 to the Plan. These Claims are not being
affected by the Plan, but shall be resolved pursuant to applicable
non-bankruptcy law and procedures.
D. STABILIZATION AND PREPETITION PLAN NEGOTIATIONS.
The terms of the Plan result in part from an analysis of the Debtor's
financial condition and operations conducted by the Debtor. The Debtor initially
concluded that to return to viability, it would have to emerge from any
restructuring with a reduced debt structure to service. The Debtor explored
various possible out-of-court restructuring alternatives and concluded that the
best vehicle to achieve a restructuring of its indebtedness was through a
prestructured chapter 11 process.
The Debtor initially assessed the total enterprise value of the
Reorganized Debtor, and concluded that the obligations to the holders of Senior
Debt Claims could not be satisfied in full even if the Debtor offered such
creditors 100% of the equity of a Reorganized Debtor. Moreover, the Debtor
continued to experience a significant downturn in new business and the burdens
of the pending litigation described above. Under these circumstances, the Debtor
concluded that to maximize the recovery to creditors and stockholders it must
explore opportunities for the sale or refinancing of the Debtor, as well as
continue restructuring negotiations with the holders of its Senior Debt Claims.
In January 1997, the Debtor decided to canvass the market in search of
a viable purchase offer by a strategic or financial buyer. The Debtor began this
process by retaining Salomon in January 1997, and Salomon immediately began
soliciting prospective purchasers and lenders informally. Salomon did not limit
the solicitation to an all cash refinancing and/or payment, but rather,
solicited any form of transaction which would provide for at least a par
recovery to the holders of Senior Debt Claims. Formal market solicitations began
on or about July 15, 1997, by which time much of the Debtor's debt was in
default.
The Debtor's market exploration process was a continuous one which took
place in three general phases, which generally occurred in the following three
time periods:
1. January to September 1997, 2. November 1997 to February 1998 and 3.
May to August 1998.
Following is a general summary of each of these three phases of the Debtor's
market exploration process.
1. January to September 1997
Salomon advised the Debtor that a public auction of either the company
itself or the refinancing of the company's debt would tend to depress the
Debtor's value. Thus, Salomon and the Debtor elected to pursue a "targeted"
solicitation of potential purchasers and lenders.
Initially, the Debtor and Salomon identified and contacted
approximately 40 institutions which might be interested in purchasing Mercury or
its assets or refinancing its debt. This took place from January to July 1997.
After the initial contact was made, if a party expressed serious interest, it
was asked to sign a confidentiality agreement. Of the 40 institutions initially
contacted, six executed confidentiality agreements. From July 17 to 30, 1997,
the Debtor provided all six institutions which signed confidentiality agreements
with confidential information regarding the Debtor's operations. This
information included confidential financial and operating information about the
Debtor and was followed by management interviews.
Thereafter, in or about August 1997, four of those six parties
submitted expression of interest letters to the Debtor, which entitled them to
do further due diligence regarding a possible transaction. These expression of
interest letters did not contain formal offers to purchase the Debtor or its
assets or refinance its debt, but merely expressed heightened interest in the
possibility of a transaction generally, and a specific interest in conducting
additional due diligence.
After sending the expression of interest letters, the four interested
parties conducted management and branch due diligence and reviewed documents in
data rooms established at the Company and its counsel's office in August and
September 1997.
On September 15, 1997, two additional parties executed confidentiality
agreements. Shortly thereafter, the parties received the confidential
information and conducted management interviews. Neither of those parties
submitted an expression of interest or conducted further due diligence.
As a result of this phase of solicitation, the Debtor received one
conditional offer on September 19, 1997. That offer was withdrawn approximately
one week later, before either the Debtor or the pre-petition Creditors Steering
Committee considered the offer. That offer provided for approximately 87%
recovery to holders of Senior Debt Claims and no value for equity.
2. November 1997 to February 1998
The second phase of the market exploration process took place from
approximately November 1997 through February 1998. This resulted in two parties
being sent confidentiality agreements by the Debtor, one of which was executed
and returned in December 1997.
The party that executed the confidentiality agreement conducted due
diligence in January 1998. That party submitted an offer in February 1998 which
was rejected by both the Debtor and the pre-petition Steering Committee. That
offer failed to pay senior debt in full or preserve any equity value for the in
the Debtor.
In early 1998, after evaluating the terms of the proposals submitted to
date pursuant to the foregoing process, the Debtor's board of directors
determined that the proposals were not in the best interests of the Debtor and
recommended that the Debtor pursue further restructuring negotiations with the
holders of Senior Debt Claims. The holders of Senior Debt Claims include the
holders of Claims arising from or with respect to amounts due under the Debtor's
commercial paper, short-term loans or senior term notes against the Debtor. The
Debtor filed its statements and schedules on August 14, 1998, including Schedule
F, which lists, inter alia, the holders as of the Petition Date of the Senior
Debt Claims as set forth in the Debtor's books and records. Certain assignments
of the Senior Debt Claims have occurred both before and after the Petition Date
and may continue to occur through the Effective Date of the Plan. As far as the
Debtor is aware, the holders of the Debtor's Senior Debt Claims, which are
principally financial institutions, investment funds, and an insurance company,
hold such claims for investment purposes and will continue to make decisions
regarding their Senior Debt Claims and the New Senior Secured Notes and New
Common Stock they receive under the Plan as investments in the future.
Based on results of substantial analysis of Debtor's operations and
development of the business plan, the Debtor's board of directors determined
that the Debtor had to restructure its balance sheet in order to compete in the
marketplace in the absence of a sale.
3. May to August 1998
On May 14, 1998, the Debtor executed a forbearance and consent
agreement with the holders of substantially all of its Senior Debt Claims. In
that document, which was made public in a Form 8-K, the Debtor set a floor or
base above which Mercury was interested in negotiating with third parties. It
was Debtor's hope and intent that the forbearance and consent agreement would
regenerate interest in Debtor by third parties. In May 1998, after the
forbearance and consent agreement was filed, another third party expressed an
interest in pursuing negotiation with Mercury.
The party did not submit a formal letter of interest, but expressed
interest in a transaction which would provide for a par recovery for senior debt
and a $20 million allocation for equity. The party then conducted extensive due
diligence in June and July 1998. In July 1998, the party submitted an offer that
was not in accord with its original expression of interest. The offer provided
for non-par recovery for senior debt at approximately 80 to 92% and an
approximate $20 million allocation for equity in the form of equity. This offer
was rejected by both the Debtor and the Creditors' Committee.
Failing in its efforts to sell assets to satisfy debt or refinance its
Senior Debt on terms which would satisfy and pay Senior Debt Claims in full or
on other terms acceptable to holders of Senior Debt Claims, on May 14, 1998, the
Debtor and a substantial majority of the holders of Senior Debt Claims executed
a Consent Agreement which incorporates terms of the restructuring to be
implemented in the Plan. A copy of the Consent Agreement is attached to the
Disclosure Statement as Exhibit L.
The terms of the Consent Agreement incorporate a term sheet for the
Debtor's financial restructuring. Based on the enterprise value of the Debtor
and strict adherence to the priority scheme of the Bankruptcy Code, holders of
Senior Debt Claims in Class 4 would not receive distributions sufficient to
satisfy their Claims in full. Yet, in order to facilitate an orderly
restructuring and consistent with the Debtor's valuation, upon which the Plan is
based, the holders of Senior Debt Claims have voluntarily allocated value to
other creditors and interest holders and provided the opportunity for the
holders of Old Common Stock and Securities Fraud Claims to share in any
potential of a successful restructuring by receiving the New Warrants. Equally
important, the Debtor has received the right to terminate the Consent Agreement
upon receipt of a binding commitment for new debt and/or equity financing from a
credit worthy entity in amounts sufficient to repay all amounts due as of the
Petition Date to the holders of Senior Debt Claims under their credit agreements
in cash in full.
The Debtor and the holders of Senior Debt Claims believed that there
was a compelling need to recapitalize the Debtor and return the Debtor to the
marketplace, thus the holders of Senior Debt Claims required that, as
consideration for agreement to compromise their claims and provide value to
other holders of Claims and Interests in connection with a restructuring, the
restructuring must be completed in an efficient and timely fashion. The Plan, as
proposed, provides distributions to Classes 5 through 7B because the holders of
Senior Debt Claims have agreed under the terms of the Consent Agreement and the
Creditors' Committee based on subsequent negotiations with the Securities
Claimants' Committee and the Equity Holders' Committee, has agreed to allocate
value otherwise attributable to holders of Class 4 Claims to junior classes.
HOWEVER, BECAUSE THE DISCLOSURE STATEMENT WAS NOT APPROVED BY SEPTEMBER 15,
1998, AND BECAUSE THE PLAN WILL NOT BE CONFIRMED BY MID-NOVEMBER, THE CONSENT
AGREEMENT IS TERMINABLE BY THE HOLDERS OF THE SENIOR DEBT CLAIMS. NEVERTHELESS,
THE CREDITORS' COMMITTEE (ALL OF WHOSE MEMBERS SIGNED THE CONSENT AGREEMENT) HAS
AGREED TO RECOMMEND IT TO ALL HOLDERS OF SENIOR DEBT CLAIMS.
On July 15, 1998, the Debtor filed a voluntary petition for relief
under the Bankruptcy Code.1 With its petition, the Debtor filed its plan of
reorganization which incorporated the terms of the Consent Agreement. Subsequent
negotiations have resulted in amendments to the original plan of reorganization
resulting in the proposed Plan. The Debtor believes that the Plan adheres to the
requirements of the Bankruptcy Code and is a result of extended arms length
negotiations.
E. POST-PETITION ACTIVITIES OF THE DEBTOR.
1. Motions
On or after the Petition Date, the Debtor filed several motions
relating to the ordinary course operations of its business and the business of
its Nondebtor Subsidiaries. The Court has entered orders granting the Debtor's
motion either as requested or modified to some extent, but in either event
permitting the Debtor to continue operations during the Case. Additionally, the
Debtor sought to retain the law firm of McDermott, Will & Emery. This
application was also granted. As discussed in Section II.B., the Debtor is
seeking to assume the employment agreements of Brandt and DSI. These motions are
pending.
There are also currently proceedings pending in the United States
District Court for the Northern District of Illinois which were commenced by a
Securities Fraud Claimant. These proceedings challenge the constitutionality of
Section 510(b) of the Bankruptcy Code. They also seek to withdraw the reference
of the Reorganization Case from the Court to the federal district court. If this
relief is granted, the Plan and the proceedings may be affected. The Debtor
disputes this position and does not believe it will be sustained by the federal
district court. The federal district court has requested briefs from the
parties. If the Section 510(b) constitutional challenge is sustained, the Plan
as currently proposed may not be confirmable. The Debtor also disputes this
position and does not believe it will be sustained by the federal district
court. However, the Securities Fraud Claimant has agreed to hold both matters in
abeyance and, upon approval of the settlement agreement described in Section
I.E., to dismiss and/or withdraw both matters.
2. Appointment of Committees
The Court has appointed the following three committees in the Case:
(1) The Official Committee of Unsecured Creditors, whose members
include:
Franklin Mutual Advisers
c/o Jeffrey A. Altman
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Principal Life Insurance Co.
c/o Thomas E. Luther
711 High Street
Des Moines, IA 50392-0800
Nomura Holdings America, Inc.
c/o Michael Embler
Two World Financial Center
17th Floor
New York, NY 10281
Cerberus Partners
c/o Joyce C. Johnson-Miller
450 Park Avenue, 28th Floor
New York, NY 10022
The Creditors' Committee has retained as co-counsel the law firms of Jones, Day,
Reavis & Pogue and Cleary, Gottlieb, Steen & Hamilton. The Creditors' Committee
also has retained Houlihan, Lokey, Howard & Zukin Capital as its financial
advisor.
(2) The Official Committee of Securities Claimants includes the
following members:
Jay Fleisher
Shriners Hospitals For Children
P.O. Bo 31356
Tampa, FL 33631-3356
Minnesota State Board of Investment
c/o Lois Buermann
Room 105, M.E.A. Building
55 Sherburne Ave.
St. Paul, MN 55155
Joseph Danielle
1131 Meadowcrest Rd.
LaGrange Pr, IL 60526
T. Rowe Price, et al.
c/o Laura Chasney and Herb Stiles
100 East Pratt Street
Baltimore, MD 21202
Michael Dloogatch
6048 N. Lawndale
Chicago, IL 60659
James Ferree
c/o Sussman & Watkins
Two First National Plaza #600
Chicago, IL 60603
David J. Isaak
600 Seventeenth Street
#2610
South Tower
Denver, CO 80202
The Securities Claimants' Committee has retained as co-counsel the law firms of
Holper, Welsh and Mitchell and Barbakoff, Zazove & Glick Chtd. The Securities
Claimants' Committee has also retained the Barrington Consulting Group, Inc. as
its financial advisor.
(3) The Official Committee of Equity Holders includes the following
members:
Thomas J. Hill
Co-Chairman
New Generation Advisers Inc.
400 E. Jefferson
Charlottesville, VA 22902
Robert Lentz
Co-Chairman
U.S. Financial Credit Corp.
2113 Chels Way
Old Hickory, TN 37138
David Himick
1905 Newman Drive
Trenton, MI 48183
Paul Davner
Jordan Capital
One Pickwick Plaza #250
Greenwich, CT 06830
Thomas Gooding
First Community Bank of Hillsboro
400 South Main Street
Hillsboro, IL 62049
John W. Damisch
161 North Clark Street #4950
Chicago, IL 60601
Norman Louie
94-11 69th Avenue
Forest Hills, NY 11375
Bruce Lemishow
147-20 76 Avenue
Flushing, NY 11367
Clement Malki
1212 Ben Franklin Drive
Sarasota, Florida 34236
The Equity Holders' Committee has retained as co-counsel the law firms of
Berlack, Israels & Liberman LLP, and Gordon, Glickman & Flesch. The Equity
Holders' Committee has also retained Chanin, Kirkland Messina as its financial
advisor.
3. Operations
Since filing the Case, the Debtor has experienced a negative impact on
employee morale and their concern over the Debtor's long-term viability.
Although the Debtor is achieving its business plan objectives in terms of
yield and projected annual loss rate on 1998 loan originations, the Debtor
continues to struggle in its efforts to increase overall loan originations to
forecasted levels. From June 1998 through August 1998, monthly loan
originations (excluding credit card operations) have averaged $45.7 million.
The Debtor had originally forecasted loan originations to average $50.5
million during this same time frame. The Debtor's five-year forecast included
in this Disclosure Statement projects loan originations to average $57.1
million per month in 1999. If the Debtor is unable to achieve this level of
loan originations, it will not achieve its forecasted level of profitability
in 1999 and beyond, even if it achieves its yield and loss rate goals. A copy
of the Debtor's post-petition operating reports are attached as Exhibit S.
The following is a summary of actual 1998 operating results
through October 31, 1998:
- --------------------------------------------------------------------------------
REVENUES:
- --------------------------------------------------------------------------------
Interest and Late Fees on Loans 142,619,792
- --------------------------------------------------------------------------------
Interest on Deposits in Banks 2,604,253
- --------------------------------------------------------------------------------
Gulfco Life Equity Income 0
- --------------------------------------------------------------------------------
Insurance Co. Equity Income 2,216,616
- --------------------------------------------------------------------------------
Twin Insurance Co. Equity Income 0
- --------------------------------------------------------------------------------
Midland Equity Income 65,580
- --------------------------------------------------------------------------------
Lyndon Equity Income 0
- --------------------------------------------------------------------------------
Insurance Commissions 3,673,607
- --------------------------------------------------------------------------------
Auto Club Commissions 576,731
- --------------------------------------------------------------------------------
Dealer Reserve Discount 0
- --------------------------------------------------------------------------------
Fees on Loans 0
- --------------------------------------------------------------------------------
Other 2,947,532
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Revenue 154,704,111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Interest on Notes Payable 38,425,946
- --------------------------------------------------------------------------------
Provision for Credit Losses 41,525,783
- --------------------------------------------------------------------------------
Salaries 28,825,388
- --------------------------------------------------------------------------------
Employee Benefits 9,277,504
- --------------------------------------------------------------------------------
Occupancy 3,559,063
- --------------------------------------------------------------------------------
Equipment 2,702,556
- --------------------------------------------------------------------------------
Amortization Goodwill Gulfco 716,239
- --------------------------------------------------------------------------------
Amortization Goodwill Midland 0
- --------------------------------------------------------------------------------
Data processing 1,569,767
- --------------------------------------------------------------------------------
Other Operating Expenses 17,742,677
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Expenses 144,344,923
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPERATING INCOME 10,359,188
- --------------------------------------------------------------------------------
Loss on Sale of Lyndon 0
- --------------------------------------------------------------------------------
Restructuring Expenses (13,804,655)
- --------------------------------------------------------------------------------
Restructuring Fee (14,480,148)
- --------------------------------------------------------------------------------
Proceeds from Life Insurance 1,964,878
- --------------------------------------------------------------------------------
Closed Office Expense 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income before Income taxes (15,960,737)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income Tax 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Income (15,960,737)
- --------------------------------------------------------------------------------
III.
DEBT AND EQUITY STRUCTURE OF THE DEBTOR
A. DESCRIPTION OF DEBT STRUCTURE OF THE DEBTOR.
The following is a summary of the approximate outstanding debt of the
Debtor under (i) the Long-Term Senior Debt evidenced by Senior Note Agreements;
(ii) Commercial Paper and other short term notes; and (iii) Long-Term
Subordinated Debt evidenced by Subordinated Note Agreements, and the Indentures
related thereto (in millions) as of the Petition Date:
DEBT 2 PRINCIPAL INTEREST TOTAL
- ----- --------- -------- -----
Commercial Paper $ 305.0 $ 1.7 $ 306.6
Term Notes 369.5 1.9 371.4
Subordinated Debt 22.5 2.1 24.6
-------- ---- -------
Total $ 697.0 $ 5.6 $ 702.6
------- ----- -------
As a result of the 1996 net loss, accounting irregularities, and
related matters, the Debtor violated its debt and financial covenants permitting
the holders of its senior term notes, short-term notes and subordinated debt to
accelerate all such debt, which would result in all of such debt becoming
immediately due and payable. In addition, all of the Debtor's commercial paper
has matured and is due and payable. The senior term notes, commercial paper and
the subordinated debt are unsecured. The Debtor has been accruing interest at
default rates since February 10, 1997 and pursuant to forbearance agreements has
paid interest since that date at default rates subject to a cap of 9% through
May 31, 1998. Non-default interest payments under the Forbearance Agreement were
made through June 30, 1998. The Debtor's schedules include non-default interest
for the period of July 1-July 15, 1998 and additional 2% default interest for
the period of June 1-July 15, 1998.
As described previously, the Debtor has a forbearance agreement and
several amendments thereto (collectively, the "Forbearance Agreements") with its
creditors which, including extensions, expired July 15, 1998. Under the terms of
the Forbearance Agreements, the Debtor made interest payments to the Senior Term
Noteholders and holders of commercial paper at default rates of interest,
subject to a maximum rate of nine percent (9.0%) and Subordinated Noteholders
received interest at a rate of five and one-half percent (5.5%) for the period
February 10, 1997 through June 30, 1998. Certain interest accrued, but was not
paid, between July 1, 1998 and the Petition Date. In addition, the Forbearance
Agreements required the periodic payment of excess cash to be applied as
reduction of outstanding principal. In connection with the extension of the
Forbearance Agreements until July 15, 1998, the Debtor paid a forbearance fee to
those creditors who executed the last extension. The forbearance fee totaled
approximately $15 million dollars. Approximately $307 million of principal has
been paid to creditors under the Forbearance Agreements through June 3, 1998. No
principal payments were made after June 3, 1998.
B. EQUITY STRUCTURE OF THE DEBTOR.
The Debtor presently has authorized and issued 172,497,714 shares of
Old Common Stock, par value $1.00 per share. The Debtor also granted options to
purchase the Old Common Stock to various employees, which remain unexercised.
The New York Stock Exchange ("NYSE") has certain listing criteria
applicable to companies listed on such exchanges. The Debtor does not meet the
financial listing criteria for the NYSE and the Old Common Stock has been
delisted. Currently, the Old Common Stock has developed a market and is trading
in the "pink sheets."
IV.
THE REORGANIZED DEBTOR
A. BUSINESS OF THE REORGANIZED DEBTOR.
Following the Effective Date, the Reorganized Debtor will continue to
operate the core businesses presently operated by the Debtor. It is contemplated
that, following implementation of the Plan, the Reorganized Debtor will continue
to implement its Business Plan and to create opportunities for cost reductions
and synergies in the business operations of the Reorganized Debtor. The Debtor
believes that the Reorganized Debtor will be able to compete more effectively in
the highly competitive marketplaces in which the Debtor conducts business than
could the Debtor. In particular, the Debtor believes that its business can be
returned to profitability and long-term stability and growth under the
Reorganized Debtor's proposed capital structure. Implementation of the Business
Plan and any consequent degree of success will be dependent upon market forces
and the Reorganized Debtor's ability to implement the Business Plan.
B. MANAGEMENT OF THE REORGANIZED DEBTOR.
The Debtor conducted an active search for a permanent Chief Executive
Officer ("CEO") and management team through the executive search firm of
Heidrick and Struggles (the "Search"). In connection with the Search, three
members of the Creditors' Committee have been designated to participate in
discussions with the Debtor concerning the selection of a new CEO. In early
November, the Debtor, with the consent of the Creditors' Committee, selected
Edward G. Harshfield to be the new CEO upon confirmation of the Plan. The Debtor
has sought to employ Mr. Harshfield as a consultant until the confirmation of a
plan of reorganization. Upon a confirmed plan becoming effective, the
Reorganized Debtor will employ Mr. Harshfield as its President and Chief
Executive Officer. The terms of Mr. Harshfield's consulting arrangement and
employment agreement are set forth in the Consulting Agreement and Employment
Agreement which are attached as Exhibit P to the Disclosure Statement
Until a plan is confirmed and becomes effective, it is expected that
William A. Brandt, Jr., Fred C. Caruso, Patrick J. O'Malley and the balance of
the management team from DSI, as described in Sections II. A and B has been, and
will continue to provide for the management of the Debtor and, to the extent
necessary, the Reorganized Debtor.
In addition, the board of directors of the Reorganized Debtor shall be
comprised of eleven (11) persons, seven of whom shall be nominated by the
Creditors' Committee, one of whom shall be the new CEO, two of whom shall be
nominated by the new CEO and shall be reasonably acceptable to the Creditors'
Committee, and one of whom shall be nominated by the Equity Holders' Committee
and shall be reasonably acceptable to the Creditors' Committee and the new CEO.
The identity of each of the nominees shall be disclosed prior to the
Confirmation Date. Upon the Effective Date, the Employment Agreement shall be
executed and delivered by the Reorganized Debtor and the new CEO and shall then
become effective.
V.
IMPLEMENTATION OF THE PLAN
A. NEW SECURITIES AND NEW COLLATERAL DOCUMENTS.
On the Effective Date, the Reorganized Debtor (i) shall issue in
accordance with the provisions of Article V, the New Senior Secured Notes, the
New Junior Subordinated Notes, the New Common Stock and the New Warrants, and
(ii) shall execute and deliver the New Collateral Documents, the New Indentures
and the New Warrant Agreement. The Nondebtor Subsidiaries will issue the
Subsidiaries Guaranty and the Subsidiaries Security Agreement.
B. CANCELLATION OF SECURITIES AND AGREEMENTS.
Except as expressly provided for in the Plan or in the Confirmation
Order, on the Effective Date, the Debtor's commercial paper, short-term notes,
senior notes, the Gulfco notes, Subordinated Notes, Old Common Stock, options,
shareholder's rights plans and any and all documentation relating thereto shall
be cancelled and all obligations of the Debtor under or in respect of any of the
foregoing shall be terminated.
C. MARKET AND TRADING INFORMATION.
1. MARKET INFORMATION.
Under the Plan, the Debtor has agreed to use its reasonable best
efforts to cause the New Common Stock and the New Warrants to be approved for
listing on a national securities exchange or NASDAQ NMS. It is uncertain whether
the New Common Stock or the New Warrants will initially be authorized for
listing; an unlisted market may develop.
2. DIVIDENDS.
It is not anticipated that dividends will be paid at any time in the
foreseeable future with respect to the New Common Stock. Dividends are not
payable on the New Warrants.
D. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS.
No registration statement will be filed under the Securities Act or any
state securities laws with respect to the offer and distribution under the Plan
of the New Senior Secured Notes, New Junior Subordinated Notes, New Common
Stock, New Warrants, the Subsidiaries Guaranty and the Subsidiaries Security
Agreement. The Debtor believes that the provisions of section 1145(a)(1) of the
Bankruptcy Code exempt the offer and distribution of such securities under the
Plan from federal and state securities registration requirements.
Similarly, no registration statement will be filed under the Securities
Act or any state securities laws with respect to the offer and sale of the New
Common Stock pursuant to the New Warrants. The Debtor believes that the
provisions in section 1145(a)(2) of the Bankruptcy Code exempt the offer and
sale of such securities pursuant to the New Warrants from federal and state
securities registration requirements.
E. BANKRUPTCY CODE EXEMPTIONS FROM REGISTRATION REQUIREMENTS AND TRANSFER
RESTRICTIONS.
1. INITIAL OFFER AND SALE OF SECURITIES.
Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of
securities under a plan of reorganization from registration under the Securities
Act and under state securities laws if three principal requirements are
satisfied: (i) the securities must be offered and sold "under a plan" of
reorganization and must be securities of the debtor, of an affiliate
"participating in a joint plan" with the debtor or of a successor to the debtor
under the plan; (ii) the recipients of the securities must hold a prepetition or
administrative expense claim against the debtor or an interest in the debtor or
such affiliate; and (iii) the securities must be issued entirely in exchange for
the recipient's claim against or interest in the debtor, or "principally" in
such exchange and "partly" for cash or property. The Debtor believes that the
offer and sale of the New Senior Secured Notes, New Junior Subordinated Notes,
New Common Stock, and New Warrants under the Plan satisfy the requirements of
section 1145(a)(1) of the Bankruptcy Code and are, therefore, exempt from
registration under the Securities Act and state securities laws.
Section 1145(a)(2) of the Bankruptcy Code exempts the offer of a
security through any warrant, option or right to subscribe that was sold in the
manner specified in section 1145(a)(1) of the Bankruptcy Code and the sale of a
security upon the exercise of such a warrant, option or right to subscribe. The
Debtor believes that the offer and sale of the New Common Stock pursuant to the
New Warrants satisfy the requirements of section 1145(a)(2) of the Bankruptcy
Code and are, therefore, exempt from registration under the Securities Act and
state securities laws.
In connection with the confirmation of the Plan, the Debtor will seek
to obtain from the Court an order (the "Section 1145 Order") to the effect that
(i) the offer and sale of the New Senior Secured Notes, New Junior Subordinated
Notes, New Common Stock and New Warrants under the Plan is exempt from
registration under the Securities Act and state securities laws pursuant to
section 1145(a)(1) of the Bankruptcy Code and (ii) the offer and sale of the
securities included in the New Warrants are exempt from registration under the
Securities Act and state securities laws pursuant to section 1145(a)(2) of the
Bankruptcy Code.
2. SUBSEQUENT TRANSFERS UNDER FEDERAL SECURITIES LAWS.
The New Common Stock and the New Warrants distributed under the Plan
will not be "restricted securities" within the meaning of Rule 144 under the
Securities Act.
In general, all resales and subsequent transactions in the New Common
Stock and the New Warrants offered and sold under the Plan or upon the exercise
of the New Warrants will be exempt from registration under the Securities Act
pursuant to Section 4(1) of the Securities Act, unless the holder thereof is
deemed to be an "underwriter" with respect to such securities, an "affiliate" of
the issuer of such securities or a "dealer." Section 1145(b)(i) of the
Bankruptcy Code defines four types of "underwriters":
(i) persons who purchase a claim against, an interest in, or a
claim for administrative expense against the debtor with a
view to distributing any security received or to be received
in exchange for such a claim or interest ("accumulators");
(ii) persons who offer to sell securities offered or sold under a
plan for the holders of such securities ("distributors");
(iii) persons who offer to buy securities offered or sold under a
plan from the holders of such securities, if the offer to buy
is (a) with a view to distributing such securities and (b)
made under an agreement in connection with the plan or with
the offer or sale of securities under the plan; and
(iv) a person who is an "issuer" with respect to the securities, as
the term "issuer" is defined in Section 2(11) of the
Securities Act.
Under section 2(l1) of the Securities Act, an "issuer" includes any
"affiliate" of the issuer, which means any person directly or indirectly
controlling or, controlled by the issuer or any person under direct or indirect
common control with the issuer. Under section 2(12) of the Securities Act, a
"dealer" is any person who engages either for all or part of his time, directly
or indirectly, as agent, broker or principal, in the business of offering,
buying, selling or otherwise dealing or trading in securities issued by another
person. Whether or not any particular person would be deemed to be an
"underwriter" or an "affiliate" with respect to any security to be issued
pursuant to the Plan or to be a "dealer" would depend upon various facts and
circumstances applicable to that person. Accordingly, the Debtor expresses no
view as to whether any person would be an "underwriter" or an "affiliate" with
respect to any security to be issued pursuant to the Plan or to be a "dealer."
In connection with prior bankruptcy cases, the staff of the Commission
has taken the position that resales by accumulators and distributors of
securities distributed under a plan of reorganization are exempt from the
registration under the Securities Act if effected in "ordinary trading
transactions." The staff of the Commission has indicated in this context that a
transaction may be considered an "ordinary trading transaction" if it is made on
an exchange or in the over-the-counter market at a time when the issuer of the
security is a reporting company under the Exchange Act and does not involve any
of the following factors:
(i) (a) concerted action by the recipients of securities issued
under a plan in connection with the sale of such securities,
or (b) concerted action by distributors on behalf of one or
more such recipients in connection with such sales, or (c)
both;
(ii) use of informational documents concerning the offering of the
securities prepared or used to assist in the resale of such
securities, other than a disclosure statement and supplements
thereto and documents filed with the Commission pursuant to
the Exchange Act; or
(iii) special compensation to brokers and dealers in connection with
the sale of such securities designed as a special incentive to
the resale of such securities (other than the compensation
that would be paid pursuant to arm's length negotiations
between a seller and a broker or dealer each acting
unilaterally, and not greater than the compensation that would
be paid for a routine similar-sized sale of similar securities
of a similar issuer).
THE VIEWS OF THE COMMISSION ON THESE MATTERS HAVE NOT BEEN SOUGHT BY
THE DEBTOR AND, THEREFORE, NO ASSURANCE CAN BE GIVEN REGARDING THE PROPER
APPLICATION OF THE "ORDINARY TRADING TRANSACTION" EXEMPTION DESCRIBED ABOVE. ANY
PERSON INTENDING TO RELY ON SUCH EXEMPTION IS URGED TO CONSULT HIS OR HER OWN
COUNSEL AS TO THE APPLICABILITY THEREOF TO HIS OR HER CIRCUMSTANCES.
In addition, Rule 144 provides an exemption from registration under the
Securities Act for certain limited public resales of securities by "affiliates"
of the issuer of such securities. Rule 144 allows a holder of securities that is
an affiliate of the issuer of such securities to sell, without registration,
within any three month period a number of shares of such securities that does
not exceed the greater of 1% of the number of outstanding securities in question
or the average weekly trading volume in the securities in question during the
four calendar weeks preceding the date on which notice of such sale was filed
pursuant to Rule 144, subject to the satisfaction of certain other requirements
of Rule 144 regarding the manner of sale, notice requirements and the
availability of current public information regarding the issuer.
The holders of Class 4 Claims that become holders of a specified
percentage of the New Common Stock and/or the New Senior Secured Notes will be
entitled to demand that the Reorganized Debtor register the sale of their New
Common Stock and/or New Senior Secured Notes under the Securities Act, and such
holders of the New Common Stock will be permitted to obtain registration of the
sale of their New Common Stock in certain circumstances in connection with
certain offerings of the New Common Stock by the Reorganized Debtor that are
registered under the Securities Act.
GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR PERSON
MAY BE AN UNDERWRITER, THE DEBTOR MAKES NO REPRESENTATIONS CONCERNING THE RIGHT
OF ANY PERSON TO TRADE IN THE NEW COMMON STOCK OR THE NEW WARRANTS TO BE
DISTRIBUTED PURSUANT TO THE PLAN. THE DEBTOR RECOMMENDS THAT HOLDERS OF CLASS 4
CLAIMS AND HOLDERS OF CLASSES 7A AND 7B INTERESTS CONSULT THEIR OWN COUNSEL
CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES OR INTERESTS.
3. SUBSEQUENT TRANSFERS UNDER STATE LAW.
The state securities laws generally provide registration exemptions for
subsequent transfers by a bona fide owner for his or her own account and
subsequent transfers to institutional or accredited investors. Such exemptions
are generally expected to be available for subsequent transfers of New Common
Stock and the New Warrants.
Any person intending to rely on such exemption is urged to consult his
or her own counsel as to the applicability thereof to his or her circumstances.
F. CERTAIN TRANSACTIONS BY STOCKBROKERS.
Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers are
required to deliver a copy of this Disclosure Statement (and supplements hereto,
if any, if ordered by the Court) at or before the time of delivery of securities
issued under the Plan to their customers for the first 40 days after the
Effective Date. This requirement specifically applies to trading and other
aftermarket transactions in such securities.
G. FRACTIONAL SHARES - DISTRIBUTION OF NEW COMMON STOCK AND NEW WARRANTS.
No fractional shares of New Common Stock or New Warrants shall be
distributed under the Plan. Rather, Interests that would otherwise receive a
fractional share or Warrant shall be treated as follows:
(a) On the date of final distribution of New Common Stock to the
holders of Class 7A Equity Interests, the aggregate of all fractional shares of
New Common Stock that would otherwise be distributed to such persons shall
instead be placed in a separate pool (hereinafter, the "Fractional New Common
Stock Pool"). All holders of Allowed Equity Interests entitled to a fractional
interest in New Common Stock shall be placed on a list (the "New Common Stock
Distribution List") in descending order according to the size of the fractional
interest in the New Common Stock to which each such holder is entitled. In the
event two or more holders of Allowed Equity Interests are entitled to the same
fractional interest (rounded to six decimal places) in New Common Stock, their
relative ranking on the New Common Stock Distribution List shall be determined
by lot. Based upon the New Common Stock Distribution List, a whole share of New
Common Stock shall be distributed to holders entitled to the largest fractions
of New Common Stock until all of the whole shares of New Common Stock in the
Fractional New Common Stock Pool shall have been distributed. The fractional New
Common Stock shall be carried to six decimal places, with the number five (5)
being rounded down.
(b) On the date of the final distribution of New Warrants to the
holders of Class 7A Equity Interests, the aggregate of all fractional New
Warrants that would otherwise be distributed to such persons shall instead be
placed in a separate pool (hereinafter, the "Fractional New Warrants Pool"). All
holders of Allowed Equity Interests entitled to a fractional interest in New
Common Stock shall be placed on a list (the "New Warrants Distribution List") in
descending order according to the size of the fractional interest in the New
Warrants to which each such holder is entitled. In the event two or more holders
of Allowed Equity Interests are entitled to the same fractional interest
(rounded to six decimal places) in New Warrants, their relative ranking on the
New Warrants Distribution List shall be determined by lot. Based upon the New
Warrants Distribution List, a whole New Warrant shall be distributed to holders
entitled to the largest fractions of New Warrants until all of the whole New
Warrants in the Fractional New Warrants Pool shall have been distributed. The
fractional New Warrants shall be carried to six decimal places, with the number
five (5) being rounded down.
VI.
CONDITIONS PRECEDENT TO THE PLAN
A. CONDITIONS TO CONFIRMATION.
It is a condition to confirmation of the Plan that:
(i) the Confirmation Order include provisions:
(a) authorizing the Reorganized Debtor to adopt
and file the Amended and Restated
Certificate of Incorporation and By-laws;
(b) authorizing the issuance of the New Common
Stock and New Warrants;
(c) approving the compromise and settlement as
set forth in Section 8.05 of the Plan and
authorizing all transactions contemplated
therein;
(d) authorizing the issuance of the New Senior
Secured Notes and the New Junior
Subordinated Notes;
(e) authorizing all of the other transactions
contemplated by the Plan in order to
effectuate the Plan;
(f) exempting the New Senior Secured Notes, the
New Junior Subordinated Notes, the New
Common Stock and the New Warrants from
registration under the Securities Act and
state and local laws pursuant to Section
1145;
(g) making the provisions of the Confirmation
Order non-severable and mutually dependent;
(ii) the Debtor shall have filed (a) an objection to the
allowance of claims asserted by John N. Brincat and
the estate of James A. Doyle and (b) an adversary
proceeding which seeks to subordinate any Equity
Interests held by John N. Brincat and the estate of
James A. Doyle; and
(iii) in the event KPMG shall have filed any Claim against
the Debtor prior to the Confirmation Date, the Debtor
shall have filed an objection to the allowance of
such Claims and such Claims shall have been
disallowed by Final Order.
B. CONDITIONS TO THE EFFECTIVE DATE.
The Confirmation Order shall contain the provisions set forth in
Section 10.01 of the Plan (unless waived in accordance with the provisions of
Section 10.03) and the Confirmation Order shall be in full force and effect and
shall not have been reversed, stayed, modified or amended. The Debtor shall
provide written notice to the Creditors' Committee, the Securities Claimants'
Committee and the Equity Holders' Committee of the occurrence of the Effective
Date.
C. WAIVER OF CONDITIONS.
The Debtor, with the consent of the Creditors' Committee (and the
consent of the Equity Holders' Committee if such waiver relates to the condition
set forth in Article X(i)(a), (b), (f) or (ii)(b)), may waive any condition set
forth in Article X of the Plan at any time, without notice, without leave of the
Court, and without any formal action other than proceeding to consummate the
Plan.
VII.
DISTRIBUTIONS UNDER THE PLAN
A. GENERAL.
1. DISTRIBUTION DATE.
Except as otherwise provided in the Plan, property to be distributed
under the Plan to an Impaired Class (a) shall be distributed on or as soon as
practicable after the Effective Date to each holder of an Allowed Claim of that
Class that is an Allowed Claim as of the Effective Date, and (b) shall be
distributed to each holder of an Allowed Claim of that Class that is allowed
after the Effective Date, to the extent allowed, as soon as practicable after
the order of the Court allowing the Claim becomes a Final Order. Property to be
distributed under the Plan to a Class that is not impaired or on account of an
Administrative Claim shall be distributed on the latest of (i) the later of the
two dates specified in the preceding sentence, and (ii) the date on which the
distribution to the holder of the Claim would have been due and payable in the
ordinary course of business or under the terms of the Claim in the absence of
the Reorganization Case.
2. DISTRIBUTION RECORD DATE--SENIOR DEBT CLAIMS AND SUBORDINATED
NOTEHOLDER CLAIMS.
As of the close of business on the Distribution Record Date, the
respective transfer registers for the Senior Debt Claims and Subordinated
Noteholder Claims as maintained by the Debtor, or their respective agents, shall
be closed.
3. EXCHANGE AGENT.
The Debtor may designate an entity or entities to serve as Exchange
Agent to distribute all the property to be distributed under the Plan or may
itself serve as Exchange Agent, including, without limitation the payment of
Excess Cash, the delivery of the New Common Stock, the New Senior Secured Notes,
the New Junior Subordinated Notes and the New Warrants.
4. SURRENDER OF INSTRUMENTS AND RECEIPT OF DISTRIBUTIONS --
SENIOR DEBT CLAIMS AND SUBORDINATED NOTEHOLDER CLAIMS.
As a condition to participation under the Plan, each holder of a Senior
Debt Claim or Subordinated Noteholder Claim is required to complete the
book-entry confirmation procedure or provide a Letter of Transmittal described
in Section XV.G.
5. DISTRIBUTION RECORD DATE--OLD COMMON STOCK.
At the close of business on the Distribution Record Date, the transfer
ledgers for the Old Common Stock shall be closed, and there shall be no further
changes in the record holders of the Old Common Stock. The Debtor shall have no
obligation to recognize any transfer of the Old Common Stock occurring on or
after the Distribution Record Date. The Debtor shall be entitled instead to
recognize and deal for all purposes hereunder with only those record holders
stated on the transfer ledgers of the transfer agent as of the close of business
on the Distribution Record Date.
As a condition to participation under the Plan, each holder of an
Equity Interest is required to provide a Letter of Transmittal described in
Section XV.G.
6. ACCRUAL OF INTEREST.
Pursuant to the terms of the New Senior Secured Note Indenture and the
New Junior Subordinated Note Indenture, interest on the New Senior Secured Notes
and the New Junior Subordinated Notes shall begin to accrue at the respective
rates set forth in the New Senior Secured Notes and the New Junior Subordinated
Notes, on the ninety-first day following the Petition Date and shall be payable
as set forth therein, respectively. It is the Debtor's position that the accrual
of interest is not a payment for the use of money borrowed, but rather, reflects
one component of the formula or analysis used to set the value of consideration
to be received by the holders of Senior Debt Claims as is set forth in Section
I.C.
7. UNCLAIMED DISTRIBUTIONS.
If any holder of a Claim or Interest entitled to a distribution
directly from the Exchange Agent under the Plan cannot be located on the
Effective Date, such securities shall be set aside and maintained by the
Exchange Agent. If such person is located within two years of the Effective
Date, such securities shall be distributed to such person. If such person cannot
be located within two years of the Effective Date, any such securities shall
become the property of and shall be released to the Reorganized Debtor;
provided, however, that nothing contained in this Plan shall require the
Reorganized Debtor to attempt to locate such person.
8. TAX PROVISIONS.
Pursuant to section 1146(c) of the Bankruptcy Code, the issuance,
transfer or other exchange of a security, or the making or delivery of an
instrument of transfer under the Plan shall not be taxed under any state or
local law imposing a stamp tax, transfer tax or similar tax or fee.
9. SETOFFS.
Except with respect to Senior Debt Claims3, the Debtor may, but shall
not be required to, setoff against any Claim (for purposes of determining the
allowed amount of such Claim on which distribution shall be made), any claims of
any nature whatsoever the Debtor may have against the claimant, but neither the
failure to do so nor the allowance of any Claim hereunder shall constitute a
waiver or release by the Debtor, of any such claim the Debtor may have against
such claimant.
B. PROVISIONS FOR TREATMENT OF DISPUTED, CONTINGENT AND UNLIQUIDATED
CLAIMS AND ADMINISTRATIVE EXPENSES.
1. CHARACTERIZATION OF DISPUTED CLAIMS.
Except for the Class 7B Claims for which Requests for Allowance must be
filed on or before the Class 7B Bar Date and which will be allowed or disallowed
pursuant to the procedures set forth Section 8.15 and in the Class 7B
Liquidating Trust Agreement, pursuant to subsection 1111(a) of the Bankruptcy
Code, a proof of a Claim is deemed filed under section 501 of the Bankruptcy
Code if that Claim is included in the schedules filed under section 1106(a)(2)
of the Bankruptcy Code, except if the Claim is scheduled as disputed,
contingent, or unliquidated. Such a disputed, contingent, or unliquidated claim
must be asserted by its holder, or an indenture trustee representing such
holder, by the timely filing of a proof of claim. If a proof of claim is not
filed in a timely manner, the Claim may be deemed to be disallowed.
2. RESOLUTION OF CONTESTED CLAIMS AND INTERESTS.
The Debtor shall have the right to object to and contest the allowance
of any Claim or Interest Filed or deemed Filed with the Court, whether or not
such Claim was scheduled as disputed, contingent or unliquidated.
The Senior Debt Claims shall be deemed Allowed by the Plan.
VIII.
ACCEPTANCE OR REJECTION OF THE PLAN
A. PRESUMED ACCEPTANCE OF PLAN.
Classes 1, 2 and 3 are unimpaired under the Plan, and, therefore,
conclusively are presumed to have accepted the Plan in accordance with section
1126(f) of the Bankruptcy Code.
B. DEEMED NON-ACCEPTANCE OF PLAN.
Class 8 is deemed to have rejected the Plan and will not be solicited
for acceptances or rejections to the Plan.
C. VOTING CLASSES.
Each holder of an Allowed Claim or Equity Interest in Classes 4, 5, 6,
7A and 7B shall be entitled to vote to accept or reject the Plan.
D. ACCEPTANCE BY IMPAIRED CLASSES.
An Impaired Class of Claims shall have accepted the Plan if (i) the
holders (other than those designated under section 1126(e) of the Bankruptcy
Code) of at least two-thirds in amount of the Allowed Claims actually voting in
such Class have voted to accept the Plan and (ii) the holders (other than those
designated under section 1126(e) of the Bankruptcy Code) of more than one-half
in number of the Allowed Claims actually voting in such Class have voted to
accept the Plan. An Impaired Class of Interests shall have accepted the Plan if
the holders (other than those designated under section 1126(e) of the Bankruptcy
Code) of at least two-thirds in amount of the Allowed Interests actually voting
in such Class have voted to accept the Plan.
E. NON-CONSENSUAL CONFIRMATION.
The Debtor will seek confirmation of the Plan under section 1129(b) of
the Bankruptcy Code in view of the deemed non-acceptance by Class 8. In the
event that any other Impaired Class of Claims or Interests does not accept the
Plan in accordance with section 1126 of the Bankruptcy Code, the Debtor hereby
requests that the Court confirm the Plan in accordance with section 1129(b) of
the Bankruptcy Code. Subject to Section 1127 of the Bankruptcy Code the Debtor
reserves the right to modify the Plan to the extent that confirmation pursuant
to section 1129(b) of the Bankruptcy Code requires modification.
IX.
EFFECTS OF PLAN CONFIRMATION
A. DISCHARGE AND RELEASE.
1. Except as otherwise expressly provided in the Plan or Confirmation
Order, as of the Effective Date, the Debtor shall be discharged forthwith from,
and the Confirmation Order shall operate as an injunction against, the
commencement or continuation of an action, the employment of process, or an act
to collect, recover or offset, any Claim (including any Securities Fraud Claim
(or any claim for contribution or indemnity relating thereto)) and any "debt"
(as that term is defined in section 101(12) of the Bankruptcy Code), and any
interest (or claims or debt related thereto) from or against the Debtor or the
Reorganized Debtor and the Debtor's and the Reorganized Debtor's liability in
respect thereof shall be extinguished completely, whether reduced to judgment or
not, liquidated or unliquidated, contingent or noncontingent, asserted or
unasserted, fixed or not, matured or unmatured, disputed or undisputed, legal or
equitable, known or unknown, or arising from any agreement that the Debtor
entered into or obligation of any kind of the Debtor incurred before the
Confirmation Date, or from any conduct of the Debtor prior to the Confirmation
Date or that otherwise arose before the Confirmation Date (including, without
limitation, all interest, if any, on any such debts, whether such interest
accrued before or after the date of commencement of the applicable
Reorganization Case), and the Debtor and the Reorganized Debtor shall be
released and discharged from any liability of a kind specified in Sections
502(g), 502(h) and 502(i) of the Bankruptcy Code, whether or not a proof of
claim is filed or deemed filed under section 501 of the Bankruptcy Code, such
Claim is allowed under section 502 of the Bankruptcy Code, or the holder of such
Claim has accepted the Plan.
2. On the Effective Date, in consideration for, or as part of, the
treatment accorded to the holders of Claims and Interests under the Plan, each
holder of a Claim or Interest against or in the Debtor shall be deemed to have
released the Debtor from any and all causes of action and claims, in law or in
equity, whether based on tort, fraud, contract or otherwise, which arose prior
to the Petition Date.
B. RELEASE BY THE DEBTOR OF DIRECTORS, OFFICERS AND EMPLOYEES.
Except for the estate of James A. Doyle and John N. Brincat, as of the
Effective Date and subject to the settlement and compromise as set forth in
Section 8.05 of the Plan, the Debtor shall be deemed to have waived and released
its present and former directors, officers and employees from any and all claims
of the Debtor or Debtor in Possession (including claims which the Debtor in
Possession otherwise has legal power to assert, compromise or settle in
connection with its Reorganization Case) against such present and former
directors, officers and employees arising on or prior to the Effective Date.
C. TERM OF INJUNCTIONS OR STAYS.
Unless otherwise provided in the Plan, all injunctions or stays
provided for in the Reorganization Case pursuant to Section 105 or 362 of the
Bankruptcy Code or otherwise in effect on the Confirmation Date shall remain in
full force and effective until the Effective Date.
D. EXCULPATION.
Except with respect to KPMG Peat Marwick, neither the Debtor, the
Reorganized Debtor, nor any of their respective officers, directors, employees,
advisors, agents professionals or representatives, benefit plan administrators
or trustees nor the members of the Steering Committee or the parties to the
Consent Agreement and their principals, advisors, professionals and agents nor
the members of the Creditors' Committee, Equity Holders' Committee, Securities
Claimants' Committee and their members, advisors, professionals and agents shall
have or incur any liability to any holder of a Claim or Interest for any act or
omission in connection with or arising out of actions taken or omitted to be
taken in good faith in connection with the Debtor's restructuring, the Plan, the
Reorganization Case, including all prepetition activities leading to the
promulgation and confirmation of the Plan and the administration of the Plan or
the property to be distributed under the Plan, provided, however, such
exculpation shall not relate to post confirmation conduct deemed to be willful
misconduct or gross negligence. On the Confirmation Date, the Securities
Claimants' Committee shall dismiss or shall be deemed to have dismissed with
prejudice adversary proceeding no. 98-A-01580 against the non-director
defendants.
E. REVESTING.
Except as otherwise expressly provided in the Plan or in the New
Collateral Documents, on the Effective Date, the Debtor will be vested with all
of the property of its Estate free and clear of all Claims, liens, encumbrances,
charges and other interests of creditors and equity security holders, and may
operate its business free of any restrictions imposed by the Bankruptcy Code or
by the Court. The Debtor shall continue as debtor in possession under the
Bankruptcy Code until the Effective Date and, thereafter, the Reorganized Debtor
may operate its business free of any restrictions imposed by the Bankruptcy Code
or the Court except as specifically authorized by the Plan.
F. RETENTION OF CAUSES OF ACTION/RESERVATION OF RIGHTS.
1. Except as set forth in Section IX. B, D and E above and in section 3
below, nothing contained in the Plan or the Confirmation Order shall be deemed
to be a waiver or relinquishment of any rights or causes of action that the
Debtor, the Debtor in Possession or the Reorganized Debtor may have or which the
Reorganized Debtor may choose to assert on behalf of the Estate under any
provision of the Bankruptcy Code or any applicable non-bankruptcy law,
including, without limitation, (i) any and all Claims against any entity,
including but not limited to KPMG Peat Marwick, to the extent such entity
asserts a crossclaim, counterclaim and/or Claim for setoff which seeks
affirmative relief against the Debtor, the Reorganized Debtor, their officers,
directors or representatives, (ii) the avoidance of any transfer by or
obligation of the Debtor or the Reorganized Debtor, or (iii) the turnover of any
property to the Estate, all of which are expressly reserved by the Plan, or (iv)
derivative actions currently pending on behalf of the Debtor which shall be
dismissed by the Reorganized Debtor immediately following the Effective Date.
2. Nothing contained in the Plan or the Confirmation Order shall be
deemed to be a waiver or relinquishment of any claim, cause of action, right of
setoff, or other legal or equitable defense which the Debtor had immediately
prior to the Petition Date, against or with respect to any defense which the
Debtor had immediately prior to the Petition Date, against or with respect to
any Claim left unaltered or Unimpaired by the Plan. The Reorganized Debtor shall
have, retain, reserve and be entitled to assert all such claims, causes of
action, rights of setoff and other legal or equitable defenses which it had
immediately prior to the Petition Date fully as if the Reorganization Case had
not been commenced; and all of the Reorganized Debtor's legal and equitable
rights respecting any Claim left unaltered or Unimpaired by the Plan may be
asserted after the Confirmation Date to the same extent as if the Reorganization
Case had not been commenced.
3. Under the Plan, except for the estate of James A. Doyle, John N.
Brincat and KPMG Peat Marwick, the Debtor waives and releases any rights or
causes of action for the recovery of preferential payments or fraudulent
conveyances it may have against any party. Such a waiver and release is
validated by the Debtor's prepetition practices of timely payment in the
ordinary course of business, including payment under the debt instruments and/or
forbearance agreements in existence. Further, with respect to the holders of
Senior Debt Claims, the Debtor does not believe any claims exist against such
Claimants and, as part of the voluntary allocation of their value to other
creditors and equity holders, the holders of Senior Debt Claims require an
acknowledgement of the validity of their claims and release of actions, if any.
G. POST-CONSUMMATION EFFECT OF EVIDENCES OF CLAIMS OR INTERESTS.
Outstanding notes, stock certificates and other evidences of Claims
against or Interests in the Debtor in Classes 4, 5, 6, 7A, 7B and 8 under the
Plan shall, effective upon the Effective Date, represent only the right to
participate in the distributions contemplated by the Plan.
X.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
On the Effective Date, and to the extent permitted by applicable law,
all executory contracts and unexpired leases of the Debtor set forth on Exhibit
C to the Plan shall be assumed in accordance with the provisions of sections 365
and 1123 of the Bankruptcy Code and, in the case of contracts evidencing
Corporate Indemnities, subject to the provisions of Section 12.03, unless such
executory contracts or unexpired leases are rejected by the Debtor's motion
prior to confirmation or in connection with the confirmation hearing.
Contracts or leases entered into after the Petition Date will be
performed by the Reorganized Debtor in the ordinary course of business.
B. CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED LEASES.
Any Claims arising out of the rejection of contracts or leases must be
filed with the Court within the time set by any Final Order rejecting an
executory contract or unexpired lease or 30 days after the Effective Date. Any
Claims not filed within such time will be forever barred from assertion against
the Debtor or Reorganized Debtor, its estate and property. Unless otherwise
ordered by the Bankruptcy Court or provided in this Plan, all such Claims for
which proofs of Claim are required to be filed will be treated as Class 3
Claims.
The Debtor is a party, along with Nondebtor Subsidiaries, to several
unexpired leases which are the primary responsibility of, and paid in the
ordinary course by, the Nondebtor Subsidiaries. Although the Debtor does not
expect to reject many of the unexpired leases, any such leases which are
rejected shall remain the obligation of the relevant Nondebtor Subsidiary.
Further, Claims arising from the rejection of such leases shall be permitted
against the Debtor only to the extent of the amount of the Claimant's Allowed
Claim.
C. LIMITED ASSUMPTION AND SURVIVAL OF THE DEBTOR'S CORPORATE INDEMNITIES.
Except as provided in Sections 5.03 and 12.03 of the Plan, the
Corporate Indemnities shall not be discharged or impaired by Confirmation of
this Plan. Such obligations shall be deemed and treated as executory contracts
to be assumed by the Debtor and the Reorganized Debtor pursuant to the Plan, and
shall continue as obligations of the Reorganized Debtor, provided that the
Debtor's or Reorganized Debtor's obligations on such Corporate Indemnities shall
be limited as follows:
(i) the claims of officers, agents and employees who
remain employed by the Reorganized Debtor as of the
first day immediately following the Effective Date
(excluding any claims charged by the Indemnification
Settlement Fund, shall be fully assumed ;
(ii) the claims of officers, agents, and employees, (other
than the claims of the estate of James A. Doyle and
John N. Brincat in respect of which no obligations
shall be assumed), who are no longer Employed by the
Reorganized Debtor as of the first day immediately
following the Effective Date, shall be assumed only
to the extent that they relate to costs and expenses
incurred after the Effective Date in connection with
their participation in an agency or government
investigation and shall be limited to $250,000 in the
aggregate, such claims to be submitted to the
Reorganized Debtor and paid upon adequate
verification;
(iii) the Beneficiaries shall be entitled to assert Allowed
Indemnification Claims, but shall be entitled to
compensation on account of such claims only out of
(x) the Indemnification Settlement Fund, and (ii) the
extent of insurance coverage available under the
Reliance Policies; and
(iv) the claims of outside directors as of the day
immediately preceding the Effective Date shall be
assumed and limited (except to the extent of claims
of such persons as Beneficiaries) to the sum of (x)
any remaining fee retainer in possession of the
professionals retained by such directors and (y)
$350,000.
XI.
MISCELLANEOUS
A. RETENTION OF JURISDICTION.
Notwithstanding the entry of the Confirmation Order or the Effective
Date having occurred, the Court shall retain original and exclusive jurisdiction
to (a) determine any disputed Claims, (b) determine requests for payment of
Claims entitled to priority under section 507(a)(1) of the Bankruptcy Code,
including compensation of and reimbursement of expenses of professionals and
other parties entitled thereto, (c) resolve controversies and disputes regarding
interpretation and implementation of the Plan, (d) enter orders in aid of the
Plan, including, without limitation, appropriate orders (which may include
contempt or other sanctions) to protect the Debtor and the Reorganized Debtor in
accordance with Sections 524 and 1141 of the Bankruptcy Code and the terms and
conditions of the Confirmation Order, (e) modify the Plan pursuant to Section
14.02 of the Plan, (f) determine any and all applications, adversary proceedings
and contested or litigated matters pending on the Effective Date, (g) allow,
disallow, estimate, liquidate or determine any Claim or Interest and to enter or
enforce any order requiring the filing of any such Claim before a particular
date, (h) determine any and all pending applications for the rejection of
executory contracts or unexpired leases, or for the assignment of assumed
executory contracts or unexpired leases, and to hear and determine, and if need
be, liquidate any and all Claims arising from any such rejections, assumption
and/or assignment, (i) determine any actions or other controversies arising
under or in connection with the Plan, the Confirmation Order, the Class 7B
Liquidating Trust, or any contract, instrument, release, or other agreement
created in connection with the Plan, (j) enter and implement orders as are
necessary or appropriate if the Confirmation Order is for any reason modified,
stayed, reversed, revoked or vacated, and (k) enter a final decree closing the
Reorganization Case, and (l) determine any actions or controversies related to
or asserted against the Exchange Agent, and (m) enter and implement orders as
are necessary to the transactions set forth in Section 8.05 of the Plan..
B. FAILURE OF COURT TO EXERCISE JURISDICTION.
If the Court abstains from exercising or declines to exercise
jurisdiction, or determines that it is without jurisdiction over any matter or
proceeding arising out of, related to, or otherwise connected with the
Reorganization Case, including the matters set forth in this Article XI, the
exercise of jurisdiction by any other court having competent jurisdiction with
respect to such matter shall not be limited or otherwise affected by the Plan.
C. RETIREE BENEFITS.
The Debtor, and on behalf of the Nondebtor Subsidiaries, currently
employs 1300 employees.4 The Debtor offers no post-retirement medical benefit
plans for its employees. The Debtor, however, has three pension plans from which
its employees may be entitled to benefits upon retirement. The three plans are
described below.
The Debtor is the contributing sponsor of the Mercury Finance Company,
Inc. Retirement Plan (the "Mercury Plan") and a controlled group member of the
contributing sponsor of the Retirement Plan for Employees of Gulfco Investment,
Inc. and its subsidiaries (the "Gulfco Plan", together, the "Pension Plans").
The contributing sponsor of the Gulfco Plan, Gulfco Investment, Inc. is not in
bankruptcy. The Pension Plans are covered by Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The Debtor understands that
it and all members of its controlled group are obligated to contribute to the
Pension Plans at least the amounts necessary to satisfy ERISA's minimum funding
standards, ERISA ss. 302; Internal Revenue Code of 1996 ("IRC") ss. 412. In
addition, in the event of a termination of either or both of the Pension Plans,
the Debtor and all members of its controlled group may be jointly and severally
liable for the unfunded benefit liabilities of the Pension Plans. See 29 U.S.C.
ss. 1362(a). The Debtor understands that the Pension Plans may be terminated
only if the statutory requirements of either ERISA ss. 4041, 29 U.S.C. ss. 1341,
or ERISA ss. 4042, 29 U.S.C. ss. 1342, are met.
The PBGC5 estimates that, using PBGC assumptions, the Mercury Plan is
currently underfunded on a termination basis for all benefit liabilities by
approximately $1,885,000, and that the Gulfco Plan is borderline sufficient for
all benefit liabilities. The Debtor, however, has made no independent
calculation of this potential liability because it has no intention to terminate
the Pension Plans and the Pension Plans will remain on-going after confirmation
of the Plan. All required contributions have been made to the Pension Plans and
all PBGC premiums have been paid to date. Nevertheless, the Debtor understands
that as a precautionary measure, once a Bar Date is established, PBGC will file
claims for minimum funding contributions, unfunded benefit liabilities and PBGC
premiums, if any, in connection with the Pension Plans. The Debtor reserves its
right to object to any claims filed by the PBGC and understands that if the
Pension Plans do in fact remain on-going after confirmation of the Plan, PBGC
will withdraw its claims. Nothing in the Plan shall be construed to effect
PBGC's claim upon termination of the Pension Plans.
In addition to the Pension Plans, the Debtor sponsors a 401(k) plan.
Full-time and certain part-time employees are eligible to participate following
six months of employment. Approximately 650 employees actively participate in
the 401(k) Plan. For every one dollar each participant contributes to the 401(k)
Plan, up to 6% of base pay, the Debtor makes a matching contribution of $1.00.
With respect to employees hired prior to July 1, 1995, the Debtor's 401(k) Plan
match plan vests immediately. For employees hired after July 1, 1995, the
Debtor's 401(k) match payment vests 20% per year over 5 years of continual
employment. The Debtor is current with all payments under the 401(k) Plan.
On and after the Effective Date, pursuant to section 1129(a)(13) of the
Bankruptcy Code or applicable nonbankruptcy law, the Reorganized Debtor shall
continue to be obligated to pay all retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, and shall continue to pay such retiree
benefits as they become due at the level established at any time prior to
confirmation of the Plan pursuant to subsection (e)(1)(B) or (g) of section
1114, for the duration of the period the Debtor has obligated itself to provide
such benefits; provided, however, that nothing herein shall extend or otherwise
prohibit the Debtor's ability or the Reorganized Debtor's ability to modify the
duration of such period or otherwise modify the terms and conditions of such
retiree benefits as otherwise permitted by such plans and applicable
nonbankruptcy law.
D. MODIFICATION OF PLAN.
The Debtor reserves the sole right, in accordance with the Bankruptcy
Code and the Bankruptcy Rules, to amend or modify the Plan prior to the entry of
the Confirmation Order. After the entry of the Confirmation Order, the
Reorganized Debtor may, upon order of the Court, amend or modify the Plan in
accordance with section 1127(b) of the Bankruptcy Code and the Bankruptcy Rules,
or remedy any defect or omission or reconcile any inconsistency in the Plan in
such manner as may be necessary to carry out the purpose and intent of the Plan.
E. WITHDRAWAL OF PLAN.
The Debtor reserves the right, at any time prior to the entry of the
Confirmation Order, to revoke and withdraw the Plan. If the Debtor revokes or
withdraws the Plan under this section, or if entry of the Confirmation Order
does not occur, then the Plan shall be deemed null and void. In that event,
nothing contained in the Plan shall be deemed to constitute a waiver or release
of any Claims by or against, or any Interests in, the Debtor, to prejudice in
any manner the rights of the Debtor in any further proceedings involving the
Debtor, constitute an admission against interest by the Debtor or any other
party in interest.
XII.
HISTORICAL FINANCIAL STATEMENTS OF THE DEBTOR AND
FINANCIAL PROJECTIONS OF THE REORGANIZED DEBTOR
At September 30, 1998 the assets of the Debtor consisted of cash on
hand of $92.5 million, income tax refunds receivable of $52.7 million, net
credit card receivables of $47.8 million, fixed assets with net book value of
$2.1 million, other assets of $3.0 million, and equity interest in 37 subsidiary
finance companies. As of September 30, 1998, the equity interest in subsidiaries
had a book value of $603.2 million for total assets of $792.0 million.
The Debtor's liabilities as of September 30, 1998 include short term
notes payable and commercial paper of $339.3 million, long term notes payable of
$335.1 million and long term subordinated notes payable of $22.5 million. The
Debtor is obligated for other liabilities of $37.1 million for total liabilities
as of September 30, 1998 of $734.0 million.
Historical financial statements of the Debtor are attached to the
Disclosure Statement as Exhibit N. Financial projections of the Reorganized
Debtor are attached to the Disclosure Statement as Exhibit M. The projected
financial information gives affect to the proposed restructuring.
XIII.
SUMMARY OF CERTAIN RISK FACTORS RELATING TO THE PLAN
The securities to be issued or transferred pursuant to the Plan are
subject to a number of material risks, including those enumerated below. The
risk factors enumerated below assume confirmation and the consummation of the
Plan and all transactions contemplated therein, and do not include matters that
could prevent or delay confirmation. Prior to deciding whether and how to vote
on the Plan, holders of Claims and Interests should carefully consider all of
the information contained in this Disclosure Statement, especially the factors
mentioned in the following paragraphs.
1. RISKS RELATING TO THE PROJECTIONS.
The management of the Debtor has prepared the projected financial
information contained in this Disclosure Statement relating to the Reorganized
Debtor and contained in the attached as Exhibit M hereto (the "Reorganized
Debtor Projections") in connection with the development of the Plan to present
the projected effects of the Plan. The Reorganized Debtor Projections assume the
Plan and the transactions contemplated thereby will be implemented in accordance
with their terms. The assumptions and estimates underlying such Reorganized
Debtor Projections are inherently uncertain and are subject to significant
business, economic and competitive risks and uncertainties that could cause
actual results to differ materially from those projected. Such uncertainties and
other factors include approval by the Court of the Plan, objections of third
parties as well as the Debtor's ability to acquire finance receivables, trends
in the automobile and finance industries, and general economic conditions.
Accordingly, the Reorganized Debtor Projections are not necessarily indicative
of the future financial condition or results of operations of the Reorganized
Debtor, which may vary significantly from those set forth in the Reorganized
Debtor Projections. Consequently, the projected financial information contained
herein or in Exhibit M should not be regarded as a representation by the Debtor,
the Debtor's advisors, or any other person that the Reorganized Debtor
Projections can or will be achieved. The Debtor is currently engaged in a search
for a new Chief Executive Officer. There can be no assurance that the new Chief
Executive Officer will operate the Debtor in accordance with the projections as
presented.
2. ASSUMPTIONS REGARDING VALUE OF DEBTOR'S ASSETS.
It has been determined in the preparation of the projected financial
information included elsewhere in this Disclosure Statement that the historical
book value of the Debtor's assets generally approximates the fair value thereof,
except for specific adjustments discussed in the notes to unaudited pro forma
financial information. For financial reporting purposes the fair value of the
assets of the Debtor (including deferred tax assets) must be determined as of
the Effective Date. Although such valuation is not presently expected to result
in values that are materially greater or less than the values assumed in the
preparation of such unaudited pro forma financial information and the projected
financial information, there can be no assurance with respect thereto.
3. NONCOMPARABILITY OF HISTORICAL FINANCIAL INFORMATION.
As a result of the consummation of the Plan and the transactions
contemplated thereby, the financial condition and results of operations of the
Reorganized Debtor from and after the Effective Date will not be comparable to
the financial condition or results of operations reflected in the historical
financial statements of Debtor contained herein in the Exhibits attached hereto.
4. CERTAIN RISKS ASSOCIATED WITH THE REORGANIZATION CASE.
The Debtor is a party to various contractual arrangements under which
the commencement of the Reorganization Case and the other transactions
contemplated by the Plan could, subject to the Debtor's rights and powers under
sections 362 and 365 of the Bankruptcy Code, (i) result in a breach, violation,
default or conflict, (ii) give other parties thereto rights of termination or
cancellation, or (iii) have other adverse consequences for the Debtor or the
Reorganized Debtor. The magnitude of any such adverse consequences may depend
upon, among other factors, the diligence and vigor with which other parties to
such contracts may seek to assert any such rights and pursue any such remedies
in respect of such matters, and the ability of the Debtor or Reorganized Debtor
to resolve such matters on acceptable terms through negotiations with such other
parties or otherwise. The Debtor does not believe that any enforceable breach of
or default under any such agreement has occurred. Although the Debtor presently
believes that none of the foregoing matters will have a material adverse affect
on the businesses, financial condition or results of operations of the
Reorganized Debtor, there can be no assurance with respect thereto.
5. CAPITAL REQUIREMENTS.
The Reorganized Debtor's businesses are expected to require certain
amounts of working capital. While the Reorganized Debtor Projections assume that
the Reorganized Debtor will generate sufficient funds to meet its working
capital needs for the foreseeable future, the ability of the Reorganized Debtor
to gain access to additional capital, if needed, cannot be assured, particularly
in view of competitive factors and industry conditions.
6. CERTAIN RISKS ASSOCIATED WITH THE WARRANTS.
The New Warrants are speculative securities. Under their terms, they
are exercisable at specified exercise prices and will expire at 5:00 p.m.
central standard time on the date that is three years, four years, and five
years, respectively, after the Effective Date of the Plan. There can be no
assurance that the market value of the New Common Stock will exceed the exercise
price of the New Warrants at any time prior to the expiration of the New
Warrants. The New Warrants will have no voting rights and no right to share in
dividends, if any, paid with respect to the New Common Stock and would have no
rights on liquidation of the Reorganized Debtor. There can be no assurance that
the New Warrants will have access to a liquid trading market.
7. LACK OF TRADING MARKET; VOLATILITY.
There can be no assurance that a market will develop for the securities
issued pursuant to the Plan.
A. THE NEW SECURITIES.
Although the Debtor will use reasonable best efforts to cause the New
Common Stock and the New Warrants to be listed on a national securities exchange
or NASDAQ NMS, it is unlikely that initial listing requirements will be
satisfied at the time of the Effective Date. Even if such securities are
subsequently listed, there is no assurance that an active market for such
securities will develop or, if any such market does develop, that it will
continue to exist, or as to the degree of price volatility in any such market
that does develop. Accordingly, no assurance can be given as to the liquidity of
the market for any of the New Securities or the price at which any sales may
occur. In addition, the availability of the New Common Stock and New Warrants
for future sale or the perception that such sales can occur could act to depress
the market price for such securities.
8. RESTRICTED RESALE OF SECURITIES DISTRIBUTED UNDER THE PLAN.
The New Common Stock and the New Warrants will be distributed pursuant
to the Plan without registration under the Securities Act or any state
securities laws pursuant to exemptions from such registration contained in
section 1145(a) of the Bankruptcy Code. With certain exceptions for "ordinary
trading transactions" by certain persons, in the event that a holder of
securities offered and sold under the Plan is deemed to be an "underwriter" with
respect to such securities or an "affiliate" of the issuer of such securities,
resales of such securities by such holder would not be exempt from the
registration requirements under the Securities Act and securities laws pursuant
to Section 1145 of the Bankruptcy Code and, accordingly, could be effected only
pursuant to an effective registration statement or in reliance on another
applicable exemption from such registration requirements.
9. DIVIDEND RESTRICTIONS.
It is not anticipated that any cash dividends will be paid on the New
Common Stock for the foreseeable future.
10. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS.
The U.S. federal income tax consequences of consummation of the Plan to
creditors and equityholders are complex and subject to uncertainty. For example,
the exchange by holders of Senior Debt Claims of their Claims for Excess Cash,
New Senior Secured Notes and New Common Stock may result in partial or full
recognition of tax gain or loss depending on whether the Senior Debt Claims and
New Senior Secured Notes constitute "securities" for U.S. federal income tax
purposes, a determination that depends on certain facts and circumstances. The
exchange by equityholders of Old Common Stock for New Common Stock and New
Warrants appears not to cause recognition of tax gain or loss. The determination
of whether any recognized gain or loss is ordinary or capital in nature depends
on additional circumstances. The Debtor does not anticipate that there will be a
net operating loss carryover ("NOL") following the Effective Date. See "Certain
U.S. Federal Income Tax Considerations" below for additional discussion of the
U.S. federal income tax consequences for creditors, equityholders and the Debtor
on the consummation of the Plan.
11. CERTAIN RISKS OF NON-CONFIRMATION.
There can be no assurance that the requisite acceptances to confirm the
Plan will be received. Even if the requisite acceptances are received, there can
be no assurance that the Court will confirm the Plan. A non-accepting creditor
or equity security holder of the Debtor might challenge the adequacy of the
Disclosure Statement or the balloting procedures and results as not being in
compliance with the Bankruptcy Code and/or Bankruptcy Rules. Even if the Court
were to determine that the Disclosure Statement and the balloting procedures and
results were appropriate, the Court could still decline to confirm the Plan if
it were to find that any of the statutory requirements for confirmation had not
been met. Section 1129 of the Bankruptcy Code sets forth the requirements for
confirmation and requires, among other things, a finding by the Court that the
confirmation of the Plan is not likely to be followed by a liquidation or a need
for further financial reorganization and that the value of distributions to
non-accepting holders of claims and interests within a particular class under
the Plan will not be less than the value of distributions such holders would
receive if the Debtor were liquidated under chapter 7 of the Bankruptcy Code.
While there can be no assurance that the Court will conclude that these
requirements have been met, the Debtor believes that the Plan will not be
followed by a need for further financial reorganization and that non-accepting
holders within each class under the Plan will receive distributions at least as
great as would be received following a liquidation pursuant to chapter 7 of the
Bankruptcy Code when taking into consideration all administrative claims and
costs associated with any such Chapter 7 case.
The confirmation and consummation of the Plan are also subject to
certain conditions. If the Plan, or a plan determined not to require
resolicitation of any Classes of Claims or Interests by the Court, were not to
be confirmed, it is unclear whether the restructuring could be implemented and
what distribution holders of Claims and Interests ultimately would receive with
respect to their Claims and Interests. If an alternative reorganization could
not be agreed to, it is possible the that Debtor would have to liquidate its
assets, in which case it is likely that holders of Claims and Interests would
receive substantially less than the treatment they will receive pursuant to the
Plan.
12. DISRUPTION OF OPERATIONS RELATING TO BANKRUPTCY FILING.
The Debtor's commencement of the Reorganization Case, even in
connection with the Plan, could adversely affect the Debtor's subsidiaries'
relationships with their customers, suppliers, dealers and employees. Employees
of the Debtor and its subsidiaries generally are not parties to employment
contracts. The Debtor believes that, due to uncertainty about its financial
condition, it may be difficult to retain or attract high quality employees. If
the Debtor's relationships with its customers, suppliers, dealers and employees
are adversely affected, the Debtor's subsidiaries' operations could be
materially affected.
13. BUSINESS AND COMPETITION.
The consumer finance business is intensely competitive. The Debtor
competes with other consumer finance companies, personal loan departments of
commercial banks, federally insured credit unions, industrial banks, credit card
issuers and companies which finance the sales of their own merchandise or the
merchandise of others. In recent months, a number of the Debtor's competitors
have announced that they have exited the sub-prime sales finance industry, have
no funds available to acquire additional sales finance contracts or have
tightened credit standards resulting in lower volumes. While this may be a sign
that competitive pressures should be easing, there still appears to be no
shortage of alternatives for auto dealers attempting to sell sales finance
contracts.
XIV.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following description sets forth material U.S. federal income tax
consequences to prospective participants participating in the Plan and of the
ownership and disposition of the New Senior Secured Notes, New Junior
Subordinated Notes, New Common Stock and New Warrants. Such description is based
on the provisions of the Internal Revenue Code (the "Code"), final, temporary
and proposed Treasury Regulations thereunder and administrative and judicial
interpretations thereof, all as in effect as of the day hereof and all of which
are subject to change, possibly on a retroactive basis. Prospective participants
in the Plan should be aware that many of such tax consequences are unclear under
existing law and, as a result, many alternative tax results are possible. There
can be no assurance that the Internal Revenue Service (the "Service") will not
challenge one or more of the tax consequences of the Plan described herein. No
ruling or advisory opinion as to the U.S. federal income tax consequences of the
Plan is being requested from the Service.
The following discussion does not include all matters that may be
relevant to any particular holder of Claims or Interests in light of such
holder's particular facts and circumstances. Certain holders, including
financial institutions, broker-dealers, tax-exempt entities, insurance
companies, foreign persons and stockholders who acquired their stock through the
exercise of an employee stock option or otherwise as compensation, may be
subject to special rules not addressed below.
This discussion assumes that holders hold their Old Securities (as
defined below), Old Common Stock, New Senior Secured Notes, New Junior
Subordinated Notes, New Common Stock and New Warrants as "capital assets" within
the meaning of Code Section 1221. Any gain or loss recognized by such a holder
on the disposition of any Old Securities, Old Common Stock, New Senior Secured
Notes, New Junior Subordinated Notes, New Common Stock or New Warrants would,
except as specifically noted below, be a capital gain or loss. Such gain or loss
would be long-term capital gain or loss if the holding period with respect to
such Old Securities, Old Common Stock, New Senior Secured Notes, New Junior
Subordinated Notes, New Common Stock or New Warrants exceeds one year, and
otherwise would be short-term capital gain or loss. The use of capital losses to
offset other income is subject to significant limitations.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX. ALL
HOLDERS OF THE OLD SECURITIES AND OLD COMMON STOCK SHOULD CONSULT WITH THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE PLAN AND THE
OWNERSHIP AND DISPOSITION OF THE REORGANIZED DEBTOR SECURITIES ISSUED PURSUANT
TO THE PLAN, INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL AND
FOREIGN TAX LAWS, REGULATIONS OR ADVISORY OPINIONS.
A. TAX CONSEQUENCES TO CREDITORS
1. GENERAL
The Plan contemplates the distribution of New Common Stock, New Senior
Secured Notes and Excess Cash in exchange for the Senior Debt Claims. The Senior
Debt Claims consist of commercial paper, short-term loans ("Short Term Loans")
and senior term notes ("Senior Term Notes"). In addition, the Plan involves the
distribution of New Junior Subordinated Notes in exchange for Mercury's
subordinated notes (the "Subordinated Notes").
The U.S. federal income tax consequences to the holders of the Senior
Debt Claims and the Subordinated Noteholders depend on whether the New Senior
Secured Notes and New Junior Subordinated Notes are obligations that constitute
"securities" for U.S. federal income tax purposes (a "Tax Security"). The tax
consequences also depend on whether the Senior Debt Claims and the Subordinated
Notes (the "Old Securities") constitute Tax Securities. Tax Securities are not
defined in the Code or the Treasury Regulations. Whether an obligation
constitutes a Tax Security is based on the facts and circumstances surrounding
the origin and nature of the obligation and its maturity date. Generally, stock,
and bonds or debentures with an original term of at least ten years have been
considered to be Tax Securities. In contrast, instruments with terms of five
years or less rarely qualify as Tax Securities.
The U.S. federal income tax consequences to the holders of the Old
Securities also depend on whether the Old Securities, the New Senior Secured
Notes and the New Junior Subordinated Notes are considered traded on an
established market for U.S. federal income tax purposes ("publicly traded"). It
is not clear whether the Old Securities, the New Senior Secured Notes and the
New Junior Subordinated Notes are publicly traded for tax purposes. The
discussion in the "Holders of Senior Debt Claims" and "Subordinated Noteholders"
sections below assumes that the Old Securities, the New Senior Secured Notes and
the New Junior Subordinated Notes are not publicly traded for tax purposes. The
consequences if the Old Securities, the New Senior Secured Notes or the New
Junior Subordinated Notes are publicly traded for tax purposes are set forth
below under "Publicly Traded Status; Original Issue Discount".
Because the New Senior Secured Notes and the New Junior Subordinated
Notes provide for payments in future years, any gain, but not loss, recognized
by the holders of Old Securities may, under certain circumstances, be reportable
under the installment sale rules pursuant to Code Section 453 (see "Installment
Sales" below).
2. HOLDERS OF SENIOR DEBT CLAIMS.
Based on their maturity dates, it appears that the commercial paper,
the Short Term Loans, the Senior Term Notes, and the New Senior Secured Notes
will not constitute Tax Securities. It will be assumed for the remainder of this
discussion that the New Senior Secured Notes will not constitute Tax Securities.
In general, the amount of gain or loss realized by a holder of a Senior
Debt Claim as a result of participating in the Plan should equal the difference
of (a) the sum of (i) the fair market value of the New Common Stock received,
(ii) the face amount of the New Senior Secured Notes received, and (iii) the
amount of cash received, if any (other than amounts listed in this clause (a)
that are attributable to accrued interest which will be taxable as such), less
(b) the holder's adjusted tax basis in the Senior Debt Claims exchanged.
CONSEQUENCES IF THE SENIOR DEBT CLAIMS DO NOT CONSTITUTE TAX
SECURITIES. If the Senior Debt Claims exchanged by the holder do not constitute
Tax Securities, the exchange will be a taxable event. Accordingly, the holder
will recognize gain or loss upon the exchange measured with reference to the
holder's adjusted tax basis in the Senior Debt Claims and the sum of the face
amount of the New Senior Secured Notes and the fair market value of the New
Common Stock and cash received in exchange therefor (other than amounts received
attributable to accrued interest which will be taxable as such). Such gain, if
any, may be reportable under the installment method (see "Installment Sales"
below). A portion of any such gain may be taxable as ordinary income (see
"Market Discount" below). The tax basis of the property received by the holder
will be the face amount of the New Senior Secured Notes and the fair market
value of the New Common Stock and cash received (other than amounts attributable
to accrued interest). The holding period for such property will begin on the day
after the Effective Date.
CONSEQUENCES IF THE SENIOR DEBT CLAIMS CONSTITUTE TAX SECURITIES. If
the Senior Debt Claims exchanged by the holder do constitute Tax Securities, the
exchange should qualify as a recapitalization to such holder under Code Section
368. As a result, the holder (a) should not recognize any loss realized on such
exchange, except to the extent that the holder allocates part of the
distribution to accrued but unpaid interest, if any, on a Senior Debt Claim,
which was previously included in income by such holder, and such allocation is
less than the amount of such accrued but unpaid interest, and (b) should
recognize gain realized on the exchange to the extent of the lesser of (a) the
sum of the face amount of the New Senior Secured Notes and the amount of cash,
if any, received in the distribution, and (b) the amount of such realized gain.
A portion of such gain, if any, may be reportable under the installment method
(See "Installment Sales" below). A portion of any such gain may be taxable as
ordinary income under the market discount rules (see "Market Discount" below).
The tax basis in the New Senior Secured Notes should equal their face amount and
the holding period for such property should begin the day after the Effective
Date. The tax basis in the New Common Stock received should equal the tax basis
in the Tax Securities exchanged, decreased by the face amount of the New Senior
Secured Notes and any cash received, and increased by any recognized gain. The
holding period of the New Common Stock received should include that of the Tax
Securities exchanged.
3. SUBORDINATED NOTEHOLDERS.
It appears that the New Junior Subordinated Notes do not constitute Tax
Securities because the term of the New Junior Subordinated Notes is five years.
It is unclear whether the Subordinated Notes constitute Tax Securities.
CONSEQUENCES IF EITHER THE SUBORDINATED NOTES OR THE NEW JUNIOR
SUBORDINATED NOTES DO NOT CONSTITUTE TAX SECURITIES. If either the New Junior
Subordinated Notes or the Subordinated Notes do not constitute Tax Securities,
the exchange will be a taxable event. If the exchange results in a recognized
gain, it is possible that a Subordinated Noteholder may be able to report such
exchange under the installment method (see "Installment Sales" below). If,
however, the exchange does not qualify for treatment under the installment sale
rules, the Subordinated Noteholders will recognize gain or loss upon the
exchange measured with reference to the Subordinated Noteholder's adjusted tax
basis in the Subordinated Notes and the face amount of the New Junior
Subordinated Notes received therefor (other than amounts received attributable
to accrued interest which will be taxable as such). A portion of any such gain
may be taxable as ordinary income (see "Market Discount", below). The tax basis
of the New Junior Subordinated Notes received by the Subordinated Noteholders
will equal the fair market value thereof. The holding period for such property
will begin on the day after the Effective Date.
CONSEQUENCES IF BOTH THE SUBORDINATED NOTES AND THE NEW JUNIOR
SUBORDINATED NOTES CONSTITUTE TAX SECURITIES. If both the Subordinated Notes and
the New Junior Subordinated Notes do constitute Tax Securities, the exchange
will qualify as a recapitalization to the Subordinated Noteholders under Code
Section 368. As a result, the Subordinated Noteholders (a) will not recognize
any loss realized on such exchange, except to the extent that part of its
distribution is allocated to accrued but unpaid interest, if any, on the
Subordinated Notes, which was previously included in income by such Subordinated
Noteholder, and such allocation is less than the amount of such accrued but
unpaid interest, and (b) will recognize gain realized on the exchange to the
extent, if any, the principal amount of New Junior Subordinated Notes exceeds
the principal amount of the Subordinated Notes exchanged. Such gain, if any, may
be reportable under the installment method (See "Installment Sales" below). The
amount of gain or loss realized by a Subordinated Noteholder will equal the
difference between the face amount of the New Junior Subordinated Notes received
(other than amounts received attributable to accrued interest which will be
taxable as such) and the holder's adjusted basis in the Subordinated Notes
surrendered. A Subordinated Noteholder's tax basis in the New Junior
Subordinated Notes received will equal the Subordinated Noteholder's tax basis
in the Subordinated Notes surrendered, increased by any recognized gain. The
holding period for the New Junior Subordinated Notes will include the holding
period of the Subordinated Notes.
4. INSTALLMENT SALE RULES.
If the Old Securities holders exchange their claims in an exchange that
is wholly or partially taxable, the installment sale rules may apply to defer
all or a portion of recognized gains. If the installment rules apply, the tax
consequences to the holders of the Old Securities may be different than
described above.
The installment rules should apply to any gains recognized by the
holders of Senior Debt Claims unless the New Senior Secured Notes or the Senior
Debt Claims are readily tradeable. It is not clear whether the New Senior
Secured Notes or Senior Debt Claims are readily tradeable for tax purposes. The
installment sale rules should apply to any gains recognized by the Subordinated
Noteholders unless the New Junior Subordinated Notes or the Subordinated Notes
are readily tradeable. The New Junior Subordinated Notes and Subordinated Notes
probably are not readily tradeable for tax purposes. In addition, the Old
Securities holders can affirmatively elect not to be subject to the installment
sale rules.
If the installment sale rules apply to a holder, the benefit to that
holder will be limited by rules that require taxpayers other than dealers who
hold installment obligations exceeding five million dollars to pay interest on
the tax liability deferred by application of the installment sale rules.
If the Old Securities holders recognize gain that is reportable under
the installment sale rules, such gain is recognized as such holders receive
payments. In general, the holder of the obligation recognizes gain in an amount
equal to the payment received multiplied by a fraction, the numerator of which
is the total amount of gain to be recognized on the exchange and the denominator
is the total amount to be paid under the obligations.
5. MARKET DISCOUNT ON AN EXCHANGE OF OLD SECURITIES.
Gain recognized by holders of Old Securities who exchange claims
pursuant to the Plan may be treated as ordinary income pursuant to provisions of
the Code relating to "market discount." In general, if a holder acquires a debt
instrument at a market discount and thereafter realizes gain on disposition of
the instrument (including by gift), the holder must recognize, as ordinary
income at the time of such disposition, the lesser of such gain (or appreciation
in the case of a gift) on the portion of the market discount that accrued while
the debt instrument was held by such holder. A debt instrument is acquired at a
market discount if, subject to a statutorily-defined de minimis exception, the
purchase price is less than the stated redemption price at maturity of the debt
instrument (or, if the debt instrument was issued with original issue discount,
its revised issue price).
6. TREATMENT OF INITIAL INTEREST ON NEW SENIOR SECURED NOTES.
Interest begins to accrue on the New Senior Secured Notes on the 91st
day after the Petition Date, and the New Senior Secured Notes may be issued
after the 91st day after the Petition Date. The portion of the first interest
payment that is computed by reference to the period from the 91st day after the
Petition Date until the date the New Senior Secured Notes are issued constitutes
"pre-issuance accrued interest" under section 1.1273-2(m) of the Treasury
Regulations. This pre-issuance accrued interest need not result in recognition
of original issue discount under the regulations, but can be treated as part of
the principal of the New Senior Secured Notes that is nontaxable when paid as
part of the first interest payment. The pre-issuance accrued interest must be
taken into account in determining gain or loss, if any, on the exchange of the
Senior Debt Claims for New Senior Secured Notes and New Common Stock.
7. DISPOSITION OF THE NEW COMMON STOCK.
In general, any gain or loss recognized on a subsequent sale or
exchange of the New Common Stock received pursuant to the Plan should be a
capital gain or loss. However, a creditor that receives stock in exchange for
Tax Securities (as defined above) is required, to the extent that gain is
recognized upon a subsequent disposition of such stock, to "recapture" as
ordinary income any bad debt deductions taken by the creditor with respect to
such debt and any ordinary loss claimed by the creditor upon the receipt of the
stock in satisfaction of such debt, reduced by any amount included in income
upon the receipt of the stock.
8. PUBLICLY TRADED STATUS; ORIGINAL ISSUE DISCOUNT.
If the Senior Debt Claims or the New Senior Secured Notes or if the
Subordinated Notes or New Junior Subordinated Notes are considered publicly
traded for tax purposes, the tax consequences to the holders of Old Securities
will differ from the above discussion as follows. If either the New Senior
Secured Notes or the New Junior Subordinated Notes are considered publicly
traded, the issue price of the New Senior Secured Notes or New Junior
Subordinated Notes, as the case may be, will be determined based on their fair
market value. If only the Senior Debt Claims are considered publicly traded, the
issue price of the New Senior Secured Notes will be determined by reference to
an allocation of the fair market value of the Senior Debt Claims to cash,
accrued interest, New Common Stock and New Senior Secured Notes. If only the
Subordinated Notes are considered publicly traded, the issue price of the New
Junior Subordinated Notes will equal the fair market value of the Subordinated
Notes exchanged therefor. Where the above discussion indicates that an exchange
will be taxable to the holder and that the gain will be determined by reference
to the face amount of the New Senior Secured Notes or New Junior Subordinated
Notes, the gain will be instead determined by reference to the fair market value
of the New Senior Secured Notes or New Junior Subordinated Notes (other than
amounts received attributable to accrued interest which will be taxable as
such). Where the above discussion indicates that the basis of the New Senior
Secured Notes or New Junior Subordinated Notes will be determined by reference
to the face amount of the New Senior Secured Notes or New Junior Subordinated
Notes, the basis will be instead determined by reference to the fair market
value of the New Senior Secured Notes or New Junior Subordinated Notes (other
than amounts received attributable to accrued interest which will be taxable as
such).
If either the Senior Debt Claims or the New Senior Secured Notes or if
either the Subordinated Notes or New Junior Subordinated Notes are publicly
traded for tax purposes and the issue price (as determined above) of the New
Senior Secured Notes or New Junior Subordinated Notes, as the case may be, is
less than the face amount thereof by more than a de minimis amount, the New
Senior Secured Notes or New Junior Subordinated Notes, as the case may be, will
be treated as issued with original issue discount. Original issue discount
generally is recognized as interest income to the holder under rules that cause
the sum of original issue discount and stated interest (other than "qualified
stated interest") to be recognized over the term of the debt instrument on an
economic accrual basis, regardless of whether such holder uses the cash or the
accrual method of tax accounting. As a result of this economic accrual method of
including original issue discount in income, the amounts includible in income by
a holder of New Senior Secured Notes or New Junior Subordinated Notes generally
are lesser in the early years and greater in the later years than the amounts
that would be includible on a straight-line basis.
If, however, the New Senior Secured Notes and New Junior Subordinated
Noes are not issued with original issue discount, interest on these notes will
be taxable to the holders of these notes as ordinary income at the time it is
received or accrued, depending on the holder's usual method of accounting for
tax purposes.
9. SALE, EXCHANGE OR OTHER DISPOSITION OF NEW SENIOR SECURED
NOTES OR NEW JUNIOR SUBORDINATED NOTES.
The sale, exchange, redemption or other taxable disposition of a New
Senior Secured Note or New Junior Subordinated Note will result in recognition
of taxable gain or loss to a holder of such notes in an amount equal to the
difference between (a) the amount of cash and the fair market value of property
received in exchange therefor (other than amounts attributable to accrued
interest which will be taxable as such) and (b) such holder's adjusted tax basis
in such note. Except as discussed below with respect to market discount, such
gain or loss generally will be long-term capital gain or loss if the holder has
held the note for more than one year at the time of disposition.
An exception to the capital gain treatment described above may apply to
a holder who purchased either the New Senior Secured Notes or New Junior
Subordinated Notes at a "market discount." In general, unless a holder acquired
a note upon the note's original issuance at the original "issue price" for the
notes, market discount is, in the case of notes without original issue discount,
the excess, if any, of the principal amount of a note over the holder's tax
basis therein at the time of the acquisition and, in the case of notes with
original issue discount, is the excess if any, of the "revised issue price" of
such note over the holder's tax basis therein at the time of acquisition
(unless, in either case, the amount of such excess is less than a specified de
minimis amount, in which case market discount is considered zero). A holder who
acquires a debt instrument at a market discount (and who does not elect to
include such market discount in income on a current basis, as described below)
may be required to defer a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such debt instrument until the holder
disposes of the debt instrument in a taxable transaction. A holder of a debt
instrument acquired at a market discount may elect to include the market
discount in income as the discount accrues, either on a straight-line basis or,
if elected as to such instrument, on a constant interest rate basis. The current
inclusion election, once made, applies to all market discount obligations
acquired by such holder on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
Service. If a holder makes a current inclusion election, the foregoing rules
with respect to the recognition of ordinary income on a sale or other
disposition of such debt instrument, and the deferral of interest expense on
indebtedness related thereto, should not apply.
B. TAX CONSEQUENCES TO EQUITYHOLDERS.
1. RECEIPT OF NEW COMMON STOCK AND NEW WARRANTS.
The Plan contemplates the distribution of New Common Stock and New
Warrants in exchange for the Old Common Stock. The exchange of the Old Common
Stock for 5% of the New Common Stock and all of the New Warrants will be treated
as a reorganization under Code Section 368. The exchange will not be treated as
a taxable exchange to the holders of Old Common Stock. As a result, the holders
of Old Common Stock will not recognize gain or loss on the exchange. The Old
Common Stock holder's tax basis in the New Common Stock and New Warrants should
equal the adjusted tax basis in the Old Common Stock surrendered in the
exchange. The holding period for the New Common Stock and New Warrants will
include the holding period for the Old Common Stock.
2. EXERCISE, DISPOSITION OR LAPSE OF NEW WARRANTS.
Holders of the New Warrants should not recognize gain or loss upon
exercise of the New Warrants, but their basis therein, together with amounts
paid to exercise the New Warrants, should be included in their basis in the
property acquired as a result of such exercise. The holding period for the
property acquired upon exercise should begin on the day after the date of
exercise of such rights.
Holders of New Warrants should recognize gain or loss upon the
disposition or lapse of the rights in an amount equal to the difference between
their basis in the New Warrants, if any, and the amount, if any, received in
exchange therefor. Such gain or loss generally will be capital gain or loss, and
will be long-term capital gain or loss if the holding period of the New Warrants
exceeds one year.
C. TAX CONSEQUENCES TO SECURITIES FRAUD CLAIM HOLDERS.
Pursuant to the Plan, the Securities Fraud Claim holders will receive
cash. To the extent holders receive cash in respect of claims relating to Old
Common Stock disposed of in a taxable transaction occurring in a year prior to
the year in which the cash is received (or, for accrual basis taxpayers, prior
to the year in which the Plan is confirmed), the Debtor believes such holders
will recognize gain in the year of such receipt (or year of confirmation of the
Plan for accrual basis taxpayers) equal to the amount of cash received of the
same character as the loss incurred in the prior year. To the extent holders
receive cash in respect of claims relating to Old Common Stock disposed of
during the same taxable year in which the cash is received (or year of
confirmation of the Plan for accrual basis taxpayers), but prior to such receipt
(or confirmation), the Debtor believes such holders will reduce the loss on such
disposition by an amount equal to the amount of cash received.
To the extent holders receive cash in respect of claims relating to Old
Common Stock cancelled pursuant to the Plan, such cash will be combined with the
New Common Stock and New Warrants received in respect of the Old Common Stock. A
holder will recognize gain (but not loss) equal to the lesser of (i) the excess
of the sum of the fair market value of the New Common Stock and New Warrants
received and the amount of cash received over the holder's tax basis in the Old
Common Stock and (ii) the amount of cash received. Holders of Securities Fraud
Claims should consult their tax advisors regarding the tax consequences
resulting from the Reorganization.
D. TAX CONSEQUENCES TO DIVIDEND CLAIM HOLDERS.
Pursuant to the Plan, Dividend Claim holders will receive cash. The
holders will recognize ordinary income equal to the amount of cash received in
the year of receipt (or, for accrual basis taxpayers, in the year in which the
Plan is confirmed).
E. BACKUP WITHHOLDING
Holders of Subordinated Notes, Senior Debt Claims and Old Common Stock
may, under certain circumstances, be subject to backup withholding on reportable
payments made pursuant to the Plan (or on a distribution with respect to the New
Common Stock, on interest with respect to the New Senior Secured Notes or the
New Junior Subordinated Notes, or on property received upon exercise of the New
Warrants), unless either the holder provides the correct taxpayer identification
number to the Debtor and certifies in the manner required that the holder is not
subject to backup withholding, or the holder demonstrates when required that it
is a corporation otherwise exempt from backup withholding. A holder of New
Senior Secured Notes, New Junior Subordinated Notes, New Common Stock, or New
Warrants that does not provide the Debtor with the correct taxpayer
identification number also may be subject to penalties imposed by the Service.
Amounts withheld under these rules are creditable against the holder's U.S.
federal income tax liability.
F. TAX CONSEQUENCES TO THE DEBTOR.
1. CANCELLATION OF INDEBTEDNESS INCOME.
A taxpayer generally must include in gross income the amount of any
cancelled indebtedness realized during the taxable year, except to the extent
payment of such indebtedness would have given rise to a deduction. Such amounts,
however, are not included in income where the cancellation of indebtedness is
accomplished pursuant to a plan approved by the court in a case under the
Bankruptcy Code (the "Bankruptcy Exception"). Instead, the amount of cancelled
indebtedness that would otherwise have been required to be included in income
reduces certain tax attributes of the taxpayer in the following order: net
operating loss carryforwards ("NOLs"), general business credit carryovers,
minimum tax credits, capital loss carryovers, the taxpayer's basis in property
and foreign tax credit carryovers. A reduction in the basis of taxpayer's
property is limited, however, to the excess of the aggregate bases of the
property held by taxpayer immediately after the discharge over the aggregate of
the liabilities of taxpayer immediately after the discharge.
Under the Plan, satisfaction of the Claims would give rise to
cancellation of indebtedness income to the Debtor in an amount equal to the
difference between (i) the adjusted issue price of Claims and (ii) the sum of
(a) the amount of Excess Cash, if any, paid by the Debtor in partial
satisfaction of such Claims, and (b) the issue price of any debt instrument and
the fair market value on the Effective Date of stock and other consideration
issued in satisfaction of such Claims, except to the extent that the discharged
Claims would have given rise to a deduction had they been paid in full and a
deduction for such amount has not already been claimed. Based on the estimate of
the value of the New Common Stock available on the date of the Disclosure
Statement, the Debtor estimates that satisfaction of the Claims will give rise
to approximately $70 million in cancellation of indebtedness income that will
not be recognized under the Bankruptcy Exception.
2. POTENTIAL AVAILABILITY OF NET OPERATING LOSS CARRYOVERS.
The Debtor estimates that as of the Effective Date, and based on the
assumptions on which the Reorganized Debtor projections are based, the Debtor
will have approximately $27 million of NOLs, prior to taking into account any
reductions for cancellation of indebtedness as discussed above (see
"Cancellation of Indebtedness Income"). Because the amount of cancellation of
indebtedness income is expected to be greater than the NOL as of the Effective
Date, the Debtor anticipates that the entire NOL will be eliminated. Whether the
NOL is entirely eliminated due to the exclusion of cancellation of indebtedness
will depend on the taxable income or loss generated by the Debtor up to the
Effective Date and the fair market value of the New Common Stock received by the
holders of the Claims. These factors may change between the date of this
Disclosure Statement and the Effective Date. If, due to these factors, there is
an NOL after the reduction of tax attributes as of the Effective Date, the NOL
may be subject to annual limitations under Code Section 382 (the "Section 382
Limitation").
CODE SECTION 382 - IN GENERAL. Code Section 382 provides that
corporations that undergo an "ownership change" may be limited in the amount of
existing tax attributes, including NOLs, that can be used to offset income
generated by the corporation after the date of the ownership change, unless an
exception under Code Section 382(l)(5) applies (as described below). Stated
simply, an ownership change occurs when aggregate changes in stock ownership by
5 percent shareholders exceed 50 percentage points by value over a three-year
"testing period." Following an ownership change, the annual amount of income
that may be offset by the corporation's tax attributes after the ownership
change generally will be limited to an amount equal to the sum of the equity
value of the corporation immediately before the ownership change (but including
any increase in value resulting from any surrender or cancellation of
indebtedness under the Chapter 11 case), multiplied by the long-term tax-exempt
rate then in effect. This Section 382 Limitation may be increased by certain
"recognized built-in gains" triggered during a five year "recognition period"
beginning on the ownership change date. Moreover, certain "recognized built-in
losses" triggered during the recognition period may be limited in the same
manner as if such loss were an NOL existing as of the ownership change.
CODE SECTION 382(L)(5). Code Section 382(l)(5) applies to certain
ownership changes occurring in connection with Chapter 11 cases, unless the
corporation affirmatively elects not to have such provision apply. Code Section
382(l)(5) applies to ownership changes if (i) the corporation is under the
jurisdiction of a Bankruptcy Court under Chapter 11, and (ii) the shareholders
and "qualified creditors" of the corporation (determined immediately before the
ownership change) own, after the ownership change, stock of the corporation
having at least 50 percent of the value and voting power of the corporation.
"Qualified creditors" are defined to include creditors that held their
indebtedness for at least 18 months prior to the date of the filing of the
Chapter 11 Case and creditors whose indebtedness arose in the ordinary course of
the corporation's trade or business and was held by the person who at all times
held the beneficial interest in such indebtedness. If the exception under Code
Section 382(l)(5) applies, the general Section 382 Limitation does not apply.
Instead, any existing NOLs are reduced by a portion of the interest that the
corporation claimed as a deduction on indebtedness that was converted into stock
of the corporation as a result of the Chapter 11 proceedings. The amount of
disallowed interest equals the amount of deductions the corporation claimed on
such indebtedness during the portion of the tax year in which the ownership
change occurred and the three preceding tax years.
APPLICATION OF CODE SECTION 382 TO DEBTOR. Debtor anticipates that
there will be no NOL existing after taking into account the attribute reduction
as of the Effective Date. If, however, there is an NOL existing subsequent to
the Effective Date, it appears that the Debtor could elect to have the Code
Section 382(l)(5) exception apply. Under the exception, the general Section 382
Limitation would not apply. Instead, any NOL existing on the Effective Date
(after the reduction of tax attributes) would be reduced by a portion of the
interest deducted by the Debtor with respect to the Claims that were converted
into New Common Stock pursuant to the Plan. The NOL would be reduced by the
interest deducted on such claims during the taxable year that includes the
Effective Date and the three prior years.
If the Code Section 382(l)(5) exception does not apply to the Debtor
(or the Debtor affirmatively elects out of the exception), any existing NOL
would be subject to the general Section 382 Limitation. As a result, annual
usage of the NOL would be limited to the equity value of Debtor immediately
prior to the Effective Date, (including any increase in value resulting from the
cancellation of any Claims under the Plan), multiplied by the long-term
tax-exempt rate in effect as of the Effective Date. Debtor may be allowed to
increase such limitation by certain built-in gains realized during the five year
recognition period following the change date. Certain recognized built-in losses
realized during the recognition period may be subject to Debtor's Code Section
382 limitation as if they were NOLs.
3. REDUCTION IN ASSET BASIS.
To the extent the Debtor's cancellation of indebtedness income exceeds
its NOL and capital loss and tax credit carryforwards as of the Effective Date,
the Debtor may be required to reduce the basis of its assets. The reduction in
the basis of Debtor's property would be limited, however, to the excess of the
aggregate basis of the property held by Debtor immediately after the discharge
over the aggregate of the liabilities of Debtor immediately after the discharge.
Despite this limitation, asset basis reduction could result in a significant
future tax cost to Debtor when such assets are realized or disposed of.
XV.
VOTING AND CONFIRMATION OF THE PLAN
A. CLASSIFICATION OF CLAIMS AND INTERESTS UNDER THE BANKRUPTCY CODE
The Plan divides the Claims against and Interests in the Debtor into
nine (9) classes and sets forth the treatment offered each class. Section 101(5)
of the Bankruptcy Code defines "claim" broadly as a "right to payment, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured" or a "right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured, or unsecured."
In order for the holder of a claim to participate in a plan and receive
the treatment offered to the class in which it is classified, the claim must be
"allowed." A claim is allowed under the Bankruptcy Code if such claim or a
portion thereof either:
(i) has been scheduled by the Debtor in its bankruptcy
filing, is not scheduled as disputed, contingent or
unliquidated, and is not subject to any pending
objection timely filed by any party-in-interest, or
(ii) has been timely filed by way of a proof of claim with
the court and
(A) is not subject to an objection filed within
any period for objections fixed by the
Bankruptcy Code, the Bankruptcy Rules, or an
order of the court, or
(B) the court has allowed the claim despite an
objection.
Pursuant to Section 1122 of the Bankruptcy Code, claims and interests
must be grouped into classes or "classified" under a plan of reorganization. All
claims or interests within a particular class must be substantially similar to
each other, and must in general receive the same treatment as each other, except
to the extent that a particular holder agrees to a less favorable treatment. The
Debtor believes that the classification of Claims and Interests under the Plan
is proper under the Bankruptcy Code.
Modifications or amendments to a plan's classification system may be
made with the Court's approval and may, under certain circumstances, be approved
by the Court at the confirmation hearing without re-solicitation of holders of
Claims and Interests who are not materially and adversely affected by any such
modification or amendment. In the event that re-solicitation is required, which
would be the case in the event that the modification adversely changes the
treatment of the claim of any creditor who has not accepted in writing the
modification and whose claim is in a class which must accept the plan in order
for it to be confirmed, the plan proponent must make disclosure to holders of
claims or interests of such additional adequate information as is necessary to
make an informed judgment about the Plan as modified.
It is the present intention of the Debtor to use, to the extent
permitted by the Court and the Bankruptcy Code, each acceptance received by the
Debtor pursuant to this solicitation for the purpose of obtaining the acceptance
of the Class of which a holder of Claims or Interests is ultimately deemed to be
a member, in the event of an amendment or modification of the classification
scheme under the Plan. It is possible that reclassification of Claims or
Interests could affect the Classes in which such Claims or Interests were
initially classified, or another Class under the Plan, by changing the
composition of such Classes and the votes of the members thereof required for
acceptance of the Plan by such Classes. A reclassification of Claims or
Interests after this solicitation could necessitate a re-solicitation of
acceptances.
TO THE EXTENT PERMITTED BY THE COURT, THE BANKRUPTCY CODE AND THE
BANKRUPTCY RULES, ACCEPTANCE BY ANY HOLDER OF CLAIMS OR INTERESTS OF THE PLAN
PURSUANT TO THIS SOLICITATION WILL BE DEEMED TO BE THE ACCEPTANCE OF THE PLAN'S
TREATMENT OF ANY SUCH CLAIM OR INTEREST, REGARDLESS OF POSSIBLE RECLASSIFICATION
OF THE CLAIM OR INTEREST.
B. IMPAIRMENT OF CLAIMS AND INTERESTS: IMPAIRED CLASSES.
The Bankruptcy Code requires that, in order to be confirmed, a plan of
reorganization must specify whether a class of claims or interests is "impaired"
by its treatment under the Plan. A claim or interest is "impaired" unless the
plan:
(i) leaves unaltered the legal, equitable and contractual
rights to which the claim or interest entitles the
holder thereof; or
(ii) with certain exceptions, cures any default which
occurred before or after the commencement of the
chapter 11 case, reinstates the original maturity of
the claim or interest, compensates the holder for any
damages resulting from any reasonable reliance by the
holder on a contractual provision or applicable law
that permits acceleration of the debt and does not
otherwise alter the legal, equitable or contractual
rights to which such claim or interest entitles the
holder of such claim or interest.
Under the Plan, Classes 1, 2 and 3 are not impaired, and Classes 4, 5,
6, 7A, 7B and 8 are impaired.
C. SOLICITATION OF IMPAIRED CLASSES AND VOTING REQUIREMENTS.
A class of claims or interests that is not impaired under a plan of
reorganization is deemed under the Bankruptcy Code to have accepted the plan,
and, therefore, solicitation of acceptances with respect to such class is not
required. A class that does not receive or retain any property under the Plan is
deemed to have rejected the plan.
With the transmittal of the Disclosure Statement, the Plan and the
Ballots, the Debtor is soliciting acceptances from the holders of Claims and
Equity Interests in Classes 4, 5, 6, 7A and 7B because each such Class of Claims
or Interests is impaired under the Plan, and are, therefore, entitled to vote on
the Plan. Class 8 is deemed to have rejected the Plan and will not be solicited
for acceptances or rejections of the Plan.
Section 1125 of the Bankruptcy Code requires that disclosure of
"adequate information" be made to all impaired creditors and interest holders at
the time of or before solicitation of acceptances of a plan of reorganization.
"Adequate information" means "information of a kind, and in sufficient detail,
as far as is reasonably practicable in light of the nature and history of the
debtor and the condition of the debtor's books and records, that would enable a
hypothetical, reasonable investor typical of holders of the claims or interests
of the relevant class to make an informed judgment about the plan, but adequate
information need not include such information about any other possible or
proposed plan." An "investor typical of holders of claims or interests of the
relevant class" means an investor having, among other things, "such ability to
obtain such information from sources other than the disclosure required by
section 1125 as holders of claims or interests in such class generally have."
The Debtor believes that it is transmitting the Plan to substantially
all holders of Impaired Claims and Interests in connection with this
solicitation, and that the Disclosure Statement satisfies the requirements of
section 1125 with regard to "adequate information" provided by a disclosure
statement under the Bankruptcy Code.
For an impaired class of claims to be determined to have accepted a
plan of reorganization, the holders of at least two-thirds in amount and more
than one-half in number of the claims of the holders within such class who
actually vote must accept the plan. With respect to an impaired class of
interests, the holders of at least two-thirds in amount of the interests of
holders who actually vote in such class must vote to accept the plan.
As described above, the Bankruptcy Code does not require that each
holder of a claim or interest vote in favor of a plan in order for the Court to
confirm the plan under Section 1129 of the Bankruptcy Code, as long as the
requisite number and amount of votes are obtained to constitute acceptance by
each impaired class. In addition, the Bankruptcy Code does not require that
every impaired class accept a plan. If one or more impaired classes of claims
exists, the plan must be accepted by at least one class of impaired claims to be
confirmed, without considering the votes of "insiders" as defined by the
Bankruptcy Code. If certain requirements are met, the Court can confirm the plan
notwithstanding the nonacceptance by a class of impaired claims or interests.
This is generally referred to as the "cram down" power as provided for in
Section 1129(b) of the Bankruptcy Code. The cram down power is described further
in Subsection E.4 below.
Because Class 8 is deemed to have rejected the Plan, the Debtor will
seek confirmation pursuant to Section 1129(b) of the Bankruptcy Code. In
addition, the Debtor shall ask the Court to confirm the Plan notwithstanding the
rejection by one or more Classes of Impaired Claims or Interests other than
Class 8 in the event that any such Impaired Classes of Claims or Interests
rejects the Plan.
Finally, it is possible that even if all Classes of Claims and
Interests accept the Plan, the Court may not confirm the Plan if it finds that
certain other requirements for confirmation have not been met.
D. POSSIBLE POST-SOLICITATION, PRE-CONFIRMATION EVENTS.
The Debtor reserves the sole right, in accordance with the Bankruptcy
Code, to amend or modify the Plan as the result of substantive or technical
objections to the Plan filed by holders of Claims or Interests, or as a result
of any other matter that may affect the Debtor's ability to obtain confirmation
of the Plan, or, if for any other reason such amendment or modification is
determined by the Debtor to be in its best interest. Such an amendment or
modification may occur before or after objections to the Plan are filed, if any,
or even after confirmation of the Plan.
The Debtor reserves the right to use the Ballots of holders of Claims
and Interests to obtain confirmation with respect to any modified Plan so long
as the amendment does not materially and adversely affect the treatment of the
Class of Claims and Interests under the Plan whose votes the Debtor seeks to
use. If the Plan is so amended or modified, only for cause shown and pursuant to
a request made within the time fixed for acceptance or objection may a holder of
Claims or Interest change or withdraw its ballot.
E. CONFIRMATION PROCEDURES AND REQUIREMENTS.
1. CONFIRMATION WHERE SUFFICIENT ACCEPTANCES ARE OBTAINED.
The Bankruptcy Code contains specific requirements for confirmation of
a plan in section 1129. For example, the Court must find that a plan is proposed
in "good faith" and not by any means forbidden by law, that it makes certain
specified disclosures, and that it provides that any payment made to any person
in connection with such plan and incident to the reorganization case be
reasonable and subject to the Court's approval. In addition, both the plan and
the plan proponent must comply with the provisions of the Bankruptcy Code, and
the plan must satisfy the "best interest of creditors" test and the plan must be
feasible.
2. CHAPTER 7 LIQUIDATION ANALYSIS AND "BEST INTEREST OF CREDITORS"
TEST.
Before a plan can be confirmed, the Court must determine under section
1129(a)(7) (with certain exceptions) that the plan provides, with respect to
each impaired class of claims or interests, that each holder of a claim or
interest in such class either:
(i) has accepted the plan, or
(ii) will receive or retain under the plan property of a
value, as of the effective date of the plan, that is
not less than such person would receive or retain if
the debtor were liquidated on such date under chapter
7 of the Bankruptcy Code. A detailed analysis of this
requirement as it relates to the Plan and the Debtor
is provided in Exhibit O to the Disclosure Statement.
As indicated in the Liquidation Analysis, Senior Debt
Claims would receive approximately 89% of their claim
amounts on a present value basis in a liquidation;
whereas, the Debtor's Plan provides for a less than
100% recovery for Senior Debt Claims, in addition to
the value allocated by holders of Senior Debt Claims
to other classes:
CASH PROCEEDS
Monthly Cash Collections $ 305,336
Receivable Sale 200,275
Income Tax Refunds 2,364
Asset Sales 3,000
--------------
Gross Cash Proceeds 510,975
Less: Cost of Operations (55,867)
Professional Fees (4,210)
Net Cash Provided 450,898
Plus Beginning Cash on Hand 211,192
NET CASH PROCEEDS 662,090
PRIORITY CLAIMS
Medical Claims 600
Unfunded Pension Liability 2,000
Taxes 1,471
--------------
Total Priority Claims 4,071
CASH AVAILABLE FOR UNSECURED CLAIMS 658,019
Unsecured Claims
Long Term Note Holders 335,131
CP Holders 339,340
Midland Debt 773
Subordinated Debt 22,500
--------------
Total Debt 697,744
All Other Unsecured 12,920
TOTAL UNSECURED CLAIMS $ 710,664
=================
Distribution 92.6%
PERCENTAGE NET PRESENT VALUE DISTRIBUTION
(9% DISCOUNT RATE) 89.1%
================
Because the Debtor owns 100% of the stock in the Nondebtor
Subsidiaries, the liquidation scenario focuses on liquidation of the assets of
the Nondebtor Subsidiaries, the net value of which, when liquidated, shall equal
the value of the Debtor's stock interest in the Nondebtor Subsidiaries on a
liquidation basis. The liquidation scenario is assumed to commence on March 1,
1999. Under the liquidation scenario, the Debtor ceases the acquisition of new
loans immediately and collects its loan portfolio through its branch network for
approximately 10 months. The number of branches and employees would decline as
the portfolio shrinks. At the end of 1999, it is assumed that the remaining
portfolio is sold for 80% (based upon net finance receivables net of the bad
debt allowance). Employees would be offered a stay bonus to induce them to
remain with the Debtor until their services are no longer required. This stay
bonus is based upon the same successful compensation plan used when the Debtor
downsized its operations from 260 to 185 branches in late 1997. A brief summary
of the Debtor's operating structure through the course of the liquidation is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Actual Quarter Beginning
- --------------------------------------------------------------------------------------------
9/30/98 1/1/99 4/1/99 7/1/99 10/1/99 1/1/2000
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
# of 184 153 133 132 112 92
Branches
- --------------------------------------------------------------------------------------------
# of 1,328 1,015 905 905 785 640
Employees
- --------------------------------------------------------------------------------------------
</TABLE>
Midland Finance Company ("Midland"), the Debtor's wholly owned
subsidiary, is not included in the above summary. Midland is a $38 million
consumer loan company and operates from two facilities in Chicago. It is assumed
that Midland would be liquidated in the same manner as the Debtor, i.e., it
would cease new loan originations immediately, collect its portfolio through a
downsized operation through December 1999 and the remaining portfolio would be
sold at that time.
The Debtor also owns a $53 million unsecured credit card portfolio,
which is administered and serviced by a third party vendor. It is assumed that a
sale of the credit card portfolio will be completed in January, 1999. It is
further assumed that the sale will result in cash of $25 million upon closing
and payment of $1.5 million in June, 1999 and an additional $1.5 million in
December, 1999.
Once the Debtor's various loan portfolios are sold by December 1999, it
is assumed that a core staff of employees would continue to market and sell
repossessions that were in the "pipeline" at December, 1999, prepare final
financial statements, tax and payroll reports, exit all facilities, pay final
bills and wind down all administrative affairs of the Debtor. It is assumed that
all functions would cease by March 31, 2000.
In summary, the Debtor believes that the provisions of section
1129(a)(7) will be satisfied with respect to the Plan. In particular with
respect to Classes 5, 6, 7A and 7B, the Debtor believes such holders will
receive property with at least as much value as the creditors or equity holders
in such Classes would be entitled to receive in a chapter 7 liquidation.
3. FEASIBILITY TEST.
Pursuant to the Bankruptcy Code, the Court must determine that the
confirmation of a plan is not likely to be followed by the liquidation or need
for further financial reorganization of the debtor. The Debtor believes the Plan
meets this requirement.
To reach this conclusion the Debtor has analyzed the ability of the
Reorganized Debtor to meet its obligations while retaining a sufficient amount
of cash to carry on its operations. The feasibility of the Plan can be analyzed
when the Plan is considered in light of the Debtor's operating results and the
Debtor's projections for the next five years.
In assessing the Plan's feasibility, certain matters which constitute
important risk factors have been set forth in Section XIII. THE DEBTOR URGES
EACH HOLDER OF CLAIMS AND INTERESTS TO EXAMINE CAREFULLY THE ENTIRE DISCLOSURE
STATEMENT, SPECIFICALLY INCLUDING SECTION XIII IN EVALUATING THE PLAN.
4. "CRAM DOWN"--FAIR AND EQUITABLE TEST; UNFAIR DISCRIMINATION.
If all of the requirements of section 1129(a) of the Bankruptcy Code
are met other than the acceptance of the plan by each class of impaired claims
or interests, the Court, on the request of a plan proponent, shall confirm a
plan pursuant to section 1129(b) of the Bankruptcy Code if the plan does not
discriminate unfairly and is fair and equitable with respect to each impaired
class that has not accepted the plan. This ability of the Court to confirm a
plan notwithstanding the existence of one or more dissenting impaired classes of
claims or interests has periodically been referred to as the "cram down" power.
In addition to a determination that the plan does not discriminate unfairly and
is fair and equitable with respect to each dissenting impaired class, exercise
of the cram down power requires that at least one impaired class of claims
accept the plan. The determination of whether at least one class has accepted
the plan must be made without including the acceptance of an insider of the
debtor, which is defined so as to include, if the debtor is a corporation, a
director, officer or person in control of the debtor and certain other persons.
The requirement that a plan not "discriminate unfairly" means, among
other things, that a dissenting class must be treated substantially equally with
respect to other classes of equal rank. The Debtors believe that the Plan does
not unfairly discriminate against any Class that may not accept or otherwise
consent to the Plan.
Tests for defining the term "fair and equitable" are contained in
section 1129(b)(2) of the Bankruptcy Code. A plan is deemed fair and equitable
with respect to an impaired class of unsecured claims if each member of the
class receives or retains on account of his claim property of a value, as of the
effective date of the plan, equal to the allowed amount of the claim, or
alternatively, no holder of a claim or interest that is junior to the claims of
the rejecting class of unsecured creditors will receive or retain any value
under the plan on account of such junior claims or interests. This test is
sometimes referred to as the "absolute priority" rule because it entitles any
rejecting class to have its claims satisfied in full before junior classes
receive or to retain any value under the plan of reorganization.
In the event that one or more of Classes 5, 6, 7A and 7B do not accept
the Plan, the Debtor believes that the Plan could be confirmed under section
1129(b) of the Bankruptcy Code because no Class of Claims or Interests junior to
Class 4 would receive or retain any property in the event of a chapter 7
liquidation of the Debtor. In the event that it is deemed necessary to invoke
the Court's cram down power with regard to any of Classes 5, 6, 7A, 7B and 8,
the Plan may be deemed not to comply strictly with the absolute priority rule
because it provides for distributions to Classes 5, 6, 7A and 7B notwithstanding
the fact that Class 4 may not be satisfied in full. However, the Debtor
anticipates that Class 4 will accept the Plan, therefore relieving the Debtor
from compliance with the absolute priority rule with respect to Class 4.
F. BAR DATE.
Pursuant to an order dated October 15, 1998, except with
respect to governmental agencies, the Court established December 7, 1998, as the
last date by which all Persons, creditors, individuals, partnerships,
corporations, associations, estates, trusts, or other entities that wish to
assert a Claim against the Debtor arising or existing, or which may be deemed to
have arisen or existed, prior to July 15, 1998 as defined in Section 101(5) of
the Bankruptcy Code (the "Bar Date").
G. LETTERS OF TRANSMITTAL AND BOOK-ENTRY CONFIRMATION.
SURRENDER OF INSTRUMENTS AND RECEIPT OF DISTRIBUTIONS-SENIOR DEBT
CLAIMS AND SUBORDINATED NOTEHOLDER CLAIMS. As a condition to participation under
the Plan, each holder of a Senior Debt Claim or a Subordinated Noteholder Claim
is required to provide evidence of the securities evidencing the Senior Debt
Claims and Subordinated Noteholders Claims ("Old Securities") by (i) completing
and returning a Letter of Transmittal to the Exchange Agent, together with
certificates representing their Old Securities (the "Tendered Certificates"), or
(ii) completing the book-entry confirmation procedure, promptly after the
Confirmation Date. Promptly following the Effective Date, the Exchange Agent
will mail to those persons who have properly completed and returned Letters of
Transmittal and Tendered Certificates or completed the book-entry confirmation
procedure, certificates representing the New Senior Secured Notes, the New
Junior Subordinated Notes and/or the New Common Stock to be issued in accordance
with the Plan. HOLDERS OF OLD SECURITIES WHO HAVE NOT PROPERLY COMPLETED AND
RETURNED TO THE EXCHANGE AGENT LETTERS OF TRANSMITTAL TOGETHER WITH THE TENDERED
CERTIFICATES OR COMPLETED THE BOOK-ENTRY CONFIRMATION PROCEDURE WITHIN ONE YEAR
OF THE EFFECTIVE DATE WILL NOT RECEIVE THE CERTIFICATES OR CASH TO WHICH THEY
ARE OTHERWISE ENTITLED PURSUANT TO THE PLAN NOR WILL THEY BE ENTITLED TO ANY
OTHER DISTRIBUTION UNDER THE PLAN. The Debtor selected one year as opposed to
the five year period permitted (but not required) under section 1143 of the
Bankruptcy Code because the securities mature in less than five years and the
Debtor believes that the cost and expense of establishing an escrow fund for
delinquent tenders outweighs the risk that substantial holders of Old Securities
will fail to surrender their certificates within one year.
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Securities at DTC. Any tendering financial institution that
is a participant in DTC's book-entry transfer facility system must make a
book-entry delivery of the Old Securities by causing DTC to transfer such Old
Securities into the Exchange Agent's account at DTC in accordance with DTC's
Automated Tender Offer Program ("ATOP") procedures for transfers. Such holder of
Old Securities using ATOP should transmit its acceptance to DTC on or prior to
the Expiration Date (or comply with the guaranteed delivery procedures set forth
below), DTC will verify such acceptance, execute a book-entry transfer of the
tendered Old Securities Notes into the Exchange Agent's account at DTC and then
send to the Exchange Agent confirmation of such book-entry transfer, including
an agent's message confirming that DTC has received an express acknowledgment
from such holder that such holder has received and agrees to be bound by the
Letter of Transmittal and that the company may enforce the Letter of Transmittal
against such holder (a "book-entry confirmation").
A beneficial owner of Old Securities that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial owner
wishes to participate.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Letters of Transmittal. Signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution (as defined below), unless the Old
Securities tendered pursuant thereto are tendered for the account of an Eligible
Institution or such signature guarantee if not otherwise required by applicable
law. If signatures on a Letter of Transmittal are required to be guaranteed,
such guarantees must be by a member firm of a registered national securities
exchange in the United States, a member of the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or a correspondent in the United States (each of which is an "Eligible
Institution"). If Old Securities are registered in the name of a person other
than the person signing the Letter of Transmittal, in order to be validly
tendered, the Old Securities must be endorsed or accompanied by properly
completed power of authority, with signature guaranteed by an Eligible
Institution.
Holders of Old Securities who are not holders of record should:
(i) obtain a properly completed Letter of Transmittal (or
facsimile thereof) from the
record holder,
(ii) obtain and include with the Letter of Transmittal a
properly completed stock or bond power, as the case
may be, from the record holder, or
(iii) effect a record transfer of their Old Securities
prior to delivery of the Letter of Transmittal.
If a holder desires to tender Old Securities pursuant to the Letter of
Transmittal but is unable to locate the Tendered Certificates, such holder
should write to or telephone the Exchange Agent about procedures for obtaining
replacement certificates for Old Securities or arranging for indemnification.
SURRENDER OF INSTRUMENTS AND RECEIPT OF DISTRIBUTIONS-OLD COMMON STOCK.
As a condition to participation under the Plan, each holder of an Equity
Interest is required to complete and return a Letter of Transmittal, as
described above, to the Exchange Agent.
ALL QUESTIONS AS TO THE VALIDITY, FORM, ELIGIBILITY (INCLUDING TIME OF
RECEIPT), AND ACCEPTANCE OF BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED
CERTIFICATES WILL BE RESOLVED BY THE DEBTOR, WHOSE DETERMINATION WILL BE FINAL
AND BINDING, SUBJECT ONLY TO REVIEW BY THE COURT UPON APPLICATION WITH DUE
NOTICE TO ANY AFFECTED PARTIES IN INTEREST. THE DEBTOR RESERVES THE RIGHT TO
REJECT ANY AND ALL BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES NOT
IN PROPER FORM, OR LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES, THE DEBTORS
ACCEPTANCE OF WHICH WOULD, IN THE OPINION OF THE DEBTOR OR ITS COUNSEL, BE
UNLAWFUL.
H. VOTING PROCEDURES, BALLOTING AND CONFIRMATION HEARING.
The following Classes of Claims are impaired under the Plan and are
entitled to vote to accept or reject the Plan:
Class 4 Senior Debt Claims
Class 5 Subordinated Noteholder Claims
Class 6 Indemnification Claims
Class 7A Equity Interests
Class 7B Securities Fraud Claims and Dividend Claims
In accordance with the provisions of Bankruptcy Rule 3018 and an order of the
Court, the holders of Classes 4 and 5 Claims and Class 7A Interests, shall not
be entitled to accept or reject the Plan unless the holder is the holder of
record of such claim on December 28, 1998. The Court authorized temporary
allowance of the Securities Fraud Claims for voting purposes only so that each
holder of a Securities Fraud Claim may vote such Claim in the amount of $1.00
times the number of shares held of Common Stock held by such holder on January
28, 1997. The Court fixed January 28, 1997 as the record date for determining
holders of Securities Fraud Claims.
Holders of Claims in Classes 4 through 7B are requested to complete an
appropriate color-coded Ballot, and when appropriate, Master Ballot, in
accordance with the instructions set forth thereon. Holders of claims should
take care to use the correct Ballot(s) in voting on the Plan. If any Ballots are
damaged or lost, or if a holder has any questions concerning the voting
instructions, it may contact Corporate Investors Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey, 07072 (the "Information Agent") at the
address or telephone number indicated on the back cover page. Each holder which
holds Claims in more than one Class is required to vote separately with respect
to each Class in which such holder holds Claims. A holder may not split its vote
within a Class of Claims or Interests. Incomplete and unsigned Ballots will be
returned to the holder of such Claim or Interest.
All votes to accept or reject the Plan must be cast by using the Ballot
or, if applicable, Master Ballot enclosed with the Disclosure Statement. No
other votes will be counted. A properly completed and executed Ballot must be
received no later than 5:00 p.m. EST on February 12, 1999 by Logan & Company,
Inc., the Balloting Agent, at the following address:
BALLOT CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NEW JERSEY 07030
Ballots and Master Ballots must be returned by U.S. mail, hand delivery or
overnight mail. Facsimile transmission will only be allowed for Master Ballots.
If faxed, original Master Ballots must be received by the Balloting Agent within
one business day. A return envelope will be provided for your convenience. If
you receive a return envelope addressed to a Bank or Broker, you must return
your Ballot to your Bank or Broker early enough for your vote to be processed
and then forwarded to the Balloting Agent.
A hearing to consider confirmation of the Plan, any objections that may
be interposed and any other matter that may properly come before the Court will
commence in the United States Court for the Northern District of Illinois, 219
South Dearborn Street, Room 2341, Chicago, Illinois, on February 22, 1999 at
10:00 a.m. (Central Standard Time) or as soon thereafter as counsel may be heard
(the "Confirmation Hearing"). A status hearing will be held before the Honorable
Erwin I. Katz in Room 680 of the United States Bankruptcy Court on February 17,
1999 at 11:00 (CST). You may, but are not required to, attend the Confirmation
Hearing. The Confirmation Hearing may be adjourned from time to time without
further notice other than an announcement of the adjourned date or dates at the
Confirmation Hearing.
Objections, if any, to confirmation of the Plan must be in writing and
must (a) state the name and address of the objector, (b) the objector's interest
in the Chapter 11 case, (c) if appropriate, the amount and nature of the
objector's claim or interest, (d) the grounds for the objection and the legal
basis therefor, and (e) be filed with the Clerk of the Bankruptcy Court, with
two (2) copies to chambers, and served upon and received by the parties listed
below on or before February 12, 1999 at 4:00 p.m. (Central Standard Time):
Counsel to Debtor and Counsel for the
Debtor in Possession: United States Trustee:
McDermott, Will & Emery United States Trustee's Office
227 West Monroe Street U.S. Department of Justice
Chicago, IL 60606-5096 227 West Monroe Street, Suite 3350
Attn: Lewis S. Rosenbloom Chicago, IL 60606
David D. Cleary Attn: Ira Bodenstein
Debra A. Riley Kathryn M. Gleason
Facsimile No.: (312) 984-7700 Facsimile No.: (312) 886-5794
Co-Counsel to Co-Counsel to
Creditors' Committee: Creditors' Committee:
Cleary, Gottlieb, Steen Jones, Day, Reavis & Pogue
& Hamilton 77 West Wacker Drive
One Liberty Plaza Chicago, IL 60601-1692
New York, NY 10006 Attn: David S. Kurtz
Attn: James E. Millstein Jeffrey W. Linstrom
Lindsee P. Granfield Facsimile No.: (312) 782-8585
Facsimile No.: (212) 225-3999
Co-Counsel to Co-Counsel to
Security Claimants' Committee: Security Claimants' Committee:
- ----------------------------- -----------------------------
Barbakoff, Zazove & Glick Holper Welsh & Mitchell
20 North Clark Street - Suite 1000 Esplanade III, Suite 700
Chicago, Illinois 60602 2415 East Camelback Road
Attn: Daniel A. Zazove Phoenix, AZ 85016
Facsimile No. (312) 641-5017 Attn: Richard D. Holper
Facsimile No. (602) 508-6036
Co-Counsel to Co-Counsel to
Equity Committee Equity Committee
- ---------------- ----------------
Berlack, Israels & Liberman, LLP Gordon Glickman & Flesch
120 West 45th Street 140 South LaSalle Street
New York, NY 10036 Chicago, Illinois 60603
Attn: Edward S. Weisfelner Attn: James S. Gordon
Facsimile No. (212) 704-0196 Facsimile No. (312) 346-3708
Debtor: Debtor's Interim Management:
Mercury Finance Company Development Specialists, Inc.
100 Field Drive - Suite 340 Three First National Plaza
Lake Forest, Illinois 60045 Chicago, IL 60602-4205
Atten: Mark E. Dapier Attn: William A. Brandt, Jr.
Facsimile No. (847) 295-8785 Fred C. Caruso
Patrick J. O'Malley
Facsimile No.: (312)263-1180
Any party filing objections to the Plan must comply with all orders of the Court
governing the confirmation hearing.
XVI.
ADDITIONAL INFORMATION
The Debtor is subject to the information requirements of the Exchange
Act and in accordance therewith files reports and other information with the
Securities and Exchange Commission. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and in each
instance reference is made to the copy of such document for the full text
thereof. Each such statement is qualified in its entirety by such reference.
Certain documents referred to herein have not been attached as exhibits because
of the impracticability of furnishing copies thereof to all of the Debtor's
creditors and equity security holders. All of the Exhibits to the Plan and to
this Disclosure Statement are available for inspection by contacting the
Information Agent.
XVII.
RECOMMENDATION AND CONCLUSION
FOR ALL OF THE REASONS SET FORTH IN THIS DISCLOSURE STATEMENT, THE
DEBTOR BELIEVES THAT THE CONFIRMATION AND CONSUMMATION OF THE PLAN IS PREFERABLE
TO ALL OTHER ALTERNATIVES. CONSEQUENTLY, THE DEBTOR URGES ALL HOLDERS OF CLASSES
4, 5, 6, 7A AND 7B CLAIMS AND INTERESTS TO VOTE TO ACCEPT THE PLAN, AND TO DULY
COMPLETE AND RETURN THEIR BALLOTS SO THAT THEY WILL BE ACTUALLY RECEIVED ON OR
BEFORE 5:00 P.M. EASTERN STANDARD TIME ON FEBRUARY 12, 1999.
Dated: December 29, 1998 Respectfully submitted,
MERCURY FINANCE COMPANY,
a Delaware corporation
By /S/ WILLIAM A. BRANDT JR.
William A. Brandt, Jr.
Prepared By:
Lewis S. Rosenbloom, Esq.
David D. Cleary, Esq.
MCDERMOTT, WILL & EMERY
227 West Monroe Street
Chicago, Illinois 60606
(312) 372-2000
COUNSEL FOR
MERCURY FINANCE COMPANY
EXHIBIT A
SECOND AMENDED PLAN OF REORGANIZATION
EXHIBIT B THROUGH U
Due to the voluminous nature of Exhibits B through U, the Exhibits have
not been included herewith. If you would like a copy of the Exhibits, you can
contact the Information Agent at the address and phone number listed on the back
cover page of this document. The Exhibits will be provided to you at your
expense. Additionally, the Exhibits are on file with the Clerk of the Bankruptcy
Court, 219 S. Dearborn Street, 7th Floor, Chicago, Illinois and can be reviewed
during the Court's regular business hours. The material terms of each of the
Exhibits are described in the Disclosure Statement.
- ----------
1 On July 6, 1998, certain plaintiffs (the "Petitioning Plaintiffs") in the
litigation arising from the announcement of the accounting irregularities filed
an involuntary chapter 11 petition against the Debtor (the "Involuntary
Petition"). On July 15, 1998, the Debtor filed with the Court a voluntary
petition for relief under chapter 11 of the Bankruptcy Code. The Court ordered
that the two cases be consolidated under Case No. 20763 and an order for relief
was entered on July 15, 1998.
2 Discrepancies in addition in this table are due to rounding factors.
3 The Senior Debt Claims were incurred in the ordinary course of the Debtor's
business as a mechanism to obtain capital and the Debtor made prepetition
payments to holders of Senior Debt Claims to repay that debt. The Debtor does
not believe any setoff against holders of the Senior Debt Claims exists and, as
part of the conversion of their debt and the voluntary allocation of their value
to other creditors and equity holders, the holders of Senior Debt Claims require
an acknowledgment of the validity of their claims and release of any actions.
4 Because the Debtor files its tax return on a consolidated basis with its
operating subsidiaries, the Debtor reports all employees under its federal tax
identification number. However, the direct expense of the employees is allocated
among the Debtor and its operating subsidiaries.
5 The Pension Benefit Guaranty Corporation or PBGC is a wholly-owned United
States government corporation created by Title IV of ERISA to administer the
mandatory pension plan termination insurance program established under Title IV
of ERISA. The PBGC guarantees the payment of certain pension benefits upon
termination of a pension plan covered by Title IV of ERISA.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
)
a Delaware corporation, ) Chapter 11
)
Debtor. ) Honorable Erwin I. Katz
SECOND AMENDED PLAN OF REORGANIZATION
OF
MERCURY FINANCE COMPANY
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
INTRODUCTION
MERCURY FINANCE COMPANY, A DELAWARE CORPORATION ("MERCURY" OR THE
"DEBTOR"), PROPOSES THE FOLLOWING PLAN OF REORGANIZATION (THE "PLAN") FOR THE
RESOLUTION OF ALL CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTOR. REFERENCE
IS MADE TO THE DEBTOR'S DISCLOSURE STATEMENT FILED CONTEMPORANEOUSLY WITH THE
PLAN (THE "DISCLOSURE STATEMENT"), FOR A DISCUSSION OF THE DEBTOR'S HISTORY,
BUSINESSES, PROPERTIES, RESULTS OF OPERATIONS AND PROJECTIONS FOR FUTURE
OPERATIONS, AND FOR A SUMMARY AND ANALYSIS OF THE PLAN AND CERTAIN RELATED
MATTERS. THE DEBTOR IS THE PROPONENT OF THE PLAN WITHIN THE MEANING OF SECTION
1129 OF THE BANKRUPTCY CODE, 11 U.S.C. SECTION 1129. ALL HOLDERS OF CLAIMS
AGAINST AND INTERESTS IN THE DEBTOR ENTITLED TO VOTE ON THE PLAN ARE ENCOURAGED
TO READ THE PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO
ACCEPT OR REJECT THE PLAN. SUBJECT TO CERTAIN RESTRICTIONS AND REQUIREMENTS SET
FORTH IN THE PLAN, THE DEBTOR RESERVES THE RIGHT TO ALTER, AMEND, MODIFY, REVOKE
OR WITHDRAW THE PLAN PRIOR TO ITS CONSUMMATION.
ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. DEFINITIONS.
Certain capitalized terms used throughout the Plan are defined in this
Article I. Other capitalized terms found in the Plan shall have the meaning
ascribed to such terms in the Bankruptcy Code or the Bankruptcy Rules (and shall
be construed in accordance with the rules of construction thereunder).
ADMINISTRATIVE CLAIM means a Claim for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
referred to in section 507(a)(1) of the Bankruptcy Code, including, without
limitation, the actual, necessary costs and expenses incurred after the Petition
Date of preserving the Estate and operating the business of the Debtor,
including wages, salaries or commissions for services, compensation for legal,
financial advisory, accounting and other services and reimbursement of expenses
awarded or allowed under sections 330(a) or 331 of the Bankruptcy Code, and all
fees and charges assessed against the Estate under chapter 123 of title 28,
United States Code.
ALLOWED ADMINISTRATIVE CLAIM means all or that portion of an
Administrative Claim which either (a) has been allowed by a Final Order as an
Administrative Claim, or (b) was incurred by the Debtor in the ordinary course
of business during its Reorganization Case and is determined to be due, owing,
valid and enforceable by the Debtor.
ALLOWED CLAIM or ALLOWED UNSECURED CLAIM means that portion of any
Claim, other than an Administrative Claim, (a) as to which (x) no proof of claim
has been filed with the Court and (y) the liquidated and noncontingent amount of
which is scheduled by the Debtor pursuant to the Bankruptcy Code as undisputed,
or (b) as to which a proof of claim has been timely filed in a liquidated amount
with the Court pursuant to the Bankruptcy Code or any order of the Court, or
late filed with leave of the Court after notice and a hearing, provided that (x)
no objection to the allowance of such Claim or motion to expunge such claim has
been interposed before any final date for the filing of such objections or
motions set forth in the Confirmation Order or other Court order or (y) if such
objection or motion has been filed, such objection or motion has been overruled
by a Final Order (but only to the extent such objection or motion has been
overruled), or (c) as to which a Final Order has been entered allowing such
Claim; except with respect to Claims in Class 7B which shall be liquidated and
allowed in accordance with the procedures substantially similar to those set
forth in Exhibit U attached to the Disclosure Statement.
ALLOWED CLASS 7B CLAIM means a Class 7B Claim which is allowed in
accordance with the consensual allowance or arbitration procedures set forth in
Section 8.15 and in the Class 7B Liquidating Trust.
ALLOWED EQUITY INTEREST means an Equity Interest that is of record as
of the Distribution Record Date in a stock register that is maintained by or on
behalf of the Debtor.
ALLOWED INDEMNIFICATION CLAIM means an Indemnification Claim (a) as to
which (x) no proof of claim has been filed with the Court and (y) the liquidated
and noncontingent amount of which is scheduled by the Debtor pursuant to the
Bankruptcy Code as undisputed, or (b) as to which a proof of claim has been
timely filed in a liquidated amount with the Court pursuant to the Bankruptcy
Code or any order of the Court, or late filed with leave of the Court after
notice and a hearing, provided that (x) no objection to the allowance of such
Claim or motion to expunge such claim has been interposed before any final date
for the filing of such objections or motions set forth in the Confirmation Order
or other Court order or (y) if such objection or motion has been filed, such
objection or motion has been overruled by a Final Order (but only to the extent
such objection or motion has been overruled), or (c) which has been assumed by
the Debtor, including, but not limited to, claims against the Reliance Policies.
AMENDED AND RESTATED BY-LAWS means the Amended and Restated By-laws of
the Reorganized Debtor which shall be substantially in the form set forth in
Exhibit I attached to the Disclosure Statement.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION means the Amended and
Restated Certificate of Incorporation of the Reorganized Debtor which shall be
substantially in the form set forth in Exhibit I attached to the Disclosure
Statement.
BALLOTS means the ballots accompanying the Disclosure Statement upon
which holders of Impaired Claims or Impaired Interests entitled to vote on the
Plan shall indicate their acceptance or rejection of the Plan in accordance with
the instructions regarding voting.
BANKRUPTCY CODE means title 11 of the United States Code, as now in
effect or hereafter amended.
BANKRUPTCY RULES means, collectively, the Federal Rules of Bankruptcy
Procedure, as amended, promulgated under 28 U.S.C. Section 2015 and the general
and local rules of the Court, as applicable from time to time in the
Reorganization Case.
BAR DATE means the bar date for Filing proofs of claim against the
Debtor as established by order of the Court.
BENEFICIAL HOLDER means the entity holding the beneficial interest in a
Claim or Interest.
BENEFICIARIES means the holders of Allowed Indemnification Claims other
than the estate of James A. Doyle and John N. Brincat.
BENEFITS CLAIM means any Unsecured Claim against the Debtor arising
from or with respect to any benefits plan, but excluding any Claim alleged in or
arising from the facts and circumstances alleged in the action styled as Ferre
v. Mercury Finance Company, et al., No. 97C 5245 (N.D. Ill.).
BUSINESS DAY means any day except a Saturday, Sunday or "legal holiday"
(as defined in Bankruptcy Rule 9006(a)).
CAPITAL EXPENDITURE RESERVE means an amount to be agreed upon between
the Debtor and the Creditors' Committee.
CASH means cash and cash equivalents.
CLAIM means a claim against the Debtor, whether asserted or not
asserted, as defined in section 101(5) of the Bankruptcy Code.
CLASS means a category of holders of Claims or Interests as defined in
Article III of the Plan.
CLASS 7B BAR DATE means the date set forth in Section 6.01(a) of the
Class 7B Liquidating Trust Agreement which is the bar date for filing requests
for allowance against the Debtors in order for such Requests to be considered in
the allocation/allowance procedure under the Class 7B Liquidating Trust
Agreement.
CLASS 7B LIQUIDATING TRUST means the trust established under section
8.15 of the Plan and governed by to the Class 7B Liquidating Trust Agreement.
CLASS 7B LIQUIDATING TRUST AGREEMENT means the Class 7B Liquidating
Trust Agreement in substantially the form set forth in Exhibit U to the
Disclosure Statement.
COMPANY KPMG CLAIMS means all of the Debtor's, the Estate's and the
Reorganized Debtor's rights, title, and interests in and to any and all of their
respective claims against KPMG Peat Marwick, including without limitation those
relating to, arising from, or on account of: (a) the announcement on January 29,
1997 that the Debtor would restate its earnings for certain periods as a result
of accounting irregularities, (b) such accounting irregularities, and (c) the
actions or non-action of KPMG Peat Marwick with respect to the foregoing or with
respect to its role as auditor of and provider of other services, including
accounting, to the Debtor prior to and at the time of the announcement of the
accounting irregularities, together with complete and exclusive control of the
prosecution and/or settlement of all such clams against KPMG Peat Marwick and
the sole right to prosecute the same on behalf of and in the name of the Debtor,
the Reorganized Debtor and the Estate, subject, in each such case, to any
defenses, rights of setoff, or counterclaims that KPMG Peat Marwick may have or
be entitled to assert against the Debtor in respect of such claims.
CONFIRMATION DATE means the date on which the Court enters the
Confirmation Order on its docket, within the meaning of Bankruptcy Rules 5003
and 9021.
CONFIRMATION ORDER means the order of the Court confirming the Plan
pursuant to section 1129 of the Bankruptcy Code.
CONSENT AGREEMENT means the agreement dated May 14, 1998 and attached
as Exhibit L to the Disclosure Statement.
CONSUMER LITIGATION CLAIMS means all claims against the Debtor incurred
in the ordinary course of business which are asserted under lawsuits or
complaints and are pending as of the commencement of the Reorganization Case in
state or federal court set forth in Exhibit 1 attached to the Plan, excluding
the Securities Fraud Claims and derivative actions pending against the Debtor
set forth in Exhibit 2 attached to the Plan.
CONSUMMATION means the occurrence of the Effective Date.
CORPORATE INDEMNITIES means any obligations of the Debtor, pursuant to
its corporate charter and by-laws or agreements entered into any time prior to
the Effective Date, to indemnify directors, officers, agents and/or employees
with respect to all present and future actions, suits and proceedings against
the Debtor or such directors, officers, agents and/or employees, based upon any
act or omission related to service with, or for or on behalf of the Debtor.
COURT means the United States Bankruptcy Court for the Northern
District of Illinois and, to the extent it may exercise jurisdiction in the
Reorganization Case, the United States District Court for the Northern District
of Illinois, or if either such Court ceases to exercise jurisdiction over the
Reorganization Case, such other court that exercises jurisdiction over the
Reorganization Case.
CREDITORS' COMMITTEE means the Official Creditors' Committee appointed
pursuant to section 1102 of the Bankruptcy Code in the Reorganization Case.
D&O COMPANY RELEASE means release and waiver of (i) any and all claims
against the Debtor and Reorganized Debtor for indemnification or contribution
arising under any contract, arrangement or statute in excess of the amounts set
forth in Section 12.03 and (ii) interests of the Beneficiaries in the Debtor and
the Reorganized Debtor.
DEBTOR means Mercury Finance Company.
DELAWARE GENERAL CORPORATION LAW means title 8 of the Delaware Code, as
now in effect or hereafter amended.
DISCLOSURE STATEMENT means the Debtor's Disclosure Statement Filed with
the Court on July 15, 1998, as it may be amended, modified or supplemented (and
all exhibits or schedules annexed thereto or referenced therein), which relates
to the Plan and which has been prepared and distributed in accordance with
sections 1125 and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018.
DISTRIBUTION RECORD DATE means the Business Day immediately preceding
the Confirmation Date.
DIVIDEND CLAIMS means any and all Claims relating to the Old Common
Stock for declared but unpaid dividends or rights.
EFFECTIVE DATE means a date selected by the Debtor that is no more than
ten Business Days following the date on which all conditions to the Effective
Date set forth in Section 10.02 have been satisfied or, if capable of being
waived, duly and expressly waived.
EMPLOYMENT AGREEMENT means the Employment Agreement, dated as of the
Effective Date by and between the Reorganized Debtor and Edward Harshfield.
ENTITY means an entity as defined in section 101(15) of the Bankruptcy
Code.
EQUITY HOLDERS' COMMITTEE means the Official Committee of Equity
Holders appointed by the Court.
EQUITY INTERESTS means the rights of holders of Old Common Stock,
including redemption rights, and liquidation preferences.
ESTATE means the estate created for the Debtor in its Reorganization
Case pursuant to section 541 of the Bankruptcy Code.
EXCESS CASH means, as of the day immediately preceding the Effective
Date, the ending book cash balance of the Debtor on a fully consolidated basis,
which cash shall include overnight investments, cash, corporate accounts, credit
card cash, and branch cash including cash of Midland (but only to the extent
such branch cash in the aggregate exceeds $3,000,000) minus the sum of (a)
$20,000,000 or such greater amount to be agreed to by the Debtor and the
Creditors' Committee, (b) the Interest Reserve, (c) the Capital Expenditure
Reserve, (d) the Professional Fee Reserve, (e) the Signing Bonus and (f) the
aggregate amount of cash to be distributed under the Plan to all Classes other
than to Class 4.
EXCHANGE ACT means the Securities and Exchange Act of 1934, as amended.
EXCHANGE AGENT means an entity to be designated by the Debtor not less
than ten days prior to the hearing on confirmation of the Plan.
EXPIRATION DATE means 5:00 p.m. eastern standard time on February 12,
1999, the date fixed by the Court after which Ballots with respect to the Plan
may no longer be accepted by the Debtor without leave of Court.
FILE, FILED OR FILING means file, filed or filing with the Court in the
Reorganization Case.
FINAL ORDER means an order of the Court (a) as to which the time to
appeal, petition for certiorari, or move for reargument, rehearing or new trial
has expired and as to which no appeal, petition for certiorari, or other
proceedings for reargument, rehearing or new trial shall then be pending; (b) as
to which any right to appeal, petition for certiorari, reargue, rehear or retry
shall have been waived in writing in form and substance satisfactory to the
Debtor; or (c) in the event that an appeal, writ of certiorari, reargument,
rehearing or new trial has been sought, as to which (i) such order of the
Bankruptcy Court shall have been affirmed by the highest court to which such
order was appealed; (ii) certiorari has been denied as to such order; or (iii)
reargument or rehearing or new trial from such order shall have been denied, and
the time to take any further appeal, petition for certiorari or move for
reargument, rehearing or new trial shall have expired without such actions have
been taken.
IMPAIRED means when used with reference to a Claim or Interest, a Claim
or Interest that is impaired within the meaning of section 1124 of the
Bankruptcy Code.
INDEMNIFICATION CLAIMS means all Claims, if any, as to which the
claimant asserts rights based upon Corporate Indemnities.
INDEMNIFICATION SETTLEMENT FUND means a fund of $13 million (such
amount to be deducted from the ending book cash balance of the Debtor on a
consolidated basis) for the benefit of the Beneficiaries.
INTERESTS means Equity Interests and Old Options.
INTEREST RESERVE means an amount in cash equal to the aggregate amount
of interest accrued on the New Senior Secured Notes and the New Junior
Subordinated Notes prior to the Effective Date.
LETTER OF TRANSMITTAL means the documentation required to be provided
to the Exchange Agent as set forth in Sections 6.04 and 6.05 of the Plan.
MERCURY means Mercury Finance Company, a Delaware corporation.
NET SENIOR DEBT CLAIM means with respect to any holder of Senior Debt
(i) the Allowed Senior Debt Claim of such holder, less (ii) such holder's pro
rata share of the Excess Cash distributed to Class 4 pursuant to the Plan.
NEW COLLATERAL DOCUMENTS means the Company Security Agreement, Company
Pledge Agreement, Subsidiaries Guaranty Agreement, Subsidiaries Security
Agreement, each substantially in the form of the Group Exhibit D attached to the
Disclosure Statement.
NEW COMMON STOCK means the 25,000,000 shares of Common Stock par value
$0.01 per share of the Reorganized Debtor authorized pursuant to the Amended and
Restated Certificate of Incorporation, 10,000,000 shares of which are to be
issued and distributed in accordance with the Plan constituting 100% of the
total number of shares of such Common Stock to be issued and outstanding
immediately after the Effective Date.
NEW INDENTURES means the New Senior Secured Note Indenture and the New
Junior Subordinated Note Indenture.
NEW JUNIOR SUBORDINATED NOTES means the Junior Subordinated Notes of
the Reorganized Debtor, dated as of the Effective Date and issued pursuant to
the New Junior Subordinated Note Indenture substantially in the form of Exhibit
E attached to the Disclosure Statement, the total principal amount not to exceed
$22,500,000.
NEW JUNIOR SUBORDINATED NOTE INDENTURE means the indenture under which
the New Junior Subordinated Notes will be issued, and which shall be
substantially in the form set forth in Exhibit F attached to the Disclosure
Statement.
NEW SENIOR SECURED NOTES means the Senior Secured Notes of the
Reorganized Debtor, dated as of the Effective Date and issued pursuant to the
New Senior Secured Note Indenture, substantially in the form of Exhibit B
attached to the Disclosure Statement.
NEW SENIOR SECURED NOTE INDENTURE means the indenture under which the
New Senior Notes will be issued, and which shall be substantially in the form
set forth in Exhibit C attached to the Disclosure Statement.
NEW SECURITIES means, collectively, (a) the New Senior Secured Notes,
(b) the New Junior Subordinated Notes, (c) the New Common Stock, and (d) the New
Warrants.
NEW WARRANT AGREEMENT means the New Warrant Agreement in substantially
the form set forth in Exhibit H attached to the Disclosure Statement.
NEW WARRANT AGENT means the agent appointed to act as such under the
New Warrant Agreement.
NEW WARRANTS means the warrants, each to purchase one share of New
Common Stock, to be issued by the Reorganized Debtor having the terms and
conditions set forth in the New Warrant Agreement and issued in accordance with
the Plan to holders of Allowed Interests in Class 7A. Three series of New
Warrants shall be issued under the New Warrant Agreement, each series
representing the right to purchase 580,000 shares of New Common Stock or
1,740,000 shares in the aggregate.
NONDEBTOR SUBSIDIARIES means, collectively, Mercury Finance Corporation
of Alabama; Mercury Finance Company of Arizona; Merc Finance Company of
California; Mercury Finance Company of Colorado; Mercury Finance Company of
Delaware; Mercury Finance Company of Florida; Mercury Finance Company of
Georgia; Mercury Finance Company of Idaho; Mercury Finance Company of Illinois;
Mercury Finance Company of Indiana; Mercury Finance Company of Iowa; Mercury
Finance Company of Kansas; Mercury Finance Company of Kentucky; Mercury Finance
Company of Louisiana; Mercury Finance Company of Michigan; Mercury Finance
Company of Mississippi; Mercury Finance Company of Missouri; Mercury Finance
Company of Nevada; Mercury Finance Company of New Mexico; Mercury Finance
Company of New York; Mercury Finance Company of North Carolina; Mercury Finance
Company of Ohio; MFC Finance Company of Oklahoma; Mercury Finance Company of
Oregon; Mercury Finance Company of Pennsylvania; Mercury Finance Company of
South Carolina; Mercury Finance Company of Tennessee; MFC Finance Company of
Texas; Mercury Finance Company of Utah; Mercury Finance Company of Virginia;
Mercury Finance Company of Washington; Mercury Finance Company of Wisconsin;
Filco Marketing Company; MFC Financial Services, Inc.; Gulfco Finance Company;
Gulfco Investment Company; Midland Finance Co.; MFN Insurance Company.
OLD COMMON STOCK means the common stock issued by Debtor and
outstanding immediately prior to the Distribution Record Date, including the
associated share purchase rights.
OLD OPTIONS means the options outstanding immediately prior to the
Effective Date to purchase Old Common Stock.
OUTSIDE DIRECTORS RESERVE means a fund of $350,000 deposited into a
segregated account by the Debtor to be used for purposes of reimbursement of
continuing indemnification costs of current outside directors for a period of
two years, with any remaining balance (in such account at the expiration of such
two-year period) thereafter reverting to the Reorganized Debtor.
PERSON shall have the meaning set forth in the Bankruptcy Code.
PETITION DATE means July 15, 1998.
PLAN means this Second Amended Plan of Reorganization for the Debtor
and all exhibits annexed hereto or referenced herein, as it may be amended or
modified by the Debtor from time to time in accordance with the Bankruptcy Code
and the Bankruptcy Rules, and the terms and conditions of section 14.02 of the
Plan.
PRIORITY CLAIM means an Allowed Claim for an amount entitled to
priority under section 507(a) of the Bankruptcy Code, other than an
Administrative Claim or a Tax Claim.
PROFESSIONAL FEE RESERVE means an amount in cash equal to the Debtor's
good faith estimate of the aggregate amount of accrued and unpaid professional
fees payable to professional persons entitled to reimbursement of fees and
expenses from the Debtor.
RELIANCE POLICIES means any and all policies providing the Debtor with
insurance for Corporate Indemnities, including without limitation, the
Directors' and Officers' Liability Policy Number NDA 1494742-96 issued by
Reliance Insurance Company, together with any applicable extended reporting
period.
REORGANIZATION CASE means the Debtor's case under chapter 11 of the
Bankruptcy Code.
REORGANIZED DEBTOR means the Debtor on and after the Effective Date.
SCHEDULES means, collectively, the: (a) schedules of assets and
liabilities and the statements of financial affairs, if any, Filed by the Debtor
in the Reorganization Case, pursuant to section 521 of the Bankruptcy Code, the
Bankruptcy Rules and the Official Bankruptcy Forms; and (b) schedule of
unliquidated, disputed or contingent Claims, as required by any local rule of
the Court, as such requirements may be modified by any order of the Court.
SECURED CLAIM means a Claim that is secured by a lien on property in
which the Estate has an interest or that is subject to setoff under section 553
of the Bankruptcy Code, to the extent of the value of the Claim holder's
interest in the Estate's interest in such property or to the extent of the
amount subject to setoff, as applicable, as determined pursuant to section
506(a) of the Bankruptcy Code.
SECURITIES ACT means the Securities Act of 1933, 15 U.S.C. Sections
77a-77aa, as now in effect or hereafter amended.
SECURITIES CLAIMANTS' COMMITTEE means the Official Committee of
Securities Fraud Claimants appointed by the Court.
SECURITIES FRAUD CLAIMS means all claims, including unknown claims,
demands, rights, liabilities and causes of action of any kind whatsoever, known
or unknown, asserted or which might have been asserted in a direct, derivative
or other capacity against any person or entity, including, without limitation,
claims arising out of, relating to, or in connection with (i) the purchase, sale
or other decision or action made or taken, or declined, failed or refused to be
made or taken, or otherwise foregone, concerning or relating to Equity
Interests, (ii) the facts, transactions, events, occurrences, acts,
representations, disclosure, statements, omissions, or failures to act which
were alleged or could have been alleged in the pending litigation asserted
against the Debtor and other persons and entities, whether asserted individually
or on behalf of a class of plaintiffs which generally arise from the Debtor's
accounting practices and announcement of accounting irregularities, including
the litigation set forth on Exhibit 2 attached to the Plan, (iii) the adversary
proceeding, No. 98-A-01580, in the Debtor's bankruptcy against any and all
defendants other than KPMG, KPMG-related individuals, John N. Brincat and the
Estate of James A. Doyle, and (iv) the purchase, ownership or sale of the common
stock or other securities of the Debtor, (v) accounting irregularities or
alleged accounting errors relating to the Debtor, (vi) any restatements of the
Debtor's financial statements or results of operations; and (vii) the conduct of
the Debtor's restructuring process and bankruptcy proceeding, including all
decisions, actions, inactions and alleged negligence or misconduct relating
thereto.
SENIOR DEBT CLAIMS means Claims arising from or with respect to amounts
due under the Debtor's commercial paper, short-term loans or senior term notes
against the Debtor or under any note issued by the Debtor in connection with the
purchase of Gulfco Finance Company or Gulfco Investment Company, including any
claim arising out of or in connection with such debt as against the Debtor, but
excluding Claims arising from or with respect to amounts due under the
Subordinated Notes, in an aggregate amount equal to the outstanding principal
amounts due under such agreements (approximately $678,000,000 as of the Petition
Date), plus all accrued and unpaid interest thereon and any unpaid amounts
payable under the Consent Agreement. All other claims, including, but not
limited to, make-whole payments or any additional interest payments or fees, are
waived against the Debtor for enforcement or collection by holders of Senior
Debt Claims; but reserved solely for purposes of calculating and allocating
distributions by and among the holders of Class 4 Claims.
SIGNING BONUS means the amounts designated as a signing bonus and
payable to the new Chief Executive Officer under the Employment Agreement.
STEERING COMMITTEE means the pre-petition Ad Hoc Steering Committee of
the holders of Senior Debt Claims.
SUBORDINATED NOTEHOLDER means the holder of any Subordinated Notes.
SUBORDINATED NOTES means the $22,500,000 principal amount of
outstanding Mercury subordinated notes.
TAX CLAIM means an Allowed Claim for an amount entitled to priority
under section 507(a)(8) of the Bankruptcy Code.
TRADE CLAIM means any unsecured Claim against the Debtor arising from
or with respect to the sale of goods or services to the Debtor, including
Allowed Claims based on rejection of executory contracts or unexpired leases,
prior to the Petition Date, in the ordinary course of the Debtor's business,
including but not limited to, any Claim of an employee that is not a Priority
Claim or an Indemnification Claim and any Claim of a Nondebtor Subsidiary
against the Debtor, but excluding any claim by KPMG Peat Marwick, whether
arising by contract or for contribution or indemnity.
TRADE CLAIMANT means any holder of a Trade Claim.
UNIMPAIRED CLAIM means a Claim that is not impaired within the meaning
of section 1124 of the Bankruptcy Code.
UNSECURED CLAIM means any Claim which is not an Administrative Claim,
Secured Claim, Priority Claim, Tax Claim, Senior Debt Claim, Claim arising from
the Subordinated Notes, or Securities Fraud Claims.
B. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW.
1. RULES OF INTERPRETATION. For purposes of the Plan: (a) whenever from
the context it is appropriate, each term, whether stated in the singular or the
plural, shall include both the singular and the plural; (b) any reference in the
Plan to a contract, instrument, release, indenture or other agreement or
document being in a particular form or on particular terms and conditions means
that such document shall be substantially in such form or substantially on such
terms and conditions; (c) any reference in the Plan to an existing document or
Exhibit Filed or to be Filed means such document or Exhibit, as it may have been
or may be amended, modified or supplemented; (d) if the Plan's description of
the terms of an Exhibit is inconsistent with the terms of the Exhibit, the terms
of the Exhibit shall control; (e) unless otherwise specified, all references in
the Plan to Articles, Sections, Clauses and Exhibits are references to Articles,
Sections, Clauses and Exhibits of or to the Plan; (f) the words "herein" and
"hereto" refer to the Plan in its entirety rather than to a particular portion
of the Plan; (g) captions and headings to Articles and Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the interpretation of the Plan; (h) the rules of construction set forth in
section 102 of the Bankruptcy Code shall apply to the extent such rules are not
inconsistent with any other provision in this Section 1.B.1.
2. COMPUTATION OF TIME. In computing any period of time prescribed or
allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
3. GOVERNING LAW. Except to the extent that the Bankruptcy Code or
Bankruptcy Rules are applicable, and subject to the provisions of any contract,
instrument, release, indenture or other agreement or document entered into in
connection with the Plan, the rights and obligations arising under the Plan
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, without giving effect to the principles of conflicts of
law thereof.
ARTICLE II
ADMINISTRATIVE AND TAX CLAIMS
In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims and Tax Claims, as described below, have not been
classified.
2.01 ADMINISTRATIVE CLAIMS. Unless otherwise agreed to by the parties,
each holder of an Allowed Administrative Claim shall receive cash equal to the
unpaid portion of such Allowed Administrative Claim on the later of (a) the
Effective Date and (b) the date on which such Claim becomes an Allowed
Administrative Claim; provided, however, that the Administrative Claims that
represent liabilities incurred by the Debtor in the ordinary course of its
business during the Reorganization Case shall be paid in the ordinary course of
business and in accordance with any terms and conditions of any agreements
relating thereto.
2.02 BAR DATE FOR ADMINISTRATIVE CLAIMS.
(a) Pre-Confirmation Date Claims and Expenses. All applications for
final compensation of professional persons for services rendered and
reimbursement of expenses incurred on or before the Confirmation Date and all
other requests for payment of administrative costs and expenses incurred on or
before the Confirmation Date under section 507(a)(1) or 507(b) of the Bankruptcy
Code (except only for Trade Claims incurred in the ordinary course of business
and claims under 28 U.S.C. Section 1930) shall be filed no later than 45 days
after the Confirmation Date.
(b) Effect of Failure to Timely File Claim or Request for Payment. Any
request for payment of an Administrative Claim which is not filed by the
applicable deadline set forth above shall be barred. Under no circumstance will
the applicable deadlines set forth above be extended by order of the Court or
otherwise. Any holders of Administrative Claims who are required to file a claim
or request for payment of such Claims or expenses and who do not file such
claims or requests by the applicable bar date shall be forever barred from
asserting such Claims or expenses against the Debtor, any property of the Debtor
or any distributions under the Plan.
2.03 TAX CLAIMS. Unless otherwise agreed to by the parties, each holder
of a Tax Claim will receive cash equal to the unpaid portion of such Tax Claim
on or as soon as practical after the later of (i) the Effective Date, and (ii)
the date on which such Claim becomes an Allowed Claim; provided, however, that
at the option of the Reorganized Debtor, the Reorganized Debtor may pay Tax
Claims over a period not exceeding six (6) years after the date of assessment of
the Tax Claim as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code. If
the Reorganized Debtor elects this option as to any Tax Claim, then the payment
of such Tax Claim shall be made in equal semiannual installments with the first
installment due on the latest of: (i) the Effective Date, (ii) 30 calendar days
after the date on which an order allowing such Tax Claim becomes a Final Order,
and (iii) such other time as may be agreed to by the holder of such Tax Claim
and the Reorganized Debtor. Each installment shall include simple interest on
the unpaid portion of such Tax Claim, without penalty of any kind, at the
statutory rate of interest provided for such taxes under applicable
nonbankruptcy law; provided, however, that the Reorganized Debtor shall reserve
the right to pay any Tax Claim, or any remaining balance of such Tax Claim, in
full, at any time on or after the Effective Date, without premium or penalty.
ARTICLE III
CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR
The classification of the Claims and Interests listed below shall be
for all purposes, including voting, confirmation and distribution pursuant to
the Plan. A Claim or Interest is in a particular class only to the extent that
the Claim or Interest is an Allowed Claim or Allowed Interest in that Class and
has not been paid, released, or otherwise satisfied before the Effective Date; a
Claim or Interest which is not an Allowed Claim or Interest is not in any class.
3.01 CLASS 1 - PRIORITY CLAIMS. Class 1 consists of all Priority
Claims, not otherwise treated as unclassified in Article II above.
3.02 CLASS 2 - SECURED CLAIMS. Class 2 consists of all holders of
Secured Claims.
3.03 CLASS 3 - TRADE CLAIMS, CONSUMER LITIGATION CLAIMS, BENEFITS
CLAIMS AND UNSECURED CLAIMS. Class 3 consists of all holders of Trade Claims,
Consumer Litigation Claims, Benefits Claims and Unsecured Claims.
3.04 CLASS 4 - SENIOR DEBT CLAIMS. Class 4 consists of all holders of
Senior Debt Claims.
3.05 CLASS 5 - SUBORDINATED NOTEHOLDER CLAIMS. Class 5 consists of all
holders of Subordinated Notes.
3.06 CLASS 6 - INDEMNIFICATION CLAIMS. Class 6 consists of all holders
of Indemnification Claims.
3.07 CLASS 7A - EQUITY INTERESTS. Class 7A consists of all holders of
Old Common Stock.
3.08 CLASS 7B - SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS. Class 7B
consists of all holders of Securities Fraud Claims and Dividend Claims.
3.09 CLASS 8 - OLD OPTIONS. Class 8 consists of all holders of Old
Options.
3.10 SUMMARY OF CLAIMS AND INTERESTS.
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS
<S> <C> <C>
Class 1 Priority Claims Unimpaired; deemed to have accepted
the Plan
Class 2 Secured Claims Unimpaired; deemed to have accepted
the Plan
Class 3 Trade Claims, Consumer Litigation Unimpaired; deemed to have accepted
Claims, Benefits Claims and the Plan
Unsecured Claims
Class 4 Senior Debt Claims Impaired; entitled to vote
Class 5 Subordinated Noteholder Claims Impaired; entitled to vote
Class 6 Indemnification Claims Impaired; entitled to vote
Class 7A Equity Interests Impaired; entitled to vote
Class 7B Securities Fraud Claims and Dividend Impaired; entitled to vote
Claims
Class 8 Old Options Impaired; deemed to have rejected
the Plan
</TABLE>
ARTICLE IV
TREATMENT OF CLASSES UNIMPAIRED UNDER THE PLAN
4.01 CLASS 1 - PRIORITY CLAIMS. Allowed Class 1 Claims are Unimpaired.
Unless otherwise agreed to by the parties, each holder of an Allowed Claim in
Class 1 shall be paid the allowed amount of such Claim in full in cash on the
later of (a) the Effective Date, and (b) the date such Claim becomes an Allowed
Claim.
4.02 CLASS 2 - SECURED CLAIMS. Allowed Class 2 Claims are Unimpaired.
Each Class 2 Claimant shall retain, unaltered, the legal, equitable and
contractual rights, including, without limitation, any liens that secure such
Allowed Claims, to which such Allowed Claim entitles Claimant; provided,
however, that each Claimant holding an Allowed Claim in Class 2 may only
exercise such rights and remedies with respect to the assets and property that
secure such Allowed Claim, without recourse of any kind against the Debtor. Any
Allowed Claim in Class 2 based on any deficiency claim by a Class 2 Claimant
shall become, and shall be treated for all purposes under this Plan as an
Allowed Trade Claim and shall be classified as a Class 3 Claim.
4.03 CLASS 3 - TRADE CLAIMS, CONSUMER LITIGATION CLAIMS, BENEFITS
CLAIMS AND UNSECURED CLAIMS. Allowed Claims in Class 3 are Unimpaired. The
legal, equitable and contractual rights of holders of Allowed Claims in Class 3
shall not be affected by the Reorganization Case, and each holder shall be
entitled to payment of the full amount of its Allowed Claim in complete
settlement, satisfaction and discharge of its Class 3 Claim.
ARTICLE V
TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN
5.01 CLASS 4 - SENIOR DEBT CLAIMS. Allowed Class 4 Claims are Impaired.
Each holder of an Allowed Class 4 Claim shall receive, in complete settlement,
satisfaction and discharge of its Class 4 Claim: (i) its pro rata share of
Excess Cash; (ii) New Senior Secured Notes in the principal amount of 75% of its
Net Senior Debt Claims; and (iii) its pro rata share of 9,500,000 shares of the
New Common Stock.
5.02 CLASS 5 - SUBORDINATED NOTEHOLDER CLAIMS. Allowed Claims in Class
5 are Impaired. Each holder of an Allowed Claim in Class 5 shall receive, in
complete settlement, satisfaction and discharge of its Class 5 Claims, its pro
rata share of the New Junior Subordinated Notes.
5.03 CLASS 6 - INDEMNIFICATION CLAIMS. Allowed Indemnification Claims
in Class 6 are Impaired. Each holder of an Allowed Indemnification Claim shall
be entitled to (i) continue to assert such Claims against the Debtor to the
extent of coverage under the Reliance Policies and (ii) the Debtor's cooperation
in aiding the Class 6 Claimants in pursuing their rights under the Reliance
Policies.
5.04 CLASS 7A - EQUITY INTERESTS. Interests in Class 7A are Impaired.
Each holder of an Allowed Equity Interest in Class 7A shall be enjoined from
pursuing any Claim against the Debtor or Reorganized Debtor (including any
Securities Fraud Claim) and, subject to Section 8.14, shall receive, in complete
settlement, satisfaction and discharge of its Equity Interest, its pro rata
share of (i) 500,000 shares of the New Common Stock and (ii) all of the New
Warrants subject to the terms and conditions of the New Warrant Agreement.
5.05 CLASS 7B - SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS. Claims in
Class 7B are Impaired. Each holder of an Allowed Claim in Class 7B (as
determined by procedures set forth in Section 8.15 and in the Class 7B
Liquidating Trust Agreement attached as Exhibit U to the Disclosure Statement
(the "Class 7B Liquidating Trust Agreement")) shall be enjoined from pursuing
any Claim against the Debtor or Reorganized Debtor (including any Securities
Fraud Claim) and, shall receive, in complete settlement, satisfaction and
discharge of its Class 7B Claims, a share of the beneficial interests in the
Class 7B Liquidating Trust. On the Effective Date, the Debtor shall transfer to
the Class 7B Liquidating Trust: (i) $5 million in cash (to be deducted from the
ending book cash balance of the Debtor on a consolidated basis); (ii) the
Company KPMG Claims; and (iii) $250,000 in cash for fees and costs to be
incurred in connection with the administration of the Class 7B Liquidating
Trust.
5.06 CLASS 8 - OLD OPTIONS. Holders of Old Options are Impaired. The
holders of Old Options shall receive no distributions under the Plan. On the
Effective Date, all of the Old Options shall be cancelled and extinguished.
ARTICLE VI
GENERAL PROVISIONS REGARDING TREATMENT OF CLAIMS AND
INTERESTS AND DISTRIBUTIONS UNDER THE PLAN
6.01 DISTRIBUTION DATE. Except as otherwise provided in the Plan,
property to be distributed under the Plan to an Impaired Class (a) shall be
distributed on or as soon as practicable after the Effective Date to each holder
of an Allowed Claim of that Class that is an Allowed Claim as of the Effective
Date, and (b) shall be distributed to each holder of an Allowed Claim of that
Class that is allowed after the Effective Date, to the extent allowed, as soon
as practicable after the order of the Court allowing the Claim becomes a Final
Order. Property to be distributed under the Plan to a Class that is not Impaired
or on account of an Administrative Claim shall be distributed on the latest of
(i) the distribution dates specified in the preceding sentence, or (ii) the date
on which the distribution to the holder of the Claim would have been due and
payable in the ordinary course of business or under the terms of the Claim in
the absence of the Reorganization Case.
6.02 DISTRIBUTION RECORD DATE--SENIOR DEBT CLAIMS AND SUBORDINATED
NOTEHOLDER CLAIMS. As of the close of business on the Distribution Record Date,
the respective transfer registers for the Senior Debt Claims and holders of
Subordinated Note Claims as maintained by the Debtor, or their respective
agents, shall be closed.
6.03 EXCHANGE AGENT. The Debtor may designate an entity or entities to
serve as Exchange Agent to distribute all the property to be distributed under
the Plan, including, without limitation the delivery of the New Common Stock,
the New Senior Secured Notes, and the New Junior Subordinated Notes and the New
Warrants.
6.04 SURRENDER OF INSTRUMENTS AND RECEIPT OF DISTRIBUTIONS--SENIOR DEBT
CLAIMS AND SUBORDINATED NOTEHOLDER CLAIMS. As a condition to participation under
the Plan, each holder of a Senior Debt Claim or a Subordinated Noteholder Claim
is required to provide evidence of the securities evidencing the Senior Debt
Claims and Subordinated Noteholders Claims ("Old Securities") by (i) completing
and returning a Letter of Transmittal to the Exchange Agent, together with
certificates (to the extent such exist) representing their Old Securities (the
"Tendered Certificates"), or (ii) completing the book-entry confirmation
procedure, promptly after the Confirmation Date. Holders of Senior Debt Claims
relating to commercial paper need not tender any certificates, as no such
certificates exist evidencing the commercial paper. Promptly following the
Effective Date, the Exchange Agent will mail to those persons who have properly
completed and returned Letters of Transmittal and Tendered Certificates or
completed the book-entry confirmation procedure, certificates representing the
New Senior Secured Notes, the New Junior Subordinated Notes and/or the New
Common Stock to be issued in accordance with the Plan. HOLDERS OF OLD SECURITIES
WHO HAVE NOT PROPERLY COMPLETED AND RETURNED TO THE EXCHANGE AGENT LETTERS OF
TRANSMITTAL OR COMPLETED THE BOOK-ENTRY CONFIRMATION PROCEDURE WITHIN TWO YEARS
OF THE EFFECTIVE DATE, TOGETHER WITH THE TENDERED CERTIFICATES, WILL NOT RECEIVE
THE CERTIFICATES OR CASH TO WHICH THEY ARE OTHERWISE ENTITLED PURSUANT TO THE
PLAN NOR WILL THEY BE ENTITLED TO ANY OTHER DISTRIBUTION UNDER THE PLAN. The
Debtor selected two years as opposed to the five year period permitted (but not
required) under section 1143 of the Bankruptcy Code because the securities
mature in less than five years and the Debtor believes that the cost and expense
of establishing an escrow fund for delinquent tenders outweighs the risk that
substantial holders of Old Securities will fail to surrender their certificates
within one year.
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Securities at DTC. Any tendering financial institution that
is a participant in DTC's book-entry transfer facility system must make a
book-entry delivery of the Old Securities by causing DTC to transfer such Old
Securities into the Exchange Agent's account at DTC in accordance with DTC's
Automated Tender Offer Program ("ATOP") procedures for transfers. Such holder of
Old Securities using ATOP should transmit its acceptance to DTC on or prior to
the Expiration Date (or comply with the guaranteed delivery procedures set forth
below), DTC will verify such acceptance, execute a book-entry transfer of the
tendered Old Securities Notes into the Exchange Agent's account at DTC and then
send to the Exchange Agent confirmation of such book-entry transfer, including
an agent's message confirming that DTC has received an express acknowledgment
from such holder that such holder has received and agrees to be bound by the
Letter of Transmittal and that the company may enforce the Letter of Transmittal
against such holder (a "book-entry confirmation").
A beneficial owner of Old Securities that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial owner
wishes to participate.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Letters of Transmittal. Signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution (as defined below), unless the Old
Securities tendered pursuant thereto are tendered for the account of an Eligible
Institution. If signatures on a Letter of Transmittal are required to be
guaranteed, such guarantees must be by a member firm of a registered national
securities exchange in the United States, a member of the National Association
of Securities Dealers, Inc., or by a commercial bank or trust company having an
office or a correspondent in the United States (each of which is an "Eligible
Institution"). If Old Securities are registered in the name of a person other
than the person signing the Letter of Transmittal, in order to be validly
tendered, the Old Securities must be endorsed or accompanied by properly
completed power of authority, with signature guaranteed by an Eligible
Institution.
Holders of Old Securities who are not holders of record should:
(i) obtain a properly completed Letter of Transmittal (or
facsimile thereof) from the record holder,
(ii) obtain and include with the Letter of Transmittal a
properly competed stock or bond power, as the case
may be, from the record holder, or
(iii) effect a record transfer of their Old Securities
prior to delivery of the Letter of Transmittal.
If a holder desires to tender Old Securities pursuant to the Letter of
Transmittal but is unable to locate the Tendered Certificates, such holder
should write to or telephone the Exchange Agent about procedures for obtaining
replacement certificates for Old Securities or arranging for indemnification.
ALL QUESTIONS AS TO THE VALIDITY, FORM, ELIGIBILITY (INCLUDING TIME OF
RECEIPT), AND ACCEPTANCE OF BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED
CERTIFICATES WILL BE RESOLVED BY THE DEBTOR, WHOSE DETERMINATION WILL BE FINAL
AND BINDING, SUBJECT ONLY TO REVIEW BY THE COURT UPON APPLICATION WITH DUE
NOTICE TO ANY AFFECTED PARTIES IN INTEREST. THE DEBTOR RESERVES THE RIGHT TO
REJECT ANY AND ALL BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES NOT
IN PROPER FORM, OR LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES, THE
DEBTOR'S ACCEPTANCE OF WHICH WOULD, IN THE OPINION OF THE DEBTOR OR ITS COUNSEL,
BE UNLAWFUL.
6.05 DISTRIBUTION RECORD--OLD COMMON STOCK. At the close of business on
the Distribution Record Date, the transfer ledgers for the Old Common Stock
shall be closed, and there shall be no further changes in the record holders of
the Old Common Stock. The Debtor shall have no obligation to recognize any
transfer of the Old Common Stock occurring on or after the Distribution Record
Date. The Debtor shall be entitled instead to recognize and deal for all
purposes hereunder with only those record holders stated on the transfer ledgers
as of the close of business on the Distribution Record Date.
As a condition to participation under the Plan, each holder of a Equity
Interest is required to provide evidence of the securities evidencing the Equity
Interest ("Old Securities") by (i) completing and returning a Letter of
Transmittal to the Exchange Agent, together with certificates (to the extent
such exist) representing their Old Securities (the "Tendered Certificates").
Promptly following the Effective Date, the Exchange Agent will mail to those
persons who have properly completed and returned Letters of Transmittal and
Tendered Certificates, certificates representing the New Common Stock and New
Warrants to be issued in accordance with the Plan. HOLDERS OF OLD SECURITIES WHO
HAVE NOT PROPERLY COMPLETED AND RETURNED TO THE EXCHANGE AGENT LETTERS OF
TRANSMITTAL WITHIN TWO YEARS OF THE EFFECTIVE DATE, TOGETHER WITH THE TENDERED
CERTIFICATES, WILL NOT RECEIVE THE CERTIFICATES TO WHICH THEY ARE OTHERWISE
ENTITLED PURSUANT TO THE PLAN NOR WILL THEY BE ENTITLED TO ANY OTHER
DISTRIBUTION UNDER THE PLAN. The Debtor selected two years as opposed to the
five year period permitted (but not required) under section 1143 of the
Bankruptcy Code because the securities mature in less than five years and the
Debtor believes that the cost and expense of establishing an escrow fund for
delinquent tenders outweighs the risk that substantial holders of Old Securities
will fail to surrender their certificates within one year.
Letters of Transmittal. Signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution (as defined below), unless the Old
Securities tendered pursuant thereto are tendered for the account of an Eligible
Institution or such signature guarantee if not otherwise required by applicable
law. If signatures on a Letter of Transmittal are required to be guaranteed,
such guarantees must be by a member firm of a registered national securities
exchange in the United States, a member of the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or a correspondent in the United States (each of which is an "Eligible
Institution"). If Old Securities are registered in the name of a person other
than the person signing the Letter of Transmittal, in order to be validly
tendered, the Old Securities must be endorsed or accompanied by properly
completed power of authority, with signature guaranteed by an Eligible
Institution.
Holders of Old Securities who are not holders of record should:
(i) obtain a properly completed Letter of Transmittal (or
facsimile thereof) from the record holder,
(ii) obtain and include with the Letter of Transmittal a
properly competed stock or bond power, as the case
may be, from the record holder, or
(iii) effect a record transfer of their Old Securities
prior to delivery of the Letter of Transmittal.
If a holder desires to tender Old Securities pursuant to the Letter of
Transmittal but is unable to locate the Tendered Certificates, such holder
should write to or telephone the Exchange Agent about procedures for obtaining
replacement certificates for Old Securities or arranging for indemnification.
ALL QUESTIONS AS TO THE VALIDITY, FORM, ELIGIBILITY (INCLUDING TIME OF
RECEIPT), AND ACCEPTANCE OF BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED
CERTIFICATES WILL BE RESOLVED BY THE DEBTOR, WHOSE DETERMINATION WILL BE FINAL
AND BINDING, SUBJECT ONLY TO REVIEW BY THE COURT UPON APPLICATION WITH DUE
NOTICE TO ANY AFFECTED PARTIES IN INTEREST. THE DEBTOR RESERVES THE RIGHT TO
REJECT ANY AND ALL BALLOTS, LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES NOT
IN PROPER FORM, OR LETTERS OF TRANSMITTAL AND TENDERED CERTIFICATES, THE DEBTORS
ACCEPTANCE OF WHICH WOULD, IN THE OPINION OF THE DEBTOR OR ITS COUNSEL, BE
UNLAWFUL.
6.06 ACCRUAL OF INTEREST. Pursuant to the terms of the New Senior
Secured Note Indenture and the New Junior Subordinated Note Indenture, interest
on the New Senior Secured Notes and the New Junior Subordinated Notes shall
begin to accrue at the respective rates set forth in the New Senior Secured
Notes and the New Junior Subordinated Notes on the ninety-first day following
the Petition Date and shall be payable as set forth therein, respectively.
6.07 UNCLAIMED DISTRIBUTIONS. If any holder of a Claim or Interest
entitled to a distribution directly from the Exchange Agent under the Plan
cannot be located on the Effective Date, such distributions shall be set aside
and maintained by the Exchange Agent. If such person is located within two years
of the Effective Date, such distributions shall be distributed to such person.
If such person cannot be located within two years of the Effective Date, any
such securities shall become the property of and shall be released to the
Reorganized Debtor; provided, however, that nothing contained in this Plan shall
require the Reorganized Debtor to attempt to locate such person.
6.08 TAX PROVISIONS. Pursuant to section 1146(c) of the Bankruptcy
Code, the issuance, transfer or other exchange of a security, or the making or
delivery of an instrument of transfer under the Plan shall not be taxed under
any state or local law imposing a stamp tax, transfer tax, or similar tax or
fee.
6.09 SETOFFS. Except with respect to Senior Debt Claims, the Debtor
may, but shall not be required to, setoff against any Claim (for purposes of
determining the allowed amount of such Claim on which distribution shall be
made), any claims of any nature whatsoever that the Debtor may have against the
claimant, but neither the failure to do so nor the allowance of any Claim
hereunder shall constitute a waiver or release by the Debtor of any such claim
the Debtor may have against such claimant.
ARTICLE VII
PROVISIONS FOR TREATMENT OF DISPUTED, CONTINGENT AND
UNLIQUIDATED CLAIMS AND ADMINISTRATIVE EXPENSES
7.01 CHARACTERIZATION OF DISPUTED CLAIMS. Except for Class 7B Claims
for which Requests for Allowance must be filed on or before the Class 7B Bar
Date and which will be allowed or disallowed pursuant to the procedures set
forth in Section 8.15 and in the Class 7B Liquidating Trust Agreement, pursuant
to subsection 1111(a) of the Bankruptcy Code, a proof of a Claim is deemed filed
under section 501 of the Bankruptcy Code if that Claim is included in the
schedules filed under section 1106(a)(2) of the Bankruptcy Code, except if the
Claim is scheduled as disputed, contingent, or unliquidated. Such a disputed,
contingent, or unliquidated claim must be asserted by its holder, or an
indenture trustee representing such holder, by the timely filing of a proof of
claim. If a proof of claim is not filed in a timely manner, the Claim may be
deemed to be disallowed.
7.02 RESOLUTION OF CONTESTED CLAIMS AND INTERESTS. The Debtor shall
have the right to object to and contest the allowance of any Claim or Interest
Filed or deemed Filed with the Court, whether or not such Claim was scheduled as
disputed, contingent or unliquidated. The Senior Debt Claims shall be deemed
allowed.
ARTICLE VIII
IMPLEMENTATION OF THE PLAN
8.01 CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE
REORGANIZED DEBTOR. The Debtor shall, as the Reorganized Debtor, continue to
exist after the Effective Date as a separate corporate entity, with all powers
of a corporation under the laws of the State of Delaware and without prejudice
to any right to alter or terminate such existence (whether by merger or
otherwise) under such applicable state law. Except as otherwise expressly
provided in the Plan on the Confirmation Date, the Reorganized Debtor shall be
vested with all of the property of the Estate free and clear of all claims,
liens, encumbrances, charges and other interests of creditors and equity
security holders, and may operate its business free of any restrictions imposed
by the Bankruptcy Code or by the Court, including, without limitation, any
contracts or leases entered into or assumed by the Debtors after the Petition
Date; provided, however, that the Reorganized Debtor shall continue as a debtor
in possession under the Bankruptcy Code until the Effective Date, and
thereafter, subject to the terms of this Plan, the Reorganized Debtor may
operate its business free of any restriction imposed by the Bankruptcy Code or
the Court.
8.02 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. On the
Effective Date, the Reorganized Debtor shall file its Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware in accordance with Section 103 of the Delaware General Corporation Law.
The Amended and Restated Certificate of Incorporation will, among other things,
provide (to the extent necessary to effectuate the terms of the Plan) for (i)
the prohibition of the issuance of non-voting equity securities, and (ii) the
authorization of 25,000,000 shares of the New Common Stock, and which
encompasses the shares to be issued upon exercise of the New Warrants; the
shares to be issued upon the exercise of stock options granted for the
establishment of a stock option plan for management of the Reorganized Debtors.
Confirmation of the Plan shall constitute an election by the Debtor not to be
governed by Section 203 of the Delaware General Corporation Law.
8.03 AMENDED AND RESTATED BY-LAWS. The Reorganized Debtor shall adopt
and effect the Amended and Restated By-laws in accordance with Section 109 of
the Delaware General Corporation Law.
8.04 NEW SECURITIES. On the Effective Date, the Reorganized Debtor (i)
shall issue, in accordance with the provisions of Article V, the New Senior
Secured Notes, the New Junior Subordinated Notes, the New Common Stock and the
New Warrants, and (ii) shall execute and deliver the New Collateral Documents,
the New Indentures, and the New Warrant Agreement. In addition, the Nondebtor
Subsidiaries will issue the Subsidiaries Guaranty Agreement and the Subsidiaries
Security Agreement.
8.05 SETTLEMENT AND COMPROMISE. On the Effective Date, in exchange for
the D&O Company Release:
(i) the Debtor shall create the Indemnification
Settlement Fund, to be established and administered
in accordance with the provisions of the Confirmation
Order;
(ii) the Debtor shall create the Outside Directors
Reserve, to be established as a segregated escrow
account in accordance with the provisions of the
Confirmation Order;
(iii) the Debtor shall assume the indemnification
obligations set forth in Section 12.03, subject to
the limits stated therein; and
(iv) the Debtor shall give the release set forth in
Section 11.03.
The entry of the Confirmation Order shall constitute the Court's
finding that such compromise or settlement is in the best interest of the
Debtor, and is fair, equitable and reasonable and that it is made in good faith.
8.06 CANCELLATION OF SECURITIES AND AGREEMENTS. Except as expressly
provided in the Plan or in the Confirmation Order, on the Effective Date, the
Debtor's commercial paper, short-term notes, senior notes, the Gulfco notes,
Subordinated Notes, Old Common Stock, options, shareholder's rights plans and
all the documentation relating thereto shall be cancelled and all obligations of
the Debtor under or in respect of any of the foregoing shall be terminated.
8.07 MANAGEMENT OF THE REORGANIZED DEBTOR. Upon the Effective Date, the
operation of the Reorganized Debtor shall become the general responsibility of
the board of directors who shall, thereafter, have the responsibility for the
management, control and operation of the Reorganized Debtor. The board of
directors of the Reorganized Debtor shall be comprised of eleven (11) persons,
seven of whom will be designated by the Creditors' Committee, one of whom shall
be the new CEO, two of whom shall be nominated by the new CEO and shall be
reasonably acceptable to the Creditors' Committee, and one of whom will be
nominated by the Equity Holders' Committee and shall be reasonably acceptable to
the Creditors' Committee and the new CEO. The identity of each of the nominees
shall be announced prior to hearing on the Confirmation Date of the Plan. Such
persons shall be deemed elected pursuant to the Confirmation Order, and such
elections shall be effective on and after the Effective Date, without any
requirement of further action by stockholders of the Reorganized Debtor. The
initial chairman of the board of directors of the Reorganized Debtor shall be
chosen by the board of directors of the Reorganized Debtor after the Effective
Date. Upon the Effective Date, the Employment Agreement shall be executed and
delivered by the Reorganized Debtor and the new CEO and shall then become
effective.
8.08 OFFICERS. On the Effective Date, the existing officers of the
Reorganized Debtor shall be retained and shall remain as officers and shall
continue to serve until such time as they may resign, be removed or replaced by
the board of directors of the Reorganized Debtor.
8.09 SATURDAY, SUNDAY OR LEGAL HOLIDAY. If any payment or act under the
Plan is required to be made or performed on a date that is not a Business Day,
then the making of such payment or the performance of such act may be completed
on the next succeeding Business Day, but shall be deemed to have been completed
as of the required date.
8.10 OTHER DOCUMENTS AND ACTIONS. The Debtor and the Reorganized Debtor
may execute such documents and take such other action as is necessary to
effectuate the transactions provided for in the Plan.
8.11 CORPORATE ACTIONS. The issuance of the New Common Stock and the
New Warrants, the adoption of the Amended and Restated Certificate of
Incorporation and By-laws by the Reorganized Debtor, the selection of certain
directors and officers of the Reorganized Debtor, the execution and delivery of
any documents to be executed and delivered under the Plan (including the
Employment Agreement), and other matters under the Plan involving the corporate
structure of the Debtor or corporate action by the Debtor shall be deemed to
have occurred and be effective on and after the Effective Date without any
requirement of further action by stockholders or directors of the Debtor
pursuant to and in accordance with Section 303 of the Delaware General
Corporation Law. Without limiting the foregoing, upon entry of the Confirmation
Order by the Clerk of the Court, the Filing by the Debtor or the Reorganized
Debtor of the Amended and Restated Certificate of Incorporation and By-laws
shall be authorized and approved in all respects. On the Effective Date, or as
soon thereafter as is practicable, pursuant to applicable state law, the
Reorganized Debtor shall file with the applicable state governmental agencies or
offices the respective Certificates of Incorporation and By-laws.
8.12 REGISTRATION RIGHTS. The Reorganized Debtor shall use its
reasonable best efforts to register the New Senior Secured Notes, New Junior
Subordinated Notes and the New Common Stock pursuant to the Registration Rights
Agreement.
8.13 LISTING OF THE NEW COMMON STOCK AND WARRANTS. The Reorganized
Debtor shall use its reasonable best efforts to list each series of the New
Warrants and the New Common Stock on the Nasdaq National Market.
8.14 FRACTIONAL SHARES - DISTRIBUTION OF NEW COMMON STOCK AND NEW
WARRANTS. No fractional shares of New Common Stock or New Warrants shall be
distributed under the Plan. Rather, Interests that would otherwise receive a
fractional share or Warrant shall be treated as follows:
(a) On the date of final distribution of New Common Stock to
the holders of Class 7A Equity Interests, the aggregate of all fractional shares
of New Common Stock that would otherwise be distributed to such persons shall
instead be placed in a separate pool (hereinafter, the "Fractional New Common
Stock Pool"). All holders of Allowed Equity Interests entitled to a fractional
interest in New Common Stock shall be placed on a list (the "New Common Stock
Distribution List") in descending order according to the size of the fractional
interest in the New Common Stock to which each such holder is entitled. In the
event two or more holders of Allowed Equity Interests are entitled to the same
fractional interest (rounded to six decimal places) in New Common Stock, their
relative ranking on the New Common Stock Distribution List shall be determined
by lot. Based upon the New Common Stock Distribution List, a whole share of New
Common Stock shall be distributed to holders entitled to the largest fractions
of New Common Stock until all of the whole shares of New Common Stock in the
Fractional New Common Stock Pool shall have been distributed. The fractional New
Common Stock shall be carried to six decimal places, with the number five (5)
being rounded down.
(b) On the date of the final distribution of New Warrants to
the holders of Class 7A Equity Interests, the aggregate of all fractional New
Warrants that would otherwise be distributed to such persons shall instead be
placed in a separate pool (hereinafter, the "Fractional New Warrants Pool"). All
holders of Allowed Interests entitled to a fractional interest in New Common
Stock shall be placed on a list (the "New Warrants Distribution List") in
descending order according to the size of the fractional interest in the New
Warrants to which each such holder is entitled. In the event two or more holders
of Allowed Equity Interests are entitled to the same fractional interest
(rounded to six decimal places) in New Warrants, their relative ranking on the
New Warrants Distribution List shall be determined by lot. Based upon the New
Warrants Distribution List, a whole New Warrant shall be distributed to holders
entitled to the largest fractions of New Warrants until all of the whole New
Warrants in the Fractional New Warrants Pool shall have been distributed. The
fractional New Warrants shall be carried to six decimal places, with the number
five (5) being rounded down.
8.15 ADMINISTRATION OF THE CLASS 7B LIQUIDATING TRUST. On the Effective
Date: (i) the Debtor shall duly execute two originals of the Class 7B
Liquidating Trust Agreement, a copy of which is attached to the Disclosure
Statement as Exhibit U, (ii) deliver one signed original thereof to the Trustees
identified below, thereby establishing a trust which shall be known as the Class
7B Liquidating Trust, and (iii) file one fully executed original of the Class 7B
Liquidating Trust Agreement with the clerk of the Court.
The provisions of the Class 7B Liquidating Trust Agreement are
incorporated into the Plan, as if the same were fully set forth herein. The
operation of the Class 7B Liquidating Trust shall be governed by the provisions
of the Class 7B Liquidating Trust Agreement and this Section 8.15 of the Plan.
Reference should be made to the Class 7B Liquidating Trust Agreement for a
complete statement of the terms and conditions governing the operation of the
Class 7B Liquidating Trust and the administration of the assets of the Class 7B
Liquidating Trust since not all of such terms and conditions are set forth in
this Section 8.15. It is the intent of the Plan that the provisions of the Class
7B Liquidating Trust Agreement shall be consistent with the provisions of this
Section 8.15 of the Plan. To the extent, if any, that the provisions of the
Class 7B Liquidating Trust Agreement and the provisions of this Section 8.15 of
the Plan may be inconsistent, the provisions of this Section 8.15 of the Plan
shall govern.
The Trustees. Initially the current members of the Securities
Claimants' Committee shall serve as Trustees. The Trustees shall serve for the
duration of the Class 7B Liquidating Trust, subject to earlier death,
resignation, mandatory disqualification, or removal. If at any time subsequent
to the Effective Date there are less than three (3) Trustees, within ten (10)
days thereof the remaining Trustees shall elect a successor Trustee or Trustees,
subject to the Court's approval. For purposes of the Class 7B Liquidating Trust
Agreement, "mandatory disqualification" of a Trustee will occur in the event
that the Class 7B Claim asserted by such Trustee is disallowed in its entirety
or is allocated a distribution in an amount less than Fifteen Thousand Dollars
($15,000), whether by virtue of a consensual allowance/allocation approved by
the Court or a decision by the Arbitrator.
Initial Trust Assets. On the Effective Date, the Reorganized Debtor
shall transfer and assign to the Class 7B Liquidating Trust, to be held in
trust, for the holders of Allowed Class 7B Claims all of the Debtor's, the
Reorganized Debtor's, and the Estate's rights, title, and interest in and to all
of the following (collectively, the "INITIAL TRUST ASSETS"): (a) the sum of Five
Million Dollars ($5,000,000) in cash which sum shall be transferred pursuant to
the wire transfer instructions provided by the Securities Claimant's Committee;
and (b) the Company KPMG Claims, as that term is defined above in Article I.A.
of the Plan, together with complete and exclusive control of the prosecution
and/or settlement of the Company KPMG Claims and (c) $250,000 in cash for fees
and costs to be incurred in connection with the administration of the Class 7B
Liquidating Trust. The Company KPMG Claims and attendant prosecution rights
shall be deemed to be assets of the Class 7B Liquidating Trust as of the
Effective Date. Upon delivery of the distributions to the Class 7B Liquidating
Trust required to be made by the Debtor pursuant to Section 5.05 and this
paragraph, the Debtor and the Reorganized Debtor shall have no obligation or
liability to the Trust or any of the Beneficiaries of the Trust, other than to
cause the claims administrator to forward Requests for Allowance to the Class 7B
Claims Administrator and to cooperate with the Trustees, as set forth in Section
2.04 of the Class 7B Liquidating Trust, in the prosecution of the Company KPMG
Claims.
Subsequent Trust Assets. In addition to the Initial Trust Assets, other
assets may be transferred to the Class 7B Liquidating Trust. These assets may
and shall include any proceeds received by the Class 7B Liquidating Trust as a
result of the Company KPMG Claims as well as any proceeds or claims received by
the Class 7B Liquidating Trust pursuant to the settlement agreement which is
attached as Exhibit T to the Disclosure Statement ("Class Settlement Agreement")
or otherwise pursuant to the Plan or agreements implementing the Plan. All
assets transferred to the Class 7B Liquidating Trust which are not included
within the definition of the Initial Trust Assets are referred to herein as the
"Subsequent Trust Assets." The Initial Trust Assets and the Subsequent Trust
Assets are collectively referred to herein as the "Trust Assets."
Powers of Trustees. Pursuant to the Class 7B Liquidating Trust
Agreement, the Trustees will have the power and authority to do, among other
actions, the following:
A. Receive and hold the Trust Assets and invest the same, from time to
time, in accordance with the parameters set forth in the Class 7B Liquidating
Trust Agreement;
B. Take such actions on behalf of the Class 7B Liquidating Trust as may
be required in connection with the Class Settlement Agreement;
C. Devise, implement, supervise, modify, and administer procedures for
the allowance of Class 7B Claims and the allocation of the assets of the Class
7B Liquidating Trust among the holders of Allowed Class 7B Claims, subject to
the limitations imposed by Class 7B Liquidating Trust Agreement or the Plan;
D. Utilize and distribute the Trust Assets to satisfy Allowed Class 7B
Claims in accordance with procedures set forth in the Class 7B Liquidating Trust
Agreement and the Plan;
E. Hire such employees, administrative personnel or claims
administrators and engage such legal, financial, accounting, investment, and
other advisors, custodians of assets, including without limitation the
Arbitrator and a Mediator, if any, as those terms are defined in the Class 7B
Liquidating Trust Agreement, and agents as the business of the Class 7B
Liquidating Trust requires, and to delegate to such Persons such powers,
authority, and discretion as the Trustees in their discretion deem advisable or
necessary to carry out the terms of the Class 7B Liquidating Trust (this
provision E. is not intended to, and shall not, include the hiring of any legal,
financial, accounting, or any other type of advisors or experts, by any Class 7B
claimant or group of Class 7B claimants for purposes of proving a Claim,
defending objections thereto, or asserting objections thereto);
F. Compensate, utilizing the Trust Assets, such employees, legal,
financial, accounting, investment, and other advisors, and agents, described in
E. above, provided, however, that accountants, lawyers, and investment advisors
engaged by the Trustees on behalf of the Class 7B Liquidating Trust to represent
interests of the Class 7B Liquidating Trust shall be compensated only with the
approval of the Court after such notice and hearing as the Court may require
(this provision F is not intended to, and shall not, include the utilization of
any Trust Assets to compensate any legal, financial, accounting, or any other
type of advisors or experts, retained by any Class 7B claimant, any group of
Class 7B claimants, any individual members of the Securities Claimants'
Committee, or individual Trustees for the purpose(s) of representing their own
respective interests);
G. Make such decisions as they may deem appropriate, and in accordance
with the voting procedures set forth in Section 4.03 of the Class 7B Liquidating
Trust Agreement, in connection with the prosecution, non-prosecution, or
resolution of the Company KPMG Claims or claims constituting Trust Assets; and
H. Apply to the Court for instructions to the Trustees as they may deem
proper or necessary in connection with the administration of the Class 7B
Liquidating Trust or the performance of their duties.
Except as otherwise provided by applicable law: (i) no Trustee shall be
liable to the Class 7B Liquidating Trust or to any Person holding a Class 7B
Claim, except for his, her, or its own willful misconduct; and (ii) except to
the extent any act or failure to act on the part of a Trustee shall constitute
willful misconduct; (a) no Trustee shall be liable for any act or omission of
any Co-Trustee or any officer, agent, or employee of the Class 7B Liquidating
Trust; (b) the Trustees shall be entitled to rely upon the advice of counsel or
other advisors to the Class 7B Liquidating Trust or the Trustees, reports
prepared by the Class 7B Claims Administrator, and information provided by any
other Person employed by the Class 7B Liquidating Trust; and (c) all actions
taken and determinations made by the Trustees, unless otherwise expressly
provided in the Class 7B Liquidating Agreement, the Plan, or an order of the
Court, shall be final and binding upon all Persons having any interest in the
Class 7B Liquidating Trust.
Each Trustee shall be reimbursed by the Class 7B Liquidating Trust for
his, her, or its reasonable expenses incurred in the performance of his, her, or
its duties ad Trustee under the Class 7B Liquidating Trust Agreement, provided
that any request for such reimbursement is approved by the Court after such
notice and hearing as the Court may require, and provided, further, that any
legal fees and costs incurred by an individual Trustee, or any other Class 7B
claimant, on its own account and not on behalf of the Class 7B Liquidating Trust
shall not be paid from Trust Assets but shall be paid from the allocation such
Trustee or Class 7B claimant receives pursuant to the allowance/allocation
procedures set forth in the Class 7B Liquidating Trust Agreement.
Company KPMG Claims-Other Claims Constituting Subsequent Trust Assets.
The Debtor will use its best efforts to obtain a tolling of the statute of
limitations for the Company KPMG Claims until sixty (60) days after the
allowance and allocation process set forth below and in the Class 7B Liquidating
Trust Agreement has become final. Thereafter, control and all decisions
regarding the Company KPMG Claims or other claims constituting Subsequent Trust
Assets, including without limitation the filing (or non-filing), prosecution,
and settlement thereof, shall be made by the vote of the representative(s) of
the holders of Allowed Class 7B Claims holding at least a majority in dollar
amount of all Allowed Class 7B Claims (singly a "REPRESENTATIVE" or collectively
"REPRESENTATIVES") which Representative(s) may be, but is/are not required to
be, a Trustee or Trustees of the Class 7B Liquidating Trust, provided, however,
that any decision (i) to release, or (ii) to settle the Company KPMG Claims or
claim constituting a Subsequent Trust Asset, in whole or in part, or (iii) to
dismiss such claims, if suit has been filed, shall be submitted to the Court for
approval after notice and hearing as the Court may require, and provided,
further, that all proceeds recovered, if any, as a result of the resolution of
the Company KPMG Claims or claims constituting Subsequent Trust Assets shall
remain Trust Assets and be distributed in accordance with Section 6.04 of the
Class 7B Liquidating Trust Agreement, all of which remains subject to the
judgment reduction provisions contained within the Class Settlement Agreement.
The Representative(s) shall provide status reports to the Trustees no less
frequently than semi-annually regarding actions taken and decisions made with
respect to the Company KPMG Claims and claims constituting Subsequent Trust
Assets.
Procedures for Claims' Allowance and Allocation.
Request for Allowance/Allocation. In connection with confirmation of
the Plan, the Debtor shall seek approval of the Court for the form of notice to
be sent to parties who may hold Claims in Class 7B ("Notice"), as well as the
form, the timing, and the place for publication of such notice, and shall cause
such notice to be sent and published as ordered by the Court. Prior to seeking
such approval from the Court, the Debtor shall obtain the review and approval
from the Securities Claimants' Committee of the forms of notice and the place
for publication hereof. The forms of notice, among other things, shall advise
Class 7B claimants that to be eligible to participate in the consensual
allowance process described below or obtain any allocation or distribution from
the Class 7B Liquidating Trust, they, or their representatives (if they are a
member of a class described in a class action pending against the Debtor on the
Petition Date or are individual holders of Class 7B claims whose claims arise
from their purchase of Old Common Stock before January 29, 1997 and who continue
to hold such Old Common Stock as of the Distribution Record Date (the "Old and
Cold Holders")) must submit a Request for Allowance/Allocation prior to the date
set forth below and in accordance with procedures set forth below. In addition,
the Notice shall advise Class 7B Claimants that if they are members of a group
included within the Class set forth in the Notice: (1) there is no need to take
any affirmative steps or submit any information at this time to participate in
the partial settlement, (2) their rights are already being represented in the
allowance process by the designated counsel for the group in which the class
member's claim falls, (3) a representative of that group will be permitted to
file a Request for Allowance on behalf of that entire group, (4) counsel for the
designated class representative of each group within the class receiving an
allocation from the settlement fund will, subject to approval of the court in
which the claims asserted by that group were initiated, issue a supplemental
Notice to members of the group which will provide information regarding the
outcome of the allocation procedure, the estimate of the average per share
recovery that will be achieved by members of the group as a result of the
settlement, and (5) the plan of allocation approved by the court pursuant in
which the proceeds of the settlement will be ultimately distributed to members
of the group.
Date before which Request for Allowance/Allocation must be Filed. In
addition to the provisions which the Court may require, the notice shall notify
such parties that in order to be eligible for any allocation or distribution
from the Class 7B Liquidating Trust, (i) they (or their representatives if they
are either a member of a class described in a class action pending against the
Debtor on the Petition Date or an Old and Cold Holder) must file a Request for
Allowance/Allocation in the form approved by the Court (a "REQUEST FOR
ALLOWANCE") with the Claims Center on or before April 9, 1999. For purposes of
the filing of a Request for Allowance, a representative of a class may include
the class representative, or if the class has not been certified or no such
representative has been appointed, lead counsel for plaintiffs in such class
action. For purposes of the filing of a Request for Allowance except to the
extent that the Court determines at the time of the confirmation of the Plan
that the interests of the Old and Cold Holders are represented in pending class
actions, a representative of the Old and Cold Holders shall be approved by the
Court at the time of confirmation of the Plan and may file a Request for
Allowance on behalf of the class of Old and Cold Holders.
Evidence to Accompany Request for Allowance. Any Request for Allowance
filed on behalf of an individual holder of a Class 7B Claim shall be accompanied
by true and correct copies of confirmations, brokerage account statements, or
other sufficient evidence of: (i) the date(s) of purchase(s), (ii) the purchase
price(s), (iii) the date(s) of sale(s), (iv) the sale price(s), and (v) the
number of shares of stock purchased or sold on such date(s) and at such
price(s). Any Request for Allowance filed on behalf of a class of holders of
Class 7B Claims or by the representative of the Old and Cold Holders shall be
accompanied by evidence sufficient to allow the Arbitrator described below to
determine the basis for an award with respect to allowance and/or allocation of
the Class 7B Claims contained in such class.
No Priority; No Automatic Allowance. The filing of a Request for
Allowance will not automatically result in the allowance of the Class 7B Claim
described therein. No Allowed Class 7B Claim shall be afforded any priority over
any other Allowed Class 7B claim in distribution. All Claims for which a Request
for Allowance is filed shall be subject to objection and the claims allowance
and allocation process in accordance with the procedures established by the
Trustees.
Forwarding Requests for Allowance. As soon as practicable after April
9, 1999, the Reorganized Debtor shall cause the Claims Center to forward copies
of all Requests for Allowance filed on behalf of claimants asserting a right to
be included in Class 7B to the Trustees, c/o the Class 7B claims administrator
selected by the Securities Claimants' Committee (the "CLASS 7B CLAIMS
ADMINISTRATOR"). Prior to or on the Confirmation Date, the Securities Claimants'
Committee will select the Class 7B Claims Administrator and provide notice of
the selection to the Debtor, the United States Trustee, counsel for the
Creditors' Committee, and counsel for the Equity Committee.
Selection of Arbitrator. Prior to or on the Confirmation Date, the
Securities Claimants' Committee (i) will select an arbitrator (the "ARBITRATOR")
to serve in connection with allowance of Class 7B Claims and the allocation of
the Trust Assets among the various classes of claimants represented in class
actions which were pending against the Debtor on the Petition Date and other
holders of Allowed Claims in Class 7B, and (ii) will provide notice of the
selection to the Debtor, the United States trustee, counsel for the Unsecured
Creditors' Committee, and counsel for the Equity Committee. At confirmation of
the Plan, the selection of the Arbitrator will be presented to the Court for
approval. The reasonable expenses of the Arbitrator as well as such fees as may
be agreed upon between the Arbitrator and the Trustees in writing shall be paid
first from the funds provided by this Section 8.15 of the Plan and, if such
funds have been exhausted, then from the Trust Assets. The arrangements relating
to the compensation and reimbursement of the Arbitrator will be presented to the
Court for approval at the hearing on confirmation of the Plan.
Allowance/Allocation/Arbitration Procedures. Within fifteen (15) days
of the Confirmation Date, the Trustees shall establish: (i) a procedure for
resolving, on a consensual basis, the allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims, and
(ii) a process for the arbitration of allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims in the
event that there is no resolution on a consensual basis. If the Trustees
determine that the services of a mediator (a "MEDIATOR") would be of assistance
in the efforts to attain a consensual allowance ad allocation, they may engage a
Mediator for that purpose.
Consensual Allowance and Allocation. If, as a result of the efforts of
the Trustees, a Mediator if any, and any claimants who indicated on their
Request for Allowance a desire to provide input regarding a consensual
allowance, a proposal with respect to a consensual allowance of Class 7B Claims
and allocation of Trust Assets on account of such Claims is accepted by a
unanimous vote of the Trustee then in office, in accordance with procedures
adopted by the Trustees, then the agreement shall be submitted by the Trustees
to the Court for approval, upon such notice as the Court shall order.
No Consensus; Arbitration. If, on or before May 14, 1999, or such later
date as the Trustees shall establish, no motion is filed with the Court seeking
approval of a consensual allowance of Class 7B Claims and allocation of Trust
Assets on account of such Claims, then an arbitration of any unresolved issues
relating to the allowance of Claims in Class 7B and the allocation of Trust
Assets shall be conducted by the Arbitrator as soon as practicable, in
accordance with such rules as the Arbitrator shall establish to the extent that
the Trustees have not done so. The arbitration shall be completed on or before
July 31, 1999.
Binding Arbitration. The arbitration shall be binding in nature, and
the only grounds of any application to vacate or modify any decision or award of
the Arbitrator shall be that the Arbitrator was other than a neutral party, that
the award was obtained by fraud, or that the award constituted an abuse of
discretion or violated public policy.
Post-Award Proceedings. Any application to vacate or modify an award of
the Arbitrator shall be only to the Court, and any notice of appeal from such an
award must be filed within fourteen (14) days after the Arbitrator shall have
provided a copy of his award to the Trustees and any party to the arbitration,
via facsimile to each of the Trustees and via overnight delivery service in a
method requiring a receipt therefor or via certified mail return receipt
requested to any other party to the arbitration. In the event such an
application is filed, with respect thereto the Arbitrator may, utilizing Trust
Assets, engage counsel to defend the award in connection with any such
application.
Expenses of Post-Award Proceedings. A party filing an application to
vacate or modify the award of the Arbitrator shall be responsible for his, her,
or its own costs, expenses and attorneys' fees. In addition, if an application
is unsuccessful in that the party making the application does not obtain a
modification or the vacation of the award of the Arbitrator, that party shall
bear all expenses of the application, including the reasonable fees and expenses
incurred in connection therewith by the Arbitrator.
Distribution. The Trustees shall distribute the Trust Assets then held
in the Class 7B Liquidating Trust, net of costs and expenses properly chargeable
to the Trust Assets under the Plan or the Class 7B Liquidating Trust Agreement,
as soon as practicable after either the award of the Arbitrator or order of the
Court approving a consensual allocation of Trust Assets has become final and not
subject to modification, reversal or appeal, and shall make such distribution in
accordance with such arbitration award or such order of the Court. If,
subsequent to such distribution, the Class 7B Liquidating Trust shall acquire
additional Trust Assets, then as soon as practicable after receipt by the Class
7B Liquidating Trust, the Trustees shall distribute those additional Trust
Assets, net of costs and expenses properly chargeable to the Trust Assets under
the Plan or the Class 7B Liquidating Trust Agreement (including net of
attorneys' fees and costs incurred in connection with such additional assets)
according to the same allocation determined previously by consensus or
arbitration, as the case may be. With respect to any distribution of Trust
Assets to Allowed Class 7B Claims which are included within a class action
against the Debtor which was pending on the Petition Date, the Trustees shall
make such distribution by delivering it to an escrow account designated by lead
counsel for that class in such class action and such distribution shall remain
in that escrow account until such time as (i) such lead counsel has been able to
apply to the court in which the respective class action is pending as to the
matter of a method of final distribution and an award of attorneys' fees and
costs, and (ii) any order on such application has become final.
Termination. Following (i) a final determination of the Company KPMG
Claims and other claims constituting Trust Assets, whether by virtue of
prosecution or settlement thereof, or (ii) a decision by the Trustees not to
take any action with respect to the Company KPMG Claims and other claims
constituting Trust Assets, at such time as all Trust Assets, including any and
all sums resulting from prosecution or settlement of the Company KPMG Claims, or
other claims constituting Trust Assets, have been fully and finally distributed,
the Trustees shall apply to the Court for an order of the Court terminating the
Class 7B Liquidating Trust, upon such notice as the Court shall order. Upon the
Court's order terminating the Class 7B Liquidating Trust becoming final, the
Class 7B Liquidating Trust shall be terminated, and the Trustees shall be
discharged of all responsibilities with respect to the Trust.
ARTICLE IX
ACCEPTANCE OR REJECTION OF THE PLAN
9.01 PRESUMED ACCEPTANCE OF PLAN. Classes 1, 2 and 3 are unimpaired
under the Plan, and, therefore, conclusively are presumed to have accepted the
Plan in accordance with Section 1126(f) of the Bankruptcy Code.
9.02 DEEMED NON-ACCEPTANCE OF PLAN. Class 8 is deemed to have rejected
the Plan and will not be solicited for acceptances or rejections of the Plan.
9.03 VOTING CLASSES. Each holder of an Allowed Claim or an Allowed
Interest in Classes 4, 5, 6, 7A and 7B shall be entitled to vote to accept or
reject the Plan.
9.04 ACCEPTANCE BY IMPAIRED CLASSES. An Impaired Class of Claims shall
have accepted the Plan if (i) the holders (other than those designated under
section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the
Allowed Claims actually voting in such Class have voted to accept the Plan and
(ii) the holders (other than those designated under section 1126(e) of the
Bankruptcy Code) of more than one-half in number of the Allowed Claims actually
voting in such Class have voted to accept the Plan. An Impaired Class of
Interests shall have accepted the Plan if the holders (other than those
designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds
in amount of the Allowed Interests actually voting in such Class have voted to
accept the Plan.
9.05 NON-CONSENSUAL CONFIRMATION. The Debtor will seek confirmation of
the Plan under section 1129(b) of the Bankruptcy Code in view of the deemed
non-acceptance by Class 8. In the event that any other Impaired Class of Claims
or Interests does not accept the Plan in accordance with section 1126 of the
Bankruptcy Code, the Debtor hereby requests that the Court confirm the Plan in
accordance with section 1129(b) of the Bankruptcy Code. Subject to Section 1127
of the Bankruptcy Code, the Debtor reserves the right to modify the Plan to the
extent that confirmation pursuant to section 1129(b) of the Bankruptcy Code
requires modification.
ARTICLE X
CONDITIONS PRECEDENT
10.01 CONDITIONS TO CONFIRMATION. It is a condition to confirmation of
the Plan that:
(i) the Confirmation Order include provisions:
(a) authorizing the Reorganized Debtor to adopt
and file the Amended and Restated Certificate
of Incorporation and By-laws;
(b) authorizing the issuance of the New Common
Stock and New Warrants;
(c) approving the compromise and settlement as
set forth in Section 8.05 and authorizing all
transactions contemplated therein;
(d) authorizing the issuance of the New Senior
Secured Notes and the New Junior Subordinated
Notes;
(e) authorizing all of the other transactions
contemplated by the Plan in order to
effectuate the Plan;
(f) exempting the New Senior Secured Notes, the
New Junior Subordinated Notes, the New Common
Stock and the New Warrants from registration
under the Securities Act and state or local
laws, pursuant to Section 1145;
(g) making the provisions of the Confirmation
Order non-severable and mutually dependent;
(ii) the Debtor shall have filed (a) an objection to the
allowance of claims asserted by John N. Brincat and
the estate of James A. Doyle and (b) an adversary
proceeding which seeks to subordinate any Equity
Interests held by John N. Brincat and the estate of
James A. Doyle; and
(iii) in the event KPMG shall have filed any claim against
the Debtor prior to the Confirmation Date, the Debtor
shall file an objection to the allowance of such
Claims and such Claims shall have been disallowed by
Final Order.
10.02 CONDITIONS TO THE EFFECTIVE DATE. The Confirmation Order shall
contain the provisions set forth in Section 10.01 of the Plan (unless waived in
accordance with the provisions of Section 10.03) and the Confirmation Order
shall be in full force and effect and shall not have been reversed, stayed,
modified or amended. The Debtor shall provide written notice to the Creditors'
Committee, Securities Claimants' Committee and Equity Holders' Committee of the
occurrence of the Effective Date.
10.03 WAIVER OF CONDITIONS. The Debtor, with the consent of the
Creditors' Committee (and the consent of the Equity Holders' Committee if such
waiver relates to the conditions set forth in Article X(i)(a), (b), (f) or
(ii)(b)), may waive any condition set forth in this Article X at any time,
without notice, without leave of the Court, and without any formal action other
than proceeding to consummate the Plan.
ARTICLE XI
EFFECTS OF PLAN CONFIRMATION
11.01 DISCHARGE. Except as otherwise expressly provided in the Plan or
Confirmation Order, as of the Effective Date, the Debtor shall be discharged
forthwith from, and the Confirmation Order shall operate as an injunction
against, the commencement or continuation of an action, the employment of
process, or an act to collect, recover or offset, any Claim (including any
Securities Fraud Claim (or any claim for contribution or indemnity relating
thereto)) and any "debt" (as that term is defined in section 101(12) of the
Bankruptcy Code) and any Interest (or Claims or debt related thereto) from or
against the Debtor or the Reorganized Debtor, and the Debtor's and the
Reorganized Debtor's liability in respect thereof shall be extinguished
completely, whether reduced to judgment or not, liquidated or unliquidated,
contingent or noncontingent, asserted or unasserted, fixed or not, matured or
unmatured, disputed or undisputed, legal or equitable, known or unknown, or
arising from any agreement of the Debtor entered into or obligation of any kind
of the Debtor incurred before the Confirmation Date, or from any conduct of the
Debtor occurring prior to the Confirmation Date or that otherwise arose before
the Confirmation Date (including, without limitation, all interest, if any, on
any such debts, whether such interest accrued before or after the date of
commencement of the applicable Reorganization Case), and the Debtor and the
Reorganized Debtor shall be released and discharged from any liability of a kind
specified in section 502(g), 502(h) and 502(i) of the Bankruptcy Code, whether
or not a proof of claim is filed or deemed filed under section 501 of the
Bankruptcy Code, such Claim is allowed under section 502 of the Bankruptcy Code,
or the holder of such Claim has accepted the Plan.
11.02 RELEASE. On the Effective Date, in consideration for, or as part
of, the treatment accorded to the holders of Impaired Claims and Interests under
the Plan, each holder of such Claims or Interests against or in the Debtor shall
be deemed to have released the Debtor from any and all causes of action and
claims, in law or in equity, whether based on tort, fraud, contract or
otherwise, which arose prior to the date of the filing of the Petition Date.
11.03 RELEASE BY THE DEBTOR OF DIRECTORS, OFFICERS AND EMPLOYEES.
Except for the estate of James A. Doyle and John N. Brincat, as of the Effective
Date and subject to the settlement and compromise set forth in Section 8.05, the
Debtor shall be deemed to have waived and released its present and former
directors, officers and employees from any and all claims of the Debtor
(including claims which the Debtor or Debtor in Possession otherwise has legal
power to assert, compromise or settle in connection with its Reorganization
Case) against such present and former directors, officers and employees arising
on or prior to the Effective Date.
11.04 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided, all
injunctions or stays provided for in the Reorganization Case pursuant to Section
105 or 362 of the Bankruptcy Code or otherwise in effect on the Confirmation
Date shall remain in full force and effective until the Effective Date.
11.05 EXCULPATION. Except with respect to KPMG Peat Marwick, neither
the Debtor, the Reorganized Debtor, any of their respective officers, directors,
employees, advisors, agents, professionals or representatives, benefit plan
administrators or trustees, nor the members of the Steering Committee or the
parties to the Consent Agreement and their principals, advisors, professionals
and agents, nor the Creditors' Committee, Equity Holders' Committee, Securities
Claimants' Committee and their members, advisors, professionals and agents shall
have or incur any liability to any holder of a Claim or Interest for any act or
omission in connection with or arising out actions taken or omitted to be taken
in good faith in connection with the Debtor's restructuring, the Plan, the
Reorganization Case, including all prepetition activities leading to the
promulgation and confirmation of the Plan, and administration of the Plan or the
property to be distributed under the Plan; provided, however, such exculpation
shall not relate to post confirmation conduct deemed to be willful misconduct or
gross negligence. Upon the Confirmation Date, the Securities Claimants'
Committee shall dismiss or shall be deemed to have dismissed with prejudice
adversary proceeding No. 98-A-01580 against the non-director defendants therein.
11.06 REVESTING. Except as otherwise expressly provided in the Plan or
in the New Collateral Documents, on the Effective Date, the Debtor will be
vested with all of the property of its Estate free and clear of all Claims,
liens, encumbrances, charges and other interests of creditors and equity
security holders, and may operate its business free of any restrictions imposed
by the Bankruptcy Code or by the Court. The Debtor shall continue as debtor in
possession under the Bankruptcy Code until the Effective Date and, thereafter,
the Reorganized Debtor may operate its business free of any restrictions imposed
by the Bankruptcy Code or the Court except as specifically authorized by the
Plan.
11.07 RETENTION OF CAUSES OF ACTION/RESERVATION OF RIGHTS.
(a) Except as provided in Sections 11.03 or 11.05 and subsection (c)
below, nothing contained in the Plan or the Confirmation Order shall be deemed
to be a waiver or relinquishment of any rights or causes of action that the
Debtor or the Reorganized Debtor may have or which the Reorganized Debtor may
choose to assert on behalf of the Estate under any provision of the Bankruptcy
Code or any similar applicable non-bankruptcy law, including, without
limitation, (i) any and all Claims against any entity, including but not limited
to KPMG Peat Marwick, to the extent such entity asserts a crossclaim,
counterclaim and/or claim for setoff which seeks affirmative relief against the
Debtor, the Reorganized Debtor, their officers, directors or representatives;
(ii) the avoidance of any transfer by or obligation of the Debtor, or (iii) the
turnover of any property to the Estate, all of which are expressly reserved by
the Plan, or (iv) derivative actions currently pending on behalf of the Debtor
which shall be dismissed by the Reorganized Debtor immediately following the
Effective Date.
(b) Nothing contained in the Plan or the Confirmation Order shall be
deemed to be a waiver or relinquishment of any claim, cause of action, right or
setoff, or other legal or equitable defense which the Debtor had immediately
prior to the Petition Date, against or with respect to any claim left unaltered
or unimpaired by the Plan. The Reorganized Debtor shall have, retain, reserve
and be entitled to assert all such claims, causes of action, rights of setoff
and other legal or equitable defenses which it had immediately prior to the
Petition Date fully as if the Reorganization Case had not been commenced; and
all of the Reorganized Debtor's legal and equitable rights respecting any claim
left unaltered or unimpaired by the Plan may be asserted after the Confirmation
Date to the same extent as if the Reorganization Case had not been commenced.
(c) Except for the estate of James A. Doyle, John N. Brincat and KPMG
Peat Marwick, the Debtor waives and releases any rights or causes of action for
the recovery of preferential payments or fraudulent conveyances against any
party.
11.08 POST-CONSUMMATION EFFECT OF EVIDENCES OF CLAIMS OR INTERESTS.
Outstanding notes, stock certificates and other evidences of Claims against or
Interests in the Debtor in Classes 4, 5, 6, 7A, 7B and 8 shall, effective upon
the Effective Date, represent only the right to participate in the distributions
contemplated by the Plan, if any.
ARTICLE XII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
12.01 ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. On the
Effective Date, and to the extent permitted by applicable law, all executory
contracts and unexpired leases of the Debtor set forth on Exhibit 3 attached to
the Plan shall be assumed in accordance with the provisions of sections 365 and
1123 of the Bankruptcy Code and, in the case of contracts evidencing Corporate
Indemnities, subject to the provisions of Section 12.03, unless such executory
contracts or unexpired leases are rejected by the Debtor's motion prior to
confirmation or in connection with the confirmation hearing.
Contracts or leases entered into after the Petition Date will be
performed by the Reorganized Debtor in the ordinary course of business.
12.02 CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED
LEASES. Any Claims arising out of the rejection of contracts or leases must be
filed with the Court within the time set by any Final Order rejecting an
executory contract or unexpired lease or 30 days after the Effective Date. Any
Claims not filed within such time will be forever barred from assertion against
the Debtor or Reorganized Debtor, its estate and property. Unless otherwise
ordered by the Court or provided in this Plan, all such Claims for which proofs
of Claim are required to be filed will be treated as Class 3 Claims.
12.03 LIMITED SURVIVAL OF THE DEBTOR'S CORPORATE INDEMNITIES. Except as
provided in Section 5.03 and this Section 12.03, the Corporate Indemnities shall
not be discharged or impaired by Confirmation of this Plan. Such obligations
shall be deemed and treated as executory contracts to be assumed by the Debtor
and the Reorganized Debtor pursuant to the Plan, and shall continue as
obligations of the Reorganized Debtor, subsequent to the Effective Date,
provided that the Debtor's or Reorganized Debtor's obligations on such Corporate
Indemnities shall be limited as follows:
(i) the claims of officers, agents and employees who
remain employed by the Reorganized Debtor as of the
first day immediately following the Effective Date
(excluding any claims covered by the Indemnification
Settlement Fund) shall be fully assumed;
(ii) the claims of officers, agents, and employees (other
than the claims of the estate of James A. Doyle and
John N. Brincat in respect of which no obligations
shall be assumed), who are no longer Employed by the
Reorganized Debtor as of the first day immediately
following the Effective Date, shall be assumed only
to the extent that they relate to costs and expenses
incurred after the Effective Date in connection with
their participation in an agency or government
investigation and shall be limited to $250,000 in the
aggregate, such claims to be submitted to the
Reorganized Debtor and paid upon adequate
verification;
(iii) the Beneficiaries shall be entitled to assert Allowed
Indemnification Claims, but shall be entitled to
compensation on account of such claims only (x) out
of the Indemnification Settlement Fund, and (y) to
the extent of insurance coverage available under the
Reliance Policies; and
(iv) the claims of persons who are outside directors as of
the day preceding the Effective Date shall be assumed
and limited to the sum of (x) any remaining fee
retainer in possession of the professionals retained
by such directors and (y) the available balance from
time to time of the Outside Directors Reserve.
Nothing in this subsection shall limit any rights of
such persons provided under Section 12.03(iii) of
this Plan.
ARTICLE XIII
RETENTION OF JURISDICTION
13.01 RETENTION OF JURISDICTION. Notwithstanding the entry of the
Confirmation Order or the Effective Date having occurred, the Court shall retain
original and exclusive jurisdiction to (a) determine any disputed Claims, (b)
determine requests for payment of Claims entitled to priority under section
507(a)(1) of the Bankruptcy Code, including compensation of and reimbursement of
expenses of professionals and other parties entitled thereto, (c) resolve
controversies and disputes regarding interpretation and implementation of the
Plan, (d) enter orders in aid of the Plan, including, without limitation,
appropriate orders (which may include contempt or other sanctions) to protect
the Debtor and the Reorganized Debtor in accordance with sections 524 and 1141
of the Bankruptcy Code and the terms and conditions of the Confirmation Order,
(e) modify the Plan pursuant to Section 14.02 of the Plan, (f) determine any and
all applications, adversary proceedings and contested or litigated matters
pending on the Effective Date, (g) allow, disallow, estimate, liquidate or
determine any Claim or Interest and to enter or enforce any order requiring the
filing of any such Claim before a particular date, (h) determine any and all
pending applications for the rejection of executory contracts or unexpired
leases, or for the assignment of assumed executory contracts and unexpired
leases, and to hear and determine, and if need to be liquidate, any and all
Claims arising from any such rejection, assumption and/or assignment, (i)
determine any actions or controversies arising under or in connection with the
Plan, the Confirmation Order, the Class 7B Liquidating Trust or any contract,
instrument, release, or other agreement created in connection with the Plan, (j)
enter and implement orders as are necessary or appropriate if the Confirmation
Order is for any reason modified, stayed, reversed, revoked or vacated, (k)
enter a final decree closing the Reorganization Case, (l) determine any actions
or controversies related to or asserted against the Exchange Agent and (m) enter
and implement orders as are necessary to the transactions set forth in Section
8.05 of the Plan.
13.02 FAILURE OF COURT TO EXERCISE JURISDICTION. If the Court abstains
from exercising or declines to exercise jurisdiction, or determines that it is
otherwise without jurisdiction over any matter or proceeding arising out of,
related to or otherwise connected with the Reorganization Case, including the
matters set forth in this Article XIII , this Article shall not prohibit, or
limit or otherwise affect the exercise of jurisdiction by any other court having
competent jurisdiction with respect to such matter or proceeding.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01 RETIREE BENEFITS. On and after the Effective Date, pursuant to
section 1129(a)(13) of the Bankruptcy Code and applicable nonbankruptcy law, the
Reorganized Debtor shall continue to be obligated to pay all retiree benefits,
as that term is defined in section 1114 of the Bankruptcy Code, and shall
continue to pay such retiree benefits as they become due at the level
established at any time prior to confirmation of the Plan pursuant to subsection
(e)(1)(B) or (g) of section 1114, for the duration of the period the Debtor has
obligated itself to provide such benefits; provided, however, that nothing
herein shall extend or otherwise modify the duration of such period or prohibit
the Debtor's ability or the Reorganized Debtor's ability to modify the terms and
conditions of the retiree benefits as otherwise permitted by such plans and
otherwise applicable nonbankruptcy law.
14.02 MODIFICATION OF PLAN. The Debtor reserves the sole right, in
accordance with the Bankruptcy Code and Bankruptcy Rules, to amend or modify the
Plan prior to the entry of the Confirmation Order. After the entry of the
Confirmation Order, the Reorganized Debtor may, upon order of the Court, amend
or modify the Plan in accordance with section 1127(b) of the Bankruptcy Code and
the Bankruptcy Rules or remedy any defect or omission or reconcile any
inconsistency in the Plan in such manner as may be necessary to carry out the
purpose and intent of the Plan.
14.03 WITHDRAWAL OF PLAN. The Debtor reserves the right, at any time
prior to the entry of the Confirmation Order, to revoke and withdraw the Plan.
If the Debtor revokes or withdraws the Plan under this section, or if entry of
the Confirmation Order does not occur, then the Plan shall be deemed null and
void. In that event, nothing contained in the Plan shall be deemed to constitute
a waiver or release of any Claims by or against or any Interests in the Debtor,
to prejudice in any manner the rights of the Debtor in any further proceedings
involving the Debtor, or constitute an admission against interest by the Debtor
or any other party in interest.
14.04 HEADINGS. The headings used in this Plan are inserted for
convenience only and neither constitute a portion of the Plan nor in any manner
affect the provisions of the Plan.
14.05 SUCCESSORS AND ASSIGNS. The rights, benefits and obligations of
any person or entity named or referred to in the Plan shall be binding upon, and
shall inure to the benefit of, the heir, executor, administrator, successor or
assign of such person or entity.
14.06 PAYMENT OF STATUTORY FEES. All fees payable pursuant to section
1930 of Title 28 of the United States Code, as determined by the Bankruptcy
Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be
paid on or before the Effective Date.
14.07 NOTICES. Any notice, request or demand given or made under this
Plan or under the Bankruptcy Code or the Bankruptcy Rules shall be in writing
and shall be hand delivered or sent by a reputable overnight courier service,
and shall be deemed given when received at the following addresses whether hand
delivered or sent by overnight courier service:
Mark E. Dapier
General Counsel
Mercury Finance Company
100 Field Drive
Suite 340
Lake Forest, Illinois 60045
with a copy to:
Lewis S. Rosenbloom
David D. Cleary
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Notwithstanding anything to the contrary provided herein, all notices concerning
this Plan shall be served upon the entities prescribed and in the manner
prescribed under the Bankruptcy Code and the Bankruptcy Rules.
14.08 SEVERABILITY OF PLAN PROVISIONS. If prior to confirmation, any
term or provision of the Plan which does not govern the treatment of Claims or
Interests or the conditions to confirmation or the Effective Date is held by the
Court to be invalid, void or unenforceable, the Court shall have the power to
alter and interpret such term or provision to make it valid or enforceable to
the maximum extent practicable, consistent with the original purpose of the term
or provision held to be invalid, void or unenforceable, and such term or
provision shall then be applicable as altered or interpreted. Notwithstanding
any such holding, alteration or interpretation, the remainder of the terms and
provision of the Plan will remain in full force and effect and will in no way be
affected, impaired or invalidated by such holdings, alteration or
interpretation. The Confirmation Order shall constitute a final judicial
determination and shall provide that each term and provision of the Plan as it
may have been altered or interpreted in accordance with the foregoing, is valid
and enforceable pursuant to its terms.
14.09 EXHIBITS. Exhibits to the Plan or Disclosure Statement that are
not filed simultaneously with the Plan shall be filed with the Court not less
than ten days prior to the hearing on the Disclosure Statement to be conducted
pursuant to the Bankruptcy Rule 3017 and shall be mailed to the Creditors'
Committee, the Securities and Exchange Commission, the Commissioner of
Securities for the State of Illinois and any party in interest that makes a
written request for such Exhibit to the Debtor.
14.10 NO ADMISSIONS. Notwithstanding anything herein to the contrary,
nothing contained in the Plan shall be deemed as an admission by the Debtor with
respect to any matter set forth herein including, without limitation, liability
on any Claim or the propriety of any Claims classification.
ARTICLE XIII
CONFIRMATION REQUEST
The Debtor requests confirmation of the Plan under Section 1129(b) of
the Bankruptcy Code.
Dated: December 29, 1998
MERCURY FINANCE COMPANY
By: /S/ WILLIAM A. BRANDT, JR.
William A. Brandt, Jr.
President and Chief Executive Officer
Prepared by:
Lewis S. Rosenbloom
David D. Cleary
McDERMOTT, WILL & EMERY
227 West Monroe Street
Chicago, Illinois 60606-5096
(312) 372-2000
Counsel for Mercury Finance
Company
EXHIBIT 1 TO PLAN
CONSUMER LITIGATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NO. CASE NAME AND NUMBER VENUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. TAWANA BLAND v. MFC d/b/a MFC of GA and Bill Heard Muscogee County State Court
Chevrolet Co. Georgia
SC95-CV331
- ---------------------------------------------------------------------------------------------------------------------
2. BRENDA BOOHER v. Fain Lunsford, Sr., Raymond Sullian County Circuit Court
Hilliard d/b/a/ A&B Used Cars, a/k/a Raymond's Bus & Tennessee
Car Garage; Lynn Anders d/b/a Factory Outlet
Furniture; and MFC - C10405(L)
- ---------------------------------------------------------------------------------------------------------------------
3. MACK CALHOUN, JR. v. MFC d/b/a MFC of GA and GT Muscogee State Court
Motors, Inc., f/k/a Players Auto Sales Georgia
SC95-CV333
- ---------------------------------------------------------------------------------------------------------------------
4 COLUMBUS FINANCE CO. v. MFC, Gayrius Mickels, Roy Muscogee State Court
Ray Automotive Georgia
97-CV-2426
- ---------------------------------------------------------------------------------------------------------------------
5 RUFUS CULLEN v. MFC Seminole County Court
98-1-SP-19-Z Florida
- ---------------------------------------------------------------------------------------------------------------------
6 WILLIAM DEARMON v. MFC, Individually and d/b/a MFC Williamson County Chancery Court
of Tennessee, Individually and American Bankers Florida
Insurance Company of Florida
24583
- ---------------------------------------------------------------------------------------------------------------------
7 SHIRLEY DEWHART v. Brooks & Thomas Motor Co., Inc., Muscogee County Superior Court
d/b/a Mike Collins Nissan and MFC Georgia
97CV-3326
- ---------------------------------------------------------------------------------------------------------------------
8 RAYMOND E. EWING v. Midland Finance Company; Gerald U.S. District Court, N.Dist., E. Div.
Mizel and MFC 96C0222 Illinois
- ---------------------------------------------------------------------------------------------------------------------
9 BOBBY & FRANCES LUCILLE GUALTNEY v. MFC Muscogee County Magistrate Court
97-301 Georgia
- ---------------------------------------------------------------------------------------------------------------------
10 TODD GORDON v. State of Florida et al. 97-3053 Miami District Court
Florida
- ---------------------------------------------------------------------------------------------------------------------
11 DAVID GROPPI v. MFC Cuyahoga City Common Pleas Court
348448 Ohio
- ---------------------------------------------------------------------------------------------------------------------
12. KATHY HOLLIDAY v. MFC d/b/a MFC of GA and Bill Heard Muscogee County State Court
Chevrolet Company Georgia
SC95-CV-330
- ---------------------------------------------------------------------------------------------------------------------
13. ANGELA K. HUMPHRIES v. MFC Jefferson County Circuit Court
CV97-676 Alabama
- ---------------------------------------------------------------------------------------------------------------------
14. EULA M. JACKSON v. Motor Cars, Inc., d/b/a Cars Muscogee County State Court
Unlimited and MFC d/b/a MFC of GA Georgia
SC-95-CV-332
- ---------------------------------------------------------------------------------------------------------------------
15. MICHAEL JOHNSON & CAROLE J. JOHNSON v. MFC d/b/a MFC Muscogee County State Court
of GA and Maloof Motor Company, Inc. Georgia
SC95-CV-326
- ---------------------------------------------------------------------------------------------------------------------
16. TERESA JOHNSTON v. James Luce MFC of Florida and MFC Pinellas County Circuit Court
97-003786-C1008 Florida
- ---------------------------------------------------------------------------------------------------------------------
17. DAWN-FUNDERBERG-KALINOWSKI on behalf of herself and US BK Court, N. Dist., IL
those similarly situated, v MFC and MFC of Illinois Illinois
98A00854
"New Case Filed 4/29/98
- ---------------------------------------------------------------------------------------------------------------------
18. DEBRA H. PORTER v. MFC d/b/a MFC of GA and Maloof Muscogee County State Court
Motor Company, Inc. Georgia
SC95-CV-325
- ---------------------------------------------------------------------------------------------------------------------
19. MILTON D. PORTER AND ANGELA N. BROWN v. MFC d/b/a Muscogee County State Court
MFC of GA and Mark Levy Auto Center, Inc. Georgia
- ---------------------------------------------------------------------------------------------------------------------
20. WAYMON PRIOR, ET AL. v. MFC of Alabama and American Coffee County, Elba Division,
Bankers Insurance Alabama
- ---------------------------------------------------------------------------------------------------------------------
21. ANGELA D. SCARVER v. Edwards Chevrolet Co, Inc., (Not listed)
American Bankers, Roadguard, MFC of Alabama and MFC
Corporation
- ---------------------------------------------------------------------------------------------------------------------
22. JOSEPH P. & MARIE SIOFELE v. Martha Cornejo; MFC and Riverside County Municipal Court
MFC d/b/a/ MERC Finance Company; California Coastal California
Recovery; and Does 1 to 10
8068
- ---------------------------------------------------------------------------------------------------------------------
23. MARION SIMS & MARY EPTING v. MFC and A.B., jointly Smith County Court
and severally Mississippi
- ---------------------------------------------------------------------------------------------------------------------
24. MYRON B. STAPLES V, MFC and John Hall Milwaukee County Circuit Court
96-CV-5065 Wisconsin
- ---------------------------------------------------------------------------------------------------------------------
25. RANDALL SCOTT STARKS, d/b/a Starks & Associates v. Harris County District Court
MFC a/k/a MFC Finance Company Texas
H-97-1379
- ---------------------------------------------------------------------------------------------------------------------
26. RALPH G. STEWART v. B&M Motors, James D. Davis d/b/a Walker County Circuit Court
B&M Motors, MFC and A,B,C,D Alabama
- ---------------------------------------------------------------------------------------------------------------------
27. DION TAYLOR & Claudia Anderson v. Celozzi Ettelson DuPage County Circuit Court
Chevrolet, Inc. and MFC Illinois
97L-00264
- ---------------------------------------------------------------------------------------------------------------------
28. JAMES E. THOMAS & DOROTHY L. DIXON V. Bill Heard Russell County Circuit Court
Chevrolet, Bill Bratton, John Does 1-10, and MFC, Alabama
Inc.
CV95-47
- ---------------------------------------------------------------------------------------------------------------------
29. LLOYD WAINWRIGHT & MITCH BUCHOLZ v. MFC of Wisconsin Racine County Circuit Court
and MFC Wisconsin
97CV-0922
- ---------------------------------------------------------------------------------------------------------------------
30. VNESSA WALLACE V. MFC d/b/a MFC of GA and Gateway Muscogee County State Court
Lincoln-Mercury Georgia
SC95-CV327
- ---------------------------------------------------------------------------------------------------------------------
31. DOUGLAS & LINDA WALTERS v. MFC and American Bankers Fayette County Circuit Court
Life Assurance Company Alabama
CV94-054
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 2 TO PLAN
SECURITIES LITIGATION
1. Each of the civil actions pending in the United States District Court
for the Northern District of Illinois in the Consolidated Pretrial
Proceeding captioned In the Matter of Mercury Finance Company of
Illinois, Case No. 97 C 3035 (N.D.Ill.) Ill. filed March 20, 1997);
2. The case captioned Ferree v. Mercury Finance Company, et al., No. 97 C
5245 (N.D. Ill.filed July 24, 1997);
3. The case captioned Realtech Software, Inc. et al. v. Mercury Finance
Co. et. al., No. 97 CH 1277 (Cir. Ct. Cook Co. Ill. filed January 31,
1997);
4. The case captioned Crandon Capital Partners v. John N. Brincat et al.,
No. 97 CH 1491 (Cir. Ct. Cook Co. Ill. filed February 5, 1997);
5. The case captioned Malone v. John N. Brincat et al., No. 15510-NC (Del.
Ch. filed February 4, 1997);
6. The cases captioned Thorp et al. v. Mercury Finance Co. et al., No. 97
CH 1440 (Cir. Ct. Cook Co. Ill. filed February 4, 1997); State Board of
Administration of Florida et al. v. Brincat et. al., No. 97 CH 1440
(Cir. Ct. Cook Co. Ill., Application for intervention filed November
22, 1997);
7. The case captioned Kittle et al. v. Mercury Finance Co. et al., No. 97
CH 3639 (Cir. Ct. Cook Co. Ill. filed March 25, 1997);
8. The case captioned Pontikes et al. v. John N. Brincat et al., No. 97 CH
3039 (Cir. Ct. Cook Co. Ill. filed March 12, 1997);
9. The case captioned Dloogatch et al. v. John N. Brincat et al., No. 97
CH 8790 (Cir. Ct. Cook Co. Ill. filed July 16, 1997);
10. The case captioned Wexler v. John N. Brincat et al., No. 15512-NC (Del.
Ch. filed February 5, 1997);
11. The case captioned Krasnow v. John Brincat et al., No. 15525-NC (Del.
Ch. filed February 7, 1997);
12. The case captioned Trauscht v. John N. Brincat et al., No. 15524-NC
(Del. Ch. filed February 6, 1997);
13. The case captioned Damaskus v. John N. Brincat et al., No. 15546-NC
(Del. Ch. filed February 14, 1997);
14. The case captioned Schwartz v. John N. Brincat et al., No. 15567-NC
(Del. Ch. filed February 24, 1997;
15. The case captioned Grinnell v. John N. Brincat et al., No. 15568-NC
(Del. Ch. filed February 24, 1997);
16. The case captioned Cumming v. John N. Brincat et al., No. 15569-NC
(Del. Ch. filed February 24, 1997);
17. The case captioned Sutherland v. John N. Brincat et al., No. 15582-NC
(Del. Ch. filed February 27, 1997);
18. The case captioned Gulf Trust v. John N. Brincat et al., No. 15581-NC
(Del. Ch. filed February 27, 1997);
19. The case captioned Jackson v. Brincat et al., No. 97 C 1941 (N.D. Ill.
filed March 20, 1997);
20. T. Rowe Price Financial Services Fund, Inc., et al. v. Mercury Finance
Co., et al. Case No. 97 C 4782 N.D. Ill. filed July 3, 1997. (Motion
for finding of relatedness denied.)
21. Robert F. Wells, et al. v. John N. Brincat, et al., No. 98 L 013108
(Cir. Ct. Cook Co. Ill. filed November 13, 1998).
22. Shriners Hospital for Children v. Mercury Finance Co, et al., No. 98 C
1480 (N.D. Ill. Filed March 15, 1998).
EXHIBIT 3 TO PLAN
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
TO BE ASSUMED1
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
NO. NAME/ADDRESS OF PARTY DESCRIPTION
TO CONTRACT OR UNEXPIRED LEASE OF CONTRACT OR UNEXPIRED LEASE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. ADT AUTOMOTIVE SERVICES, INC. Contract to provide collateral recovery services
ATTN: GENERAL COUNSEL
435 METROPLEX DRIVE
NASHVILLE, TN 37211
-------------------------------------------------------------------------------------------------------------------------------
2. ALTERNATIVE COMMUNICATIONS AND TELECONSULTING Contract to provide long-distance communication services
585 CHEROKEE ROAD
HIGHLAND PARK, IL 60035
-------------------------------------------------------------------------------------------------------------------------------
3. ARCUS DATA SECURITY Contract to provide data storage services
222 W LAS COLINAS BLVD
SUITE 850
IRVING, TX 75039
-------------------------------------------------------------------------------------------------------------------------------
4. ARNFED GENERAL AGENCY, INC. Contract to provide workman's compensation insurance
805 SOUTH WHEATLEY
SUITE 600
RIDGELAND, MS 39158
-------------------------------------------------------------------------------------------------------------------------------
5. BANK ONE, ILLINOIS, NA Contract to provide trustee and investment management services in
ATTN: BOB ZEIGLER connection with the Mercury Finance Company Savings Plan (401K)
800 DAVID STREET
EVANSTON, IL 60201 Contract to provide trustee services in connection with the
Mercury Finance Company Retirement Plan
Various contracts relating to the cash management system (i.e.
wire transfer agreement, ACH collection, Allotment agreement,
control disbursement agreement)
-------------------------------------------------------------------------------------------------------------------------------
6. BERKOW, DAVID Non-compete and Termination Benefits Contract
1310 KINGSLEY DRIVE
ARLINGTON HEIGHTS, IL 60004
-------------------------------------------------------------------------------------------------------------------------------
7. CAREY, GEORGE Non-Compete And Termination Benefits Contract
794 N
OAKWOOD AVENUE
LAKE FOREST, IL 60045
-------------------------------------------------------------------------------------------------------------------------------
8. CAUL, MICHAEL H Non-Compete And Termination Benefits Contract
10791 N. 101ST PLACE
SCOTTSDALE, AZ 85260
-------------------------------------------------------------------------------------------------------------------------------
9. CIMCO COMMUNICATIONS Contract to Provide Data Communication Services
18W100 22ND STREET
SUITE 109
OAKBROOK TERRACE, IL 60181
-------------------------------------------------------------------------------------------------------------------------------
10. COLLINS, JAMES R Non-Compete And Termination Benefits Contract
9829 S HOYNE
CHICAGO, IL 60643
-------------------------------------------------------------------------------------------------------------------------------
11. DAPIER, MARK E. Non-Compete And Termination Benefits Contract
445 E. DEERPATH
LAKE FOREST, IL 60045
-------------------------------------------------------------------------------------------------------------------------------
12. DATA CLEAN CORP Contract to provide computer equipment cleaning
services 1033 GRACELAND AVENUE
DES PLAINES, IL 60016
-------------------------------------------------------------------------------------------------------------------------------
13. EQUIFAX CREDIT INFORMATION SERVICES, INC. Contract to provide consumer credit reporting
1600 PEACHTREE STREET
ATLANTA, GA 30309
-------------------------------------------------------------------------------------------------------------------------------
14. EXPERIAN INFORMATION SOLUTIONS, INC. Contract to provide consumer credit reporting
425 NORTH MARTINGALE ROAD
SUITE 600
SCHAUMBURG, IL 60173
-------------------------------------------------------------------------------------------------------------------------------
15. FIDELITY INVESTMENTS Contract to provide trustee, record management, plan
120 N LASALLE administration and investment services in connection with the
SUITE 2700 IN4 Mercury Finance Company Savings Plan (401K Plan)
CHICAGO, IL 60602
-------------------------------------------------------------------------------------------------------------------------------
16. FIRST ALLAMERICA FINANCIAL Contract to provide administration services and excess employee
LIFE INSURANCE COMPANY benefit loss insurance in connection with employee health benefit
440 LINCOLN plan
WORCESTER, MA 01605
-------------------------------------------------------------------------------------------------------------------------------
17. GEOCAPITAL CORPORATION Contract to provide investment management services in connection
767 FIFTH AVENUE with the Mercury Finance Company Retirement Plan NEW
YORK, NY 10153
-------------------------------------------------------------------------------------------------------------------------------
18. GOULD, STEVEN G Agreement to reimburse employee relocation expenses; and
14365 W BRAEMORE Non-Compete and Termination Benefits Contract
GREEN OAKS, IL 60048
-------------------------------------------------------------------------------------------------------------------------------
19. AL GREEN Agreement to Reimburse Employee Relocation Expenses; and
2480 OTTER CREEK LN Non-Compete and Termination Benefits Contract
ELGIN, IL 60123-5608
-------------------------------------------------------------------------------------------------------------------------------
20. HARRIS TRUST COMPANY OF NEW YORK Contract to act as Registrar and Stock Transfer Agent in
77 WATER STREET connection with Common Stock
NEW YORK, NY 10005
-------------------------------------------------------------------------------------------------------------------------------
21. HARTFORD FIRE INSURANCE COMPANY Contract to provide commercial automobile liability insurance
HARTFORD PLAZA
HARTFORD, CT 06115
-------------------------------------------------------------------------------------------------------------------------------
22. HEWITT ASSOCIATES, LLC Contract to provide actuarial and consulting services in
100 HALF DAY ROAD connection with the Mercury Finance Company Retirement Plan
LINCOLNSHIRE, IL 60069
-------------------------------------------------------------------------------------------------------------------------------
23. INFINITI FINANCIAL SERVICES Automobile lease
990 WEST 190TH STREET
TORRANCE, CA 90502
-------------------------------------------------------------------------------------------------------------------------------
24. ITT HARTFORD INSURANCE GROUP Contract to provide employer's
liability insurance HARTFORD PLAZA
HARTFORD, CT 08115
-------------------------------------------------------------------------------------------------------------------------------
25. LAM, CHARLES Agreement to reimburse employee relocation expenses; and
14360 W BRAEMORE CLOSE Non-Compete and Termination Benefits Contract
GREEN OAKS, IL 60048
-------------------------------------------------------------------------------------------------------------------------------
26. LARRY FRYKMAN OFFICE MACHINES Contract to provide office equipment maintenance
281 E MESSNER DRIVE
WHEELING, IL 60090
-------------------------------------------------------------------------------------------------------------------------------
27. LLOYD'S OF LONDON Contract to provide accidental death & dismemberment insurance
CORPORATE RISK INTERNATIONAL
11250 WAPLES MILL RD
FAIRFAX, VA 22030
-------------------------------------------------------------------------------------------------------------------------------
28. LUTGEN, ROBERT M. Agreement to Provide Employee Relocation Expenses; and
14881 RIVER OAKS DR. Non-Compete and Termination Benefits Contract
LINCOLNSHIRE, IL 60069
-------------------------------------------------------------------------------------------------------------------------------
29. MARTIN PARTNERS LLC Executive Placement Agreement
224 S. MICHIGAN AVENUE
SUITE 620
CHICAGO, IL 60604
-------------------------------------------------------------------------------------------------------------------------------
30. WILLIAM M. MERCER Contract to provide consulting services with respect to employee
10 S WACKER DRIVE benefit plans
SUITE 1700
CHICAGO, IL 60606
-------------------------------------------------------------------------------------------------------------------------------
31. MERCURY FINANCE COMPANY Mercury Finance Company Amended and Restated 1989 Stock Option
100 FIELD DRIVE, SUITE 340 and Incentive Compensation Plan
LAKE FOREST, IL 60045
-------------------------------------------------------------------------------------------------------------------------------
32. NATIONAL LOAN EXCHANGE CORPORATION Contract to provide exclusive asset-marketing services for
11475 OLDE CABIN ROAD written-off loan receivables
SUITE 2200
ST LOUIS, MO 63141
-------------------------------------------------------------------------------------------------------------------------------
33. NATIONSBANK, N.A. Contract for Indemnification of NationsBank for Payment of
ATTN: LOUISA A. COMBS Certain Drafts
101 SOUTH TRYON STREET, 28TH FLOOR
CHARLOTTE, NC 28255-0074
-------------------------------------------------------------------------------------------------------------------------------
34. PARADATA FINANCIAL SYSTEMS Contract to Provide Computer Consulting Services
18102 CHESTERFIELD AIRPORT ROAD
SUITE J
CHESTERFIELD, MO 63005
-------------------------------------------------------------------------------------------------------------------------------
35. PETERS, DAVE Non-Compete and Termination Benefits Contract
2337 TIFFANY CIRCLE
FLORENCE, MS 39073
-------------------------------------------------------------------------------------------------------------------------------
36. PROGRESSIVE CASUALTY INSURANCE CO Contracts to provide collateral protection insurance and related
PROGRESSIVE NORTHERN INSURANCE CO. services
6300 WILSON MILLS ROAD
MAYFIELD VILLAGE, OH 44143
-------------------------------------------------------------------------------------------------------------------------------
37. RELIANCE INSURANCE COMPANY Two contracts providing officer and director insurance
77 WATER STREET
NEW YORK, NY 10005
-------------------------------------------------------------------------------------------------------------------------------
38. STATE MUTUAL/FIRST ALLAMERICA Contract to service employee welfare benefits
440 LINDOLN STREET
WORCHESTER, MA 01605
-------------------------------------------------------------------------------------------------------------------------------
39. STAUTZENBACH, EDWARD G. Non-Compete and Termination Benefits Contract
610 E. FAIRVIEW
ARLINGTON HGTS, IL 60005
-------------------------------------------------------------------------------------------------------------------------------
40. SUNGARD RECOVERY SERVICES Contract to provide computer services
3100 ARNOLD LANE
NORTHBROOK, IL 60062
-------------------------------------------------------------------------------------------------------------------------------
41. TWIN CITY FIRE INSURANCE COMPANY Contract to provide commercial general liability insurance
HARTFORD PLAZA
HARTFORD, CT 06115
-------------------------------------------------------------------------------------------------------------------------------
42. UNITED FINANCIAL CASUALTY COMPANY Collateral protection insurance and related services
747 ALPHA DRIVE
HIGHLAN HEIGHTS, OH 44143
-------------------------------------------------------------------------------------------------------------------------------
43. US STORAGE Contract to provide storage space
177 DEER LAKE ROAD
DEERFIELD, IL 60015
-------------------------------------------------------------------------------------------------------------------------------
44. VISION SERVICES Contract to provide administrative services and vision care
3333 QUALITY DRIVE benefits
RANCHO CORDOVA, CA 95670
-------------------------------------------------------------------------------------------------------------------------------
45. WORLDCOM Contract to provide long-distance communication services
ATTN: RONALD STUART - LEGAL DEPT
6929 N LAKEWOOD AVENUE
TULSA, OK 74117
-------------------------------------------------------------------------------------------------------------------------------
46. XEROX Contract to provide office equipment maintenance and service
350 S NORTHWEST HIGHWAY
PARK RIDGE, IL 60068
-------------------------------------------------------------------------------------------------------------------------------
47. XYPLEX Contract to provide computer network services
295 FOSTER STREET
LITTLETON, MA 01460
-------------------------------------------------------------------------------------------------------------------------------
48. FOLMAR & ASSOC. Real Property Lease
P.O. BOX 16765 Store # 280: Meridian, MS
MOBILE, AL 36616
-------------------------------------------------------------------------------------------------------------------------------
49. ATLANTIC STRUCTURES, L.P. Real Property Lease
C/O THE RUBENSTEIN CO. Store #189: Marietta, GA
SUITE 201
TWO LOGAN SQUARE
PHILADELPHIA, PA 19103
-------------------------------------------------------------------------------------------------------------------------------
50. CLAUDE DEBOTTON AS AGENT FOR THE DEBOTTON TRUST Real Property Lease
1001 BALTIMORE PIKE Store # 325 (Philadelphia West): Broomall, PA
SPRINGFIELD, PA 19064
-------------------------------------------------------------------------------------------------------------------------------
51. BANK ONE OF CHICAGO, Real Property Lease
AS TRUSTEE FOR TRUST NO. R3772 Midland: 7541 Northwestern Avenue, Chicago, IL
LAND TRUST DEPARTMENT
ATTN: CATHY MARTIN
14 SOUTH LAGRANGE
LAGRANGE, IL 60525
-------------------------------------------------------------------------------------------------------------------------------
52. BENNETT & GRIGG ASSOCIATES, INC. Real Property Lease
806-M HIGHWAY 66 S Store # 193: Kernersville, NC
KERNERSVILLE, NC 27284
-------------------------------------------------------------------------------------------------------------------------------
53. BRISCOE INVESTMENTS LIMITED PARTNER Real Property Lease
250 S. EXEUCTIVE DRIVE Store # 215: Hales Corner, WI
SUITE 301
BROOKFIELD, WI 53005
-------------------------------------------------------------------------------------------------------------------------------
54. BYRAM PROPERTIES Real Property Lease
510 S. CONGRESS, SUITE 400 Store # 137: Austin, TX
AUSTIN, TX 78704
-------------------------------------------------------------------------------------------------------------------------------
55. ATLANTA SOUTHERN BUSINESS PARK LTD. Real Property Lease
3000 CORPORATE CENTER DR., SUITE 300 Store # 212 (Atlanta South): Morrow, GA
P.O. BOX 870485
MORROW, GA. 30287
-------------------------------------------------------------------------------------------------------------------------------
56. PIERCE PROPERTIES LTD. Real Property Lease
4041 E. THOMAS ROAD, SUITE 200 Store # 162: Phoenix, AZ
PHOENIX, AZ 85108
-------------------------------------------------------------------------------------------------------------------------------
57. ALLEN DEVELOPMENT GROUP, INC. Real Property Lease
5210 ARMOUR ROAD, SUITE 300 Store # 113: Columbus Auto, Columbus, GA
COLUMBUS, GA 31904
-------------------------------------------------------------------------------------------------------------------------------
58. DELTA BUILDING INC. Real Property Lease
C/O MR. FILO COATS Store # 820: Grenada, MS
P.O. BOX 1443
GRENADA, MS 38904
-------------------------------------------------------------------------------------------------------------------------------
59. DELTA PLAZA ASSOCIATES Real Property Lease
10132 US HIGHWAY 19 Store # 223: Port Richey, FL
PORT RICHEY, FL 34668
-------------------------------------------------------------------------------------------------------------------------------
60. DESERT INN OFFICE CENTER II Real Property Lease
2785 E. DESERT INN RD., SUITE 130 Store # 142: Las Vegas, NV
LAS VEGAS, NV 89121
-------------------------------------------------------------------------------------------------------------------------------
61. DUKE REALTY INVESTMENTS, INC. Real Property Lease
4225 NAPERVILLE ROAD, SUITE 1500 Location: 100 Field Drive, Suite 340, Lake Forest, IL 6045
LISLE, IL 60532
-------------------------------------------------------------------------------------------------------------------------------
62. HAWTHORN ASSOCIATES Real Property Lease
C/O EATON & LAUTH REAL ESTATE SERVICES Store # 188: Indianapolis North, IN
12220 N. MERIDIAN ST., SUITE 175
CARMEL, IN 46032
-------------------------------------------------------------------------------------------------------------------------------
63. FIRST CAPITAL LANSING PROPERTIES Real Property Lease
6810 S. CEDAR STREET, SUITE 3C Store # 304: Lansing, MI
LANSING, MI 48911
-------------------------------------------------------------------------------------------------------------------------------
64. HARDING DAHM & CO., INC. Real Property Lease
P.O. BOX 1448 Store # 306: Fort Wayne, IN
FT. WAYNE, IN. 46858-1448
-------------------------------------------------------------------------------------------------------------------------------
65. GALAXY DEVELOPMENT LTD. Real Property Lease
2511 MILES ROAD, NORTH F Store # 246: Cleveland, OH
CLEVELAND, OH 44125-5499
-------------------------------------------------------------------------------------------------------------------------------
66. GLENWOOD SQUARE SHOPPING CENTER Real Property Lease
1000 NATIONSBANK CENTER Store # 139: Norfolk, VA
ONE COMMERCIAL
NORFOLK, VA 23510
-------------------------------------------------------------------------------------------------------------------------------
67. RIVERAIN LIMITED PARTNERSHIP Real Property Lease
C/O LARRY STEIN REALTY Store # 311 (Dayton): Centerville, OH
2 RIVERPLACE, SUITE 300
P.O. BOX 544
DAYTON, OH 45401
-------------------------------------------------------------------------------------------------------------------------------
68. HALL BROTHERS INVESTMENTS Real Property Lease
P.O. BOX 55686 Store # 224: Lexington, KY
LEXINGTON, KY 40555-5686
-------------------------------------------------------------------------------------------------------------------------------
69. HOUMA BUILDING PARTNERSHIP Real Property Lease
1340 W. TUNNEL BOULEVARD Store # 290: Houma, LA
SUITE 600
HOUMA, LA 70360
-------------------------------------------------------------------------------------------------------------------------------
70. HUBBARD REALTY OF WINSTON-SALEM Real Property Lease
285 S. STRATFORD ROAD Store # 265: Winston-Salem, NC
WINSTON-SALEM, NC 27013
-------------------------------------------------------------------------------------------------------------------------------
71. AXIS COMMERCIAL REALTY, INC. Real Property Lease
1660 S. ALBION STREET Store # 254: Northglenn, CO
SUTIE 806
DENVER, CO 80222
-------------------------------------------------------------------------------------------------------------------------------
72. JEFFERSON PARK PROPERTIES Real Property Lease
C/O SIMON PROPERTIES Store # 606: Middleburg Heights, OH
4635 RICHMOND RD., SUITE 105
WARRENSVILLE HEIGHTS, OH 44125
-------------------------------------------------------------------------------------------------------------------------------
73. KK PARTNERSHIP Real Property Lease
28901 CLEMENS ROAD, UNIT 105 Store # 289 (Cleveland West): Westlake, OH
WESTLAKE, OH 44145
-------------------------------------------------------------------------------------------------------------------------------
74. BELL WEST SHOPPING CENTER Real Property Lease
C/O MPB REALTY SERVICES Store # 192: Phoenix, AZ
200 E. MONTEREY WAY
PHOENIX, AZ 85012
-------------------------------------------------------------------------------------------------------------------------------
75. LAKESIDE DEVELOPMENT CO. Real Property Lease
955 EXECUTIVE PARKWAY, SUITE 210 Store # 217 (Roanoke): Salem, VA
ST. LOUIS, MO 63141
-------------------------------------------------------------------------------------------------------------------------------
76. LANDMARK COMMERCIAL INC. Real Property Lease
5022 WRIGHTSVILLE AVENUE Store # 307: Wilmington, NC
WILMINGTON, NC 28403
-------------------------------------------------------------------------------------------------------------------------------
77. PACESETTER ENTERPRISES Real Property Lease
C/O A.C. GOLD AND COMPANY Store # 208: South Holland, IL
2711 W. 183RD ST., SUITE 211
HOMEWOOD, IL 60430
-------------------------------------------------------------------------------------------------------------------------------
78. MCGINNIS PARTNERS Real Property Lease
555 E. LOOCKERMAN STREET Store # 303: Dover, DE
DOVER, DE 19901
-------------------------------------------------------------------------------------------------------------------------------
79. MEGA PROPERTIES Real Property Lease
4849 N. MILWAUKEE AVENUE Store # 152 (Lawrence): Chicago, IL
SUITE 302
CHICAGO, IL 60630
-------------------------------------------------------------------------------------------------------------------------------
80. MITCHELL & NANCY NANCE Real Property Lease
5301 BRAGG BOULEVARD Store # 109: Fayette Auto, Fayetteville, NC
FAYETTEVILLE, NC 28303
-------------------------------------------------------------------------------------------------------------------------------
81. CANYON CREEK NATIONAL BANK Real Property Lease
333 W. CAMPBELL ROAD Store # 226: Richardson, TX
RICHARDSON, TX 75080
-------------------------------------------------------------------------------------------------------------------------------
82. NORTHBROOK LTD Real Property Lease
C/O SLR MANAGEMENT CORP. Store # 133: No. Charleston, NC
P.O. BOX 1524
FAIRFIELD, NJ 07007
-------------------------------------------------------------------------------------------------------------------------------
83. O'REILLY INVESTMENT COMPANY Real Property Lease
P.O. BOX 1897 Store # 333: Springfield, MO
SPRINGFILED, MO 65801
-------------------------------------------------------------------------------------------------------------------------------
84. ORANGE TREE PROPERTIES Real Property Lease
2000 WELLS ROAD, SUITE B Store # 136: Jacksonville Auto, Orange Park,
FL ORANGE PARK, FL 32073
-------------------------------------------------------------------------------------------------------------------------------
85. BRENNER LAND TRUST Real Property Lease
C/O WILLIAM F. BRENNER Store # 187: Joliet, IL
2110 S. WABASH
CHICAGO, IL 60616
-------------------------------------------------------------------------------------------------------------------------------
86. PATTON JR., JOSEPH D. Real Property Lease
32 VICK PARK "B" Store # 335: Rochester, NY
ROCHESTER, NY 14607
-------------------------------------------------------------------------------------------------------------------------------
87. ROCKWELL BUILDING PARTNERSHIP Real Property Lease
C/O MR. ELDON L. HOYLE Store # 111: Junction City, KS
HOYLE REALTORS
419 N. WASHINGTON ST.
P.O. BOX 845
JUNCTION CITY, KS. 66441-0845
-------------------------------------------------------------------------------------------------------------------------------
88. PEMBROKE VIRGINIA ASSOCIATES Real Property Lease
281 INDEPENDENCE BOULEVARD Store # 107: Virginia Beach, VA
VIRGINIA BEACH, VA 23462-2979
-------------------------------------------------------------------------------------------------------------------------------
89. PORTEN, MICHAEL L. Real Property Lease
P.O. BOX 941 Store # 108: Hinesville, GA
HINESVILLE, GA 31313
-------------------------------------------------------------------------------------------------------------------------------
90. PRINCIPLE DEVELOPMENT LTD. Real Property Lease
1001 EISENHOWER BOULEVARD Store # 326: Johnstown, PA
SUITE A
JOHNSTOWN, PA 15904
-------------------------------------------------------------------------------------------------------------------------------
91. OAK CREEK OFFICE PARK L.L.C. Real Property Lease
C/O ASSET MANAGEMENT ASSOCIATES Store # 332: Flint, MI
1309 S. LINDEN AVE., SUITE A
FLINT, MI 48532
-------------------------------------------------------------------------------------------------------------------------------
92. BENDERSON, RANDALL 1993-1 Real Property Lease
570 DELAWARE AVENUE Store # 334: Buffalo, NY
BUFFALO, NY 14202
-------------------------------------------------------------------------------------------------------------------------------
93. RBR&ST Real Property Lease
P.O. BOX 1636 Store # 310: Asheville, NC
ASHEVILLE, NC 28802-1636
-------------------------------------------------------------------------------------------------------------------------------
94. REALTY ASSOCIATES, INC. Real Property Lease
2904 B TAZEWELL PIKE Store # 207: Knoxville, TN
KNOXVILLE, TN 37918
-------------------------------------------------------------------------------------------------------------------------------
95. GILBERT CUBBAGE CPM Real Property Lease
CASE POMEROY PROPERTIES Store # 203 (Orlando West): Orlando, FL
10407 CENTURION PARKWAY, N., SUITE 108
JACKSONVILLE, FL 32256
-------------------------------------------------------------------------------------------------------------------------------
96. SMETANA 8876 ASSOCIATES Real Property Lease
8876 GULF FREEWAY, SUITE 240 Store # 138: Houston, TX
HOUSTON, TX 77017
Store # 5008: Houston Recovery, Houston, TX
-------------------------------------------------------------------------------------------------------------------------------
97. SPIEGEL, SAM AND SIMONE Real Property Lease
10 FAIRWAY DRIVE, SUITE 114 Store # 144: West Palm Beach, FL
DEERFIELD BEACH, FL 33441
-------------------------------------------------------------------------------------------------------------------------------
98. STATE STREET INVESTORS OF ROCKFORD Real Property Lease
5301 E. STATE STREET, SUITE 205 Store # 196: Rockford, IL
ROCKFORD, IL 61108
-------------------------------------------------------------------------------------------------------------------------------
99. STUART HOFFMAN & RICHARD ROGGE Real Property Lease
7925 N. 76TH STREET Store # 194: Milwaukee, WI
MILWAUKEE, WI 52223
-------------------------------------------------------------------------------------------------------------------------------
100. TOWNE BROTHERS REALTY Real Property Lease
7206 HILLSIDE Store # 140: Hillside, IL
SPRING GROVE, IL 60081
-------------------------------------------------------------------------------------------------------------------------------
101. PARAMOUNT DEVELOPMENT CORP. Real Property Lease
4710 OLEANDER DR. Store # 339: Myrtle Beach, SC
MYRTLE BEACH, SC 29477
-------------------------------------------------------------------------------------------------------------------------------
102. TURN-KEY PARTNERSHIP Real Property Lease
2310 VILLAGE PARK COURT, NORTH Store # 341: Mansfield, OH
MANSFILED, OH 44906
-------------------------------------------------------------------------------------------------------------------------------
103. TWO ORACLE LIMITED COMPANY Real Property Lease
C/O ROMANO REAL ESTATE CORPORATION Store # 274: Tucson, AZ
3900 E. VIA PALOMITA
TUCSON, AZ 85718
-------------------------------------------------------------------------------------------------------------------------------
104. VIRGINIA BEACH ASSOCIATES Real Property Lease
281 INDEPENDENCE BOULEVARD Store # 5002 (Virginia Beach Recovery): Virginia Beach, VA
VIRGINIA BEACH, VA 23462-2979
-------------------------------------------------------------------------------------------------------------------------------
105. WRUBEL DEVELOPMENT Real Property Lease
#7 EXECUTIVE ESTATES DRIVE Store # 123: Belleville Auto Lot, Belleville, IL
MILLSTADT, IL 62260
-------------------------------------------------------------------------------------------------------------------------------
106. YOUNG HO KIM Real Property Lease
3054-A BERKMAR DRIVE Store # 222: Charlottesville, VA
CHARLOTTESVILLE, VA 22011
-------------------------------------------------------------------------------------------------------------------------------
107. 3701 COMMERCIAL LLC Real Property Lease
333 SKOKIE BOULEVARD, SUITE 111 Northbrook Computer Center, Northbrook, Illinois
NORTHBROOK, IL 60062
-------------------------------------------------------------------------------------------------------------------------------
108. 4905 TILGHMAN, L.P. Real Property Lease
C/O SOMERSET PROPERTIES, INC. Store # 328: Allentown, PA
768 N. BETHLEHEM PIKE, SUITE 203
LOWER GWYNEDD, PA 19002
-------------------------------------------------------------------------------------------------------------------------------
109. 7272 CORPORATION Real Property Lease
7887 SAN FELIPE, SUITE 237 Store # 197: Houston North, TX
HOUSTON, TX 77063
-------------------------------------------------------------------------------------------------------------------------------
110. ASSED, JED Undertaking Letter Agreement dated 1/13/98
11411 BLACKHAWK
HOUSTON, TX 77089
-------------------------------------------------------------------------------------------------------------------------------
111. BIGGERS, SABRINA K. Undertaking Letter Agreement dated 1/16/98
1580 CANTER DRIVE
FLORISSANT, MO 63033
-------------------------------------------------------------------------------------------------------------------------------
112. BOKSA, BONNIE Undertaking Letter Agreement dated 9/22/97
1701 W. BELMONT
LIBERTYVILLE, IL 60048
-------------------------------------------------------------------------------------------------------------------------------
113. BOROWIAK, LARRY Undertaking Letter Agreement dated 3/31/97
1600 SURRIDGE COURT
MUNDELEIN, IL 60060
-------------------------------------------------------------------------------------------------------------------------------
114. BOSSON, RICHARD Undertaking Letter Agreement dated 4/23/97 3300
COVE CAY DRIVE
APT 1-G
CLEARWATER, FL 34620
-------------------------------------------------------------------------------------------------------------------------------
115. BRINCAT, JEFFREY Undertaking Letter Agreement dated 6/2/97
16 CAMBRIDGE DRIVE
HAWTHORNE WOODS, IL 60047
-------------------------------------------------------------------------------------------------------------------------------
116. BRINCANT, JOHN JR. Undertaking Letter Agreement dated 6/16/97
21357 W. BOSCHOME
KILDEER, IL 60047
-------------------------------------------------------------------------------------------------------------------------------
117. CAREY, GEORGE Undertaking Letter Agreement dated 4/15/97
794 N. OAKWOOD AVENUE
LAKE FOREST, IL 60045
-------------------------------------------------------------------------------------------------------------------------------
118. CHOOKASZIAN, DENNHIS H. Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
119. CROFT, WILLIAM C. Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
120. FRANCIS, MIKE Undertaking Letter Agreement dated 1/19/98 319
SOUTH 2ND STREET
VIVIAN, LA 71082
-------------------------------------------------------------------------------------------------------------------------------
121. GORDON, EDWARD Undertaking Letter Agreement dated 7/2/97
C/O LEVIN MIDDLEBROOKS THOMAS ET AL
ATTN: JAMES R. GREEN
P.O. BOX 12308
316 S. BAYLEN STREET
PENSACOLA, FL 32581
-------------------------------------------------------------------------------------------------------------------------------
122. GOULD, STEVEN Indemnification Agreement dated 4/6/89
14365 W. BRAEMORE CLOSE
GREEN OAKS, IL 60048
-------------------------------------------------------------------------------------------------------------------------------
123. GREEN, AL Undertaking Letter Agreement dated 1/12/98 2480 OTTER
CREEK LANE
ELGIN, IL 60123-5608
-------------------------------------------------------------------------------------------------------------------------------
124. GUNTHER, JOHN Undertaking Letter Agreement dated 6/17/98
3456 ASHMORE LANE
PACE, FL 32571
-------------------------------------------------------------------------------------------------------------------------------
125. GUTHRIE, JIM Undertaking Letter Agreement dated 1/30/98
18352 DALLAS PARKWAY
BOX 136-337
DALLAS, TX 75287
-------------------------------------------------------------------------------------------------------------------------------
126. HAILEY, STEVEN A. Undertaking Letter Agreement dated 3/24/98
1252 HWY 1194
MARKSVILLE, LA 71351
-------------------------------------------------------------------------------------------------------------------------------
127. HOLMES, JOHN Undertaking Letter Agreement dated 3/12/98
133 WHITELOCK DRIVE
MARIETTA, GA 30064
-------------------------------------------------------------------------------------------------------------------------------
128. IKERD, GAY Undertaking Letter Agreement dated 2/2/98
3772 HIGHWAY 452
MARKSVILLE, LA 71351
-------------------------------------------------------------------------------------------------------------------------------
129. JOHNSON, CLIFFORD R. Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
130. JOHNSON, THELMA Undertaking Letter Agreement dated 1/30/98
1310 HAMBLEH ROAD
HUMBLE, TX 77339
-------------------------------------------------------------------------------------------------------------------------------
131. JOYNER, BUD Undertaking Letter Agreement dated 1/13/98
1725 HOLMAN ROAD
HOSCHTON, GA 30548
-------------------------------------------------------------------------------------------------------------------------------
132. KAPLAN, DAVE Undertaking Letter Agreement dated 1/13/98 1877 NW
99TH AVENUE
PLANTATION, FL 33324
-------------------------------------------------------------------------------------------------------------------------------
133. KURCZYNSKI, GREG Undertaking Letter Agreement dated 1/30/98
62 WINDSOR DRIVE
ENGLEWOOD, FL 34226-0008
-------------------------------------------------------------------------------------------------------------------------------
134. LABEACH, MARJORIE Undertaking Letter Agreement dated 1/2/98
1275 RIVER VISTA ROW, #137
SAN DIEGO, CA 92111
-------------------------------------------------------------------------------------------------------------------------------
135. LAIBLIN, WALTER A. Undertaking Letter Agreement dated 6/17/98
1736 S. HIAWASSEE ROAD
APT. 36
ORLANDO, FL 32835-6406
-------------------------------------------------------------------------------------------------------------------------------
136. LAM, CHARLES Undertaking Letter Agreement dated 1/5/98
9050 PARK BLVD. #8
LARGO, FL 33777
-------------------------------------------------------------------------------------------------------------------------------
137. LAWSON, RICHARD Undertaking Letter Agreement dated 3/13/98
511-6 BAYMEADOWS ROAD, #106
JACKSONVILLE, FL 32217
-------------------------------------------------------------------------------------------------------------------------------
138. LOEF, JAMES Undertaking Letter Agreement dated 9/17/97
273 SHADOW BEND
WHEELING, IL 60090
-------------------------------------------------------------------------------------------------------------------------------
139. LUCE, JAMES D. Undertaking Letter Agreement dated 1/12/98 7514
NEBRASKA AVE.
NEW PORT RICHEY, FL 34653
-------------------------------------------------------------------------------------------------------------------------------
140. MCDONALD, JANETH Undertaking Letter Agreement dated 1/2/98
429 SHERIDAN ROAD, #10
HIGHWOOD, IL 60040
-------------------------------------------------------------------------------------------------------------------------------
141. MCNALLY, ANDREW IV Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
142. MCPHEE, BRUCE I. Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
143. METZ, DENISE Undertaking Letter Agreement dated 2/3/98
1445 CHURCHHILL CT
APT #106 K
MUNDELEIN, IL 60060
-------------------------------------------------------------------------------------------------------------------------------
144. MIZEL, GERALD Undertaking Letter Agreement
15 COUNTRY LANE
NORTHFIELD, IL 60093
-------------------------------------------------------------------------------------------------------------------------------
145. OWEN, BRAD Undertaking Letter Agreement dated 9/25/97 1752 NORTH
SHORE AVENUE
CHICAGO, IL 60626
-------------------------------------------------------------------------------------------------------------------------------
146. PARKS, KENNETH Undertaking Letter Agreement dated 6/18/98 373
WINDERMERE BLVD.
ALEXANDRIA, LA 71303
-------------------------------------------------------------------------------------------------------------------------------
147. PERNA, REGINA Undertaking Letter Agreement dated 5/28/97
6871 W. MT VERON COURT
GURNEE, IL 60031
-------------------------------------------------------------------------------------------------------------------------------
148. PETERS, DAVE Undertaking Letter Agreement dated 1/98
2337 TIFFANY CIRCLE
FLORENCE, MS 39073
-------------------------------------------------------------------------------------------------------------------------------
149. PIATKIEWIC, BOB Undertaking Letter Agreement dated 1/21/98
1521 ARLINGTON AVENUE
BATON ROUGE, LA 70808
-------------------------------------------------------------------------------------------------------------------------------
150. POND, CHARLEY Undertaking Letter Agreement dated 4/1/97
25985 N. OAK HILL ROAD
LAKE BARRINGTON, IL 60010
-------------------------------------------------------------------------------------------------------------------------------
151. PORTER, DON Undertaking Letter Agreement dated 1/16/98
2500 CHAPELWOOD DRIVE
PITTSBURGH, PA 15241
-------------------------------------------------------------------------------------------------------------------------------
152. PRATT, JOHN Indemnification Agreement dated 4/6/89 15210 LAUREL
LANE S.
PEMBROKE PINES, FL 33207
-------------------------------------------------------------------------------------------------------------------------------
153. SCHUBLE, GARY Undertaking Letter Agreement dated 1/12/98
2657 LOTA COURT
ORANGE PARK, FL 32073
-------------------------------------------------------------------------------------------------------------------------------
154. SHANER, CAROLYN Undertaking Letter Agreement dated 10/6/97
401 LONGOASTLE DRIVE, #4
GREEN CASTLE, IN 46135
-------------------------------------------------------------------------------------------------------------------------------
155. SMITH, DAN G. Undertaking Letter Agreement dated 1/9/98 3114
PEBBLE HILL CT.
SELLERSBURG, IN 47172
-------------------------------------------------------------------------------------------------------------------------------
156. SMITH, ROBERT L. Undertaking Letter Agreement dated 1/27/98 122
FAIRBURY DR.
GOOSE CREEK, SC 29445
-------------------------------------------------------------------------------------------------------------------------------
157. SNYDER, LOREN Undertaking Letter Agreement dated 6/17/98
2308 BRIAR LANE
LINDENHURST, IL 60046
-------------------------------------------------------------------------------------------------------------------------------
158. STAUTZENBACH, EDWARD G. Undertaking Letter Agreement dated 10/20/97
610 E. FAIRVIEW
ARLINGTON HGTS, IL 60005
-------------------------------------------------------------------------------------------------------------------------------
159. STEINGRABER, FRED G. Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
160. STEPHENS, JOHN Undertaking Letter Agreement dated 1/15/98
8154 HWY 107
MANSURA, LA 71350-0000
-------------------------------------------------------------------------------------------------------------------------------
161. TAYLOR, DAVE Undertaking Letter Agreement dated 1/98
1720 ARABIAN LANE
PALM HARBOR, FL 34685
-------------------------------------------------------------------------------------------------------------------------------
162. TERRA, ESTATE OF DANIEL J. Undertaking Letter Agreement dated 9/15/97
528 ROSLYN
KENILWORTH, IL 60043
-------------------------------------------------------------------------------------------------------------------------------
163. TILSON, SHEILA Undertaking Letter Agreement dated 5/27/97 1023
SHADY TREE LANE
WHEELING, IL 60090
-------------------------------------------------------------------------------------------------------------------------------
164. VALLEM, BRADLEY Undertaking Letter Agreement dated 4/9/97
206 LONSDALE
PROSPECT HEIGHTS, IL 60070
-------------------------------------------------------------------------------------------------------------------------------
165. WALKER, CLIFF Undertaking Letter Agreement dated 1/14/98
1439 MARKEL DRIVE
WINTERGARDEN, FL 34787
-------------------------------------------------------------------------------------------------------------------------------
166. WATSON, CHARLES Undertaking Letter Agreement dated 1/19/98
9014 MARVA DRIVE
SHREVEPORT, LA 71118
-------------------------------------------------------------------------------------------------------------------------------
167. WICKLANDER, PHILIP Indemnification Agreement dated 3/20/97
C/O KIRKLAND AND ELLIS
200 EAST RANDOLPH
CHICAGO, IL 60601
-------------------------------------------------------------------------------------------------------------------------------
168. WILT, BILL Undertaking Letter Agreement dated 12/20/97
6421 W. CORONA DRIVE
CHANDLER, AZ 85226
-------------------------------------------------------------------------------------------------------------------------------
169. WOODALL, RALPH Undertaking Letter Agreement dated 1/98
186 BLANCO PEAK
KERNERSVILLE, NC 27284
-------------------------------------------------------------------------------------------------------------------------------
170. ZLATOS, FRANK Undertaking Letter Agreement dated 1/23/98
770 THOMASZEWSKI
LEMONT, IL 60439
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
1 Unless such contract or unexpired lease is rejected by motion on or prior to
the Confirmation Date.
Mercury Finance Company
and
Norwest Bank Minnesota, National Association,
Trustee
FIRST SUPPLEMENTAL TRUST INDENTURE
Dated as of __________, 1999
Supplementing that certain
INDENTURE
Dated as of __________, 1999
Authorizing the Issuance and Delivery of
Senior Subordinated Securities
consisting of $___________* aggregate principal amount of
11% Senior Subordinated Notes Due 2002
* In the execution version, the appropriate amount determined in accordance with
__________________________ of the Plan will be inserted here, in the
first paragraph on page 2 and in Section 1.1(b) hereof.
TABLE OF CONTENTS
Page
RECITALS......................................................................1
[Form of Face of Security]....................................................2
[Form of Reverse of Security].................................................4
ARTICLE I. ISSUANCE OF SENIOR SUBORDINATED NOTES.............................6
Section 1.1. Issuance of Senior Subordinated Notes; Principal Amount;
Maturity................................................6
Section 1.2. Interest on the Senior Subordinated Notes; Payment of
Interest................................................7
ARTICLE II. CERTAIN DEFINITIONS..............................................7
Section 2.1. Certain Definitions.....................................7
ARTICLE III. CERTAIN COVENANTS...............................................9
Section 3.1. Indebtedness............................................9
Section 3.2. Restricted Payments.....................................9
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT....................................10
Section 4.1. Immediate Events of Default............................10
ARTICLE V. REDEMPTION OF SECURITIES.........................................10
Section 5.1. Right of Redemption....................................10
Section 5.2. Repurchase.............................................10
ARTICLE VI. MISCELLANEOUS...................................................10
Section 6.1. Reference to and Effect on the Indenture...............10
Section 6.2. Waiver of Certain Covenants............................10
Section 6.3. Supplemental Indenture May be Executed in Counterparts.10
FIRST SUPPLEMENTAL INDENTURE, dated as of __________, 1999 (this "First
Supplemental Indenture"), between Mercury Finance Company, a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
and Norwest Bank Minnesota, National Association, a U.S. national banking
association, as Trustee (the "Trustee"), supplementing that certain Indenture,
dated as of __________, 1999, between the Company and the Trustee (the
"Indenture").
RECITALS
A. The Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of its senior
subordinated unsecured debentures (the "Securities") to be issued in one or more
series as provided for in the Indenture.
B. The Indenture provides that the Securities of each series shall be
in such form as may be established by or pursuant to a Board Resolution or in
one or more indentures supplemental thereto, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution thereof.
C. The Company and the Trustee have agreed that the Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated "11%
Senior Subordinated Notes Due 2002" (the "Senior Subordinated Notes") pursuant
to the terms of this First Supplemental Indenture and substantially in the form
set forth below, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Indenture
and this First Supplemental Indenture, and with 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
Subordinated Notes, as evidenced by their execution thereof.
[Form of Face of Security]
MERCURY FINANCE COMPANY
11% SENIOR SUBORDINATED NOTE DUE 2002
No. R-__________ $
CUSIP No.
MERCURY FINANCE COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter called the "Company," which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to [_______________], or registered
assigns, the principal sum of $__________ on [the third anniversary of the
Effective Date], subject to earlier redemption or repurchase as described below,
and to pay interest thereon from [the Effective Date], or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 11% per annum, payable quarterly on ___________ of each year,
commencing on __________, 199_, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in said Indenture,
be computed on the basis of a 360-day year consisting of twelve 30-day months
and paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be ________________________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
calendar days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of and any such interest on this Security
shall be made at the office or agency of the Company maintained for such purpose
in New York, New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address appears in the Security Register.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET FORTH ON THE
REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH IN THIS PLACE.
This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication herein has been signed manually by the
Trustee under said Indenture.
IN WITNESS WHEREOF, this instrument has been duly executed in
accordance with the Indenture.
MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
By:
[Form of Reverse of Security]
MERCURY FINANCE COMPANY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities") issued and to be issued in one or more
series under an Indenture, dated as of __________, 1999 (herein called the
"Indenture"), between the Company and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $-----------.
To the extent set forth in the Indenture, each Security issued
thereunder, including this Security, is and will be subordinated in right of
payment to all existing and future Senior Debt of the Company. This Security
will rank pari passu with any existing and future senior subordinated
indebtedness of the Company and will rank senior to all other subordinated
indebtedness of the Company.
No sinking fund is provided for the Securities. Provided that no Senior
Indebtedness of the Company is Outstanding, the Securities are subject to
redemption at the option of the Company, at any such time and from time to time,
in whole or in part, in increments of not less than $5.0 million, upon not more
than 60 nor less than 30 days' notice to the Holders prior to the Redemption
Date, at the principal amount thereof, plus accrued and unpaid interest thereon
to the date of redemption.
If less than all of the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed will be selected by such method as
the Trustee may deem fair and appropriate. In the event of the redemption of
this Security in part only, a new Security or Securities of this series and of
like tenor for the portion hereof not so redeemed shall be issued in the name of
the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless (a) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities of this series, (b) the Holders of not less than 25% in
principal amount of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity,
(c) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request and (d) the Trustee shall have failed
to institute such proceeding for 60 calendar days after receipt of such notice,
request, and offer of indemnity.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium or
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and integral multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like
tenor, of authorized denominations and for the same aggregate principal amount,
shall be issued to the designated transferee or transferees.
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 Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security shall be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security that are defined in the Indenture shall
have the respective meanings assigned to them in the Indenture. This Security
and the Indenture shall be construed in accordance with the laws of the State of
New York without giving effect to principles of conflict of laws of such State.
D. The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: ________________________, as Trustee
By:
Authorized Signatory
E. All acts and things necessary to make the Senior Subordinated Notes,
when the Senior Subordinated Notes have been executed by the Company and
authenticated by the Trustee and delivered as provided in the Indenture and this
First Supplemental Indenture, the valid, binding and legal obligations of the
Company and to constitute these presents a valid indenture and agreement
according to its terms, have been done and performed, and the execution and
delivery by the Company of the Indenture and this First Supplemental Indenture
and the issue hereunder of the Senior Subordinated Notes have in all respects
been duly authorized; and the Company, in the exercise of the legal right and
power in it vested, has executed and delivered the Indenture and is executing
and delivering this First Supplemental Indenture and proposes to make, execute,
issue and deliver the Senior Subordinated Notes.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the Senior
Subordinated Notes are authenticated, issued, and delivered, and in
consideration of the premises and of the purchase and acceptance of the Senior
Subordinated Notes by the Holders thereof, it is mutually agreed, for the equal
and proportionate benefit of the respective Holders from time to time of the
Senior Subordinated Notes, as follows:
ARTICLE I. ISSUANCE OF SENIOR SUBORDINATED NOTES.
Section 1.1. Issuance of Senior Subordinated Notes; Principal Amount; Maturity.
(a) On __________, 1999, the Company shall issue and deliver to the
Trustee, and the Trustee shall authenticate, Senior Subordinated Notes
substantially in the form set forth above, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by the Indenture and this First Supplemental Indenture, and with 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 Subordinated Notes, as evidenced by their
execution thereof.
(b) The Senior Subordinated Notes shall be issued in the aggregate
principal amount of $_________ and shall mature on [the third anniversary of the
Effective Date].
Section 1.2. Interest on the Senior Subordinated Notes; Payment of Interest.
(a) The Senior Subordinated Notes shall bear interest at the rate of
11% per annum from [the Effective Date], or, if later, from the most recent
Interest Payment Date to which interest has been paid or duly provided for.
(b) The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date shall, as provided in the Indenture, be paid to the
Person in whose name a Senior Subordinated Note (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the ______________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name the Senior Subordinated Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of the Senior Subordinated Notes not less than
10 calendar 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 Subordinated Notes may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
(c) Payment of the principal of and any such interest on the Senior
Subordinated Notes shall be made at the office or agency of the Company
maintained for such purpose in New York, New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address appears in the Security Register].
ARTICLE II. CERTAIN DEFINITIONS.
Section 2.1. Certain Definitions.
The terms defined in this Section 2.1 (except as herein otherwise
expressly provided or unless the context of this First Supplemental Indenture
otherwise requires) for all purposes of this First Supplemental Indenture and of
any indenture supplemental hereto have the respective meanings specified in this
Section 2.1. All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP. All other terms used in this First
Supplemental Indenture that are defined in the Indenture or the Trust Indenture
Act, either directly or by reference therein (except as herein otherwise
expressly provided or unless the context of this First Supplemental Indenture
otherwise requires), have the respective meanings assigned to such terms in the
Indenture or the Trust Indenture Act, as the case may be, as in force at the
date of this First Supplemental Indenture as originally executed.
"Affiliate" has the meaning ascribed thereto in Section 3.8.
"Effective Date" means ______________, 1999.
"Leverage Ratio" means, at any date of determination, the ratio of the
sum of the Indebtedness and the net worth of the Company and its Subsidiaries to
the Indebtedness of the Company and its Subsidiaries, in each case calculated on
a consolidated basis in accordance with GAAP.
"Permitted Indebtedness" means, without duplication: (a) the Series A
Senior Secured Notes and the Series B Senior Secured Notes; (b) Indebtedness
under one or more Working Capital Facilities; (c) Indebtedness between or among
the Company and its wholly owned Subsidiaries; (d) to the extent deemed to be
"Indebtedness," obligations under swap agreements, cap agreements, collar
agreements, insurance arrangements, or any similar agreement or arrangement, in
each case designed to provide a bona fide hedge against fluctuations in interest
rates, the cost of currency, or the cost of goods (other than inventory); (e)
other Indebtedness of the Company or its Subsidiaries in outstanding amounts not
to exceed $10 million in the aggregate at any particular time; (f) liabilities
(other than for or in connection with borrowed money) incurred in the operation
of the Finance Business in the ordinary course thereof and not more than six
months overdue, unless contested in good faith by appropriate proceedings; (g)
Indebtedness evidenced by letters of credit that are issued in the ordinary
course of the business of the Company and its Subsidiaries to secure workers'
compensation and other insurance coverages; (h) deferred taxes and other
deferred obligations incurred in the ordinary course of business and not
evidenced by notes, bonds, debentures or other evidences of indebtedness; and
(i) Indebtedness incurred in connection with any extension, renewal,
refinancing, replacement, or refunding (including successive extensions,
renewals, refinancings, replacements, or refundings), in whole or in part, of
any Indebtedness of the Company or its Subsidiaries; provided, however, that the
principal amount of the Indebtedness so incurred does not exceed the sum of the
principal amount of the Indebtedness so extended, renewed, refinanced, replaced,
or refunded, plus all interest accrued thereon and all related fees and
expenses.
"Plan" means the Plan of Reorganization of Mercury Finance Company
confirmed by the United States Bankruptcy Court for the District of
_______________ pursuant to an order dated ___________ __, 1999.
"Restricted Payments" has the meaning ascribed thereto in Section 3.2.
"Senior Subordinated Notes" means the Company's 11% Senior Subordinated
Notes Due 2002 issued pursuant to this First Supplemental Indenture.
"Subordinated Indebtedness" means any Indebtedness of the Company which
is expressly subordinated in right of payment to the senior secured notes issued
under the Senior Secured Notes Indenture.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
amended or modified from time to time.
ARTICLE III. CERTAIN COVENANTS.
Section 3.1. Indebtedness.
The Company shall not, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become liable with respect to, any Indebtedness
other than Permitted Indebtedness if immediately after incurring such
Indebtedness other than Permitted Indebtedness, the Company's Leverage Ratio,
calculated on a pro forma basis, would be equal to or greater than 3.00:1.00.
Section 3.2. Restricted Payments.
The Company shall not (a) declare or pay any dividend on, or make any
other distribution on account of, the Company's capital stock or (b) purchase,
redeem or otherwise acquire or retire for value any capital stock (including any
option, warrant or right to purchase capital stock) of the Company owned
beneficially by a Person other than a wholly owned Subsidiary of the Company
(all such dividends, distributions, purchases or redemptions being collectively
referred to as "Restricted Payments"). Notwithstanding anything in the foregoing
to the contrary, the Company may take the actions described above if, at the
time of such action or after giving effect thereto: (i) no Event of Default
shall have occurred and is continuing; (ii) the Company could incur at least
$1.00 of Indebtedness (other than Permitted Indebtedness) under Section 3.1; or
(iii) the cumulative amount of Restricted Payments made subsequent to the
Effective Date shall not be greater than the sum of: (A) 50% of the Company's
cumulative consolidated net income (or a negative amount equal to 100% of the
Company's cumulative consolidated net loss, if applicable) from the Effective
Date through the end of the Company's fiscal quarter immediately preceding the
taking of such action; and (B) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale of capital stock of the Company (other
than redeemable capital stock), including capital stock issued upon the
conversion of convertible Indebtedness issued on or after the Effective Date, in
exchange for outstanding Indebtedness, or from the exercise of options,
warrants, or rights to purchase capital stock of the Company to any Person other
than to a Subsidiary of the Company subsequent to the Effective Date (with the
Company being deemed, in the case of capital stock issued upon conversion or in
exchange for Indebtedness, to have received net cash proceeds equal to the
principal amount of the Indebtedness so converted or exchanged); provided,
however, that (1) the payment of any dividend within 60 calendar days after the
date of declaration thereof, if such declaration complied with the foregoing
redemption or other acquisition provisions on the date of such declaration, (2)
the purchase, redemption, or other acquisition or retirement for value of any
shares of capital stock of the Company in exchange for, or out of the proceeds
of, a substantially concurrent issue and sale (other than to a Subsidiary of the
Company) of other shares of capital stock (other than redeemable capital stock)
of the Company, and (3) any purchase, redemption or other acquisition or
retirement for value of any capital stock (including any option, warrant, or
right to purchase capital stock) of the Company issued to any employee or
director of the Company pursuant to any employee benefit or similar plan shall
not be deemed to constitute "Restricted Payments" and shall not be prohibited
under this Section.
ARTICLE IV. ADDITIONAL EVENTS OF DEFAULT.
Section 4.1. Immediate Events of Default
Notwithstanding anything in Section 9.01 of the Indenture to the
contrary, if the Company defaults in the performance of, or breaches any,
covenant set forth in Article III of this First Supplemental Indenture or in
Section 6.05 of the Indenture, such default or breach shall immediately
constitute an Event of Default, without giving effect to any passage of time or
notice or both.
ARTICLE V. REDEMPTION OF SECURITIES.
Section 5.1. Right of Redemption.
The Senior Subordinated Notes may be redeemed in accordance with the
provisions of the form thereof set forth herein.
Section 5.2. Repurchase.
Provided that no Senior Indebtedness of the Company is Outstanding, the
Company may at any such time and from time to time purchase Senior Subordinated
Notes in the open market or otherwise at any price, and any Senior Subordinated
Notes so purchased shall be promptly surrendered to the Trustee for cancellation
and shall not be reissued.
ARTICLE VI. MISCELLANEOUS.
Section 6.1. Reference to and Effect on the Indenture.
This First Supplemental Indenture shall be construed as supplemental to
the Indenture and all the terms and conditions of this First Supplemental
Indenture shall be deemed to be part of the terms and conditions of the
Indenture. Except as set forth herein, the Indenture heretofore executed and
delivered is hereby (i) incorporated by reference in this First Supplemental
Indenture and (ii) ratified, approved and confirmed.
Section 6.2. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Article III hereof if the Holders of a
majority in principal amount of the Outstanding Senior Subordinated 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 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.
Section 6.3. Supplemental Indenture May be Executed in Counterparts.
This instrument may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
[Seal] MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
Attest:
Name:
Title:
STATE OF [ ] )
--------------------------
) SS:
COUNTY OF [ ] )
On this _____ day of [__________], 1999, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she is a _______________ of MERCURY FINANCE COMPANY, one of the entities
described in and which executed the above instrument; that he/she knows the seal
of said entity; that the seal or a facsimile thereof affixed to said instrument
is such seal; that it was so affixed by authority of the Board of Directors of
said entity, and that he/she signed his/her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF [ ] )
-----------------
) SS:
COUNTY OF [ ] )
On this _____ day of [__________], 1999, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she is a _______________ of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
Mercury Finance Company
and
Norwest Bank Minnesota, National Association,
Trustee
-----------------------
INDENTURE
Dated as of ______________, 1999
-----------------------
SENIOR SUBORDINATED NOTES
Table of Contents*
Page
RECITALS 1
ARTICLE I. DEFINITIONS........................................................1
SECTION 1.01. CERTAIN TERMS DEFINED...................................1
Act ....................................................1
Affiliate....................................................2
Authenticating Agent.........................................2
Board of Directors...........................................2
Board Resolution.............................................2
Business Day.................................................2
Capital Lease................................................2
Capital Lease Obligations....................................2
Commission...................................................3
Common Stock.................................................3
Company 3
Company Request or Company Order.............................3
Corporate Trust Office.......................................3
Covenant Defeasance..........................................3
Default 3
Defaulted Interest...........................................3
Defeasance...................................................4
Defeasible Series............................................4
Depositary...................................................4
Event of Default.............................................4
Exchange Act.................................................4
GAAP ....................................................4
Global Security..............................................4
Holder ....................................................4
Indebtedness.................................................5
Indenture....................................................5
Interest ....................................................5
Interest Payment Date........................................5
Material Adverse Effect......................................5
Maturity 6
Notice of Default............................................6
Officer's Certificate........................................6
Opinion of Counsel...........................................6
Original Issue Discount Security.............................6
Outstanding..................................................6
Paying Agent.................................................7
Person ....................................................7
Place of Payment.............................................7
Predecessor Security.........................................7
Redemption Date..............................................8
Redemption Price.............................................8
Regular Record Date..........................................8
Responsible Officer..........................................8
Securities...................................................8
Security Register and Security Registrar.....................8
Senior Indebtedness..........................................9
Special Record Date..........................................9
Stated Maturity..............................................9
Subsidiary...................................................9
Trust Indenture Act..........................................9
Trustee 10
U.S. Government Obligation..................................10
Vice President..............................................10
Working Capital Facility....................................10
ARTICLE II. THE SECURITIES...................................................11
SECTION 2.01. DESIGNATION AND AMOUNT OF SECURITIES...................11
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF
AUTHENTICATION.........................................12
SECTION 2.03. DATE AND DENOMINATIONS.................................14
SECTION 2.04. EXECUTION, AUTHENTICATION, AND DELIVERY OF SECURITIES..14
SECTION 2.05. REGISTRATION OF TRANSFER AND EXCHANGE..................15
SECTION 2.06. TEMPORARY SECURITIES...................................17
SECTION 2.07. MUTILATED, DESTROYED, LOST, AND STOLEN SECURITIES......17
SECTION 2.08. CANCELLATION OF SURRENDERED SECURITIES.................18
SECTION 2.09. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.........18
SECTION 2.10. PERSONS DEEMED OWNERS..................................20
SECTION 2.11. COMPUTATION OF INTEREST................................20
SECTION 2.12. CUSIP NUMBERS..........................................20
ARTICLE III. REDEMPTION OF SECURITIES........................................20
SECTION 3.01. APPLICABILITY OF ARTICLE...............................20
SECTION 3.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE..................20
SECTION 3.03. DEPOSIT OF REDEMPTION PRICE............................21
SECTION 3.04. SECURITIES PAYABLE ON REDEMPTION DATE..................22
SECTION 3.05. SECURITIES REDEEMED IN PART............................22
ARTICLE IV. SINKING FUNDS....................................................22
SECTION 4.01. APPLICABILITY OF ARTICLE...............................22
SECTION 4.02. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES..23
SECTION 4.03. REDEMPTION OF SECURITIES FOR SINKING FUND..............23
ARTICLE V. DEFEASANCE AND COVENANT DEFEASANCE................................23
SECTION 5.01. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.............................................24
SECTION 5.02. DEFEASANCE AND DISCHARGE...............................24
SECTION 5.03. COVENANT DEFEASANCE....................................24
SECTION 5.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE........25
SECTION 5.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS..........27
SECTION 5.06. REINSTATEMENT..........................................27
ARTICLE VI. PARTICULAR COVENANTS OF THE COMPANY..............................28
SECTION 6.01. PAYMENT OF PRINCIPAL, PREMIUM, AND INTEREST ON
SECURITIES.............................................28
SECTION 6.02. MAINTENANCE OF OFFICE OR AGENCY........................28
SECTION 6.03. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST......28
SECTION 6.04. PAYMENT OF TAXES AND OTHER CLAIMS......................30
SECTION 6.05. EXISTENCE..............................................30
SECTION 6.06. COMPLIANCE WITH LAWS...................................30
SECTION 6.07. STATEMENT BY OFFICERS AS TO DEFAULT....................30
SECTION 6.08. WAIVER OF CERTAIN COVENANTS............................31
SECTION 6.09. CALCULATION OF ORIGINAL ISSUE DISCOUNT.................31
ARTICLE VII. SECURITIES HOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE................................................31
SECTION 7.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS................................................31
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS..32
SECTION 7.03. REPORTS BY TRUSTEE.....................................32
SECTION 7.04. REPORTS BY COMPANY.....................................32
ARTICLE VIII. DEFAULT........................................................33
SECTION 8.01. EVENT OF DEFAULT.......................................33
SECTION 8.02. COVENANT OF COMPANY TO PAY TO TRUSTEE WHOLE AMOUNT DUE
ON SECURITIES ON DEFAULT IN PAYMENT OF INTEREST OR
PRINCIPAL; SUITS FOR ENFORCEMENT BY TRUSTEE............36
SECTION 8.03. APPLICATION OF MONEY COLLECTED BY TRUSTEE..............37
SECTION 8.04. LIMITATION ON SUITS BY HOLDERS OF SECURITIES...........37
SECTION 8.05. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION IN
EXERCISE OF RIGHTS NOT A WAIVER OF EVENT OF DEFAULT....38
SECTION 8.06. RIGHTS OF HOLDERS OF MAJORITY IN PRINCIPAL AMOUNT OF
OUTSTANDING SECURITIES TO DIRECT TRUSTEE...............38
SECTION 8.07. REQUIREMENT OF AN UNDERTAKING TO PAY COSTS IN CERTAIN
SUITS UNDER THE INDENTURE OR AGAINST THE TRUSTEE.......39
SECTION 8.08. NOTICE OF DEFAULTS.....................................39
SECTION 8.09. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, AND INTEREST..................................39
SECTION 8.10. RESTORATION OF RIGHTS AND REMEDIES.....................39
SECTION 8.11. TRUSTEE MAY FILE PROOFS OF CLAIMS......................40
ARTICLE IX SUBORDINATION OF SECURITIES.......................................40
SECTION 9.01 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS...........40
SECTION 9.02 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC..........40
SECTION 9.03 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION
OF SECURITIES...........................................41
SECTION 9.04 PAYMENT LIMITATION......................................42
SECTION 9.05 PAYMENT PERMITTED.......................................43
SECTION 9.06 CERTAIN LIMITATIONS.....................................43
SECTION 9.07 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.43
SECTION 9.08 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.............44
SECTION 9.09 AGREEMENT TO EFFECTUATE SUBORDINATION...................44
SECTION 9.10 NO WAIVER OF SUBORDINATION PROVISIONS...................44
SECTION 9.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.......................................45
SECTION 9.12 PROHIBITED PAYMENTS HELD IN TRUST.......................45
ARTICLE X. CONCERNING THE TRUSTEE............................................46
SECTION 10.01. CERTAIN DUTIES AND RESPONSIBILITIES...................46
SECTION 10.02. CERTAIN RIGHTS OF TRUSTEE.............................46
SECTION 10.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES............................................47
SECTION 10.04. MAY HOLD SECURITIES...................................47
SECTION 10.05. MONEY HELD IN TRUST...................................47
SECTION 10.06. COMPENSATION AND REIMBURSEMENT........................48
SECTION 10.07. DISQUALIFICATION; CONFLICTING INTERESTS...............48
SECTION 10.08. CORPORATE TRUSTEE REQUIRED ELIGIBILITY................48
SECTION 10.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.....49
SECTION 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................50
SECTION 10.11. MERGER, CONVERSION, CONSOLIDATION, OR SUCCESSION TO
BUSINESS..............................................51
SECTION 10.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.....52
SECTION 10.13. APPOINTMENT OF AUTHENTICATING AGENT...................52
ARTICLE XI. SUPPLEMENTAL INDENTURES AND CERTAIN ACTIONS......................54
SECTION 11.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE
ENTERED INTO WITHOUT CONSENT OF HOLDERS...............54
SECTION 11.02. MODIFICATION OF INDENTURE WITH CONSENT OF HOLDERS OF
AT LEAST A MAJORITY IN PRINCIPAL AMOUNT OF
OUTSTANDING SECURITIES................................55
SECTION 11.03. NO AMENDMENTS TO ARTICLE IX...........................56
SECTION 11.04. EXECUTION OF SUPPLEMENTAL INDENTURES..................56
SECTION 11.05. EFFECT OF SUPPLEMENTAL INDENTURES.....................56
SECTION 11.06. CONFORMITY WITH TRUST INDENTURE ACT...................56
SECTION 11.07. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES....56
ARTICLE XII. CONSOLIDATION, MERGER, SALE, OR TRANSFER........................57
SECTION 12.01. CONSOLIDATIONS AND MERGERS OF COMPANY AND SALES
PERMITTED ONLY ON CERTAIN TERMS.......................57
ARTICLE XIII. SATISFACTION AND DISCHARGE OF INDENTURE........................57
SECTION 13.01. SATISFACTION AND DISCHARGE OF INDENTURE...............57
SECTION 13.02. APPLICATION OF TRUST MONEY............................58
ARTICLE XIV. MISCELLANEOUS PROVISIONS........................................58
SECTION 14.01. SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE..58
SECTION 14.02. SERVICE OF REQUIRED NOTICE TO TRUSTEE AND COMPANY.....59
SECTION 14.03. SERVICE OF REQUIRED NOTICE TO HOLDERS; WAIVER.........59
SECTION 14.04. INDENTURE AND SECURITIES TO BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.....59
SECTION 14.05. COMPLIANCE CERTIFICATES AND OPINIONS..................60
SECTION 14.06. FORM OF DOCUMENTS DELIVERED TO TRUSTEE................60
SECTION 14.07. PAYMENTS DUE ON NON-BUSINESS DAYS.....................60
SECTION 14.08. PROVISIONS REQUIRED BY TRUST INDENTURE ACT TO CONTROL.60
SECTION 14.09. INVALIDITY OF PARTICULAR PROVISIONS...................61
SECTION 14.10. INDENTURE MAY BE EXECUTED IN COUNTERPARTS.............61
SECTION 14.11. ACTS OF HOLDERS; RECORD DATES.........................61
SECTION 14.12. EFFECT OF HEADINGS AND TABLE OF CONTENTS..............63
SECTION 14.13. BENEFITS OF INDENTURE.................................63
This INDENTURE, dated as of ___________ __, 1999, between
Mercury Finance Company, a corporation duly organized and existing under the
laws of the State of Delaware (the "Company"), and Norwest Bank Minnesota,
National Association, a U.S. national banking association, as Trustee (the
"Trustee").
RECITALS
A. The Company has duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time of its senior
subordinated notes (the "Securities"), to be issued in one or more series as in
this Indenture provided.
B. All acts and things necessary to make the Securities, when
the Securities have been executed by the Company and authenticated by the
Trustee and delivered as provided in this Indenture, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
indenture and agreement according to its terms, have been done and performed,
and the execution and delivery by the Company of this Indenture and the issue
hereunder of the Securities have in all respects been duly authorized; and the
Company, in the exercise of legal right and power in it vested, is executing and
delivering this Indenture and proposes to make, execute, issue and deliver the
Securities.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the
Securities are authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Securities by the Holders
thereof, it is mutually agreed, for the equal and proportionate benefit of the
respective Holders from time to time of the Securities or of a series thereof,
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. CERTAIN TERMS DEFINED
(a) The terms defined in this Section 1.01 for all purposes of
this Indenture and of any indenture supplemental hereto (except as herein or
therein otherwise expressly provided or unless the context of this Indenture
otherwise requires) have the respective meanings specified in this Section 1.01.
All other terms used in this Indenture that are defined in the Trust Indenture
Act, either directly or by reference therein (except as herein otherwise
expressly provided or unless the context of this Indenture otherwise requires),
have the respective meanings assigned to such terms in the Trust Indenture Act
as in force at the date of original execution of this Indenture.
Act:
The term "Act," when used with respect to any Holder, has the
meaning set forth in Section 14.11.
Affiliate:
The term "Affiliate" means, with respect to a particular
Person, any Person that, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, control of a Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
Authenticating Agent:
The term "Authenticating Agent" means any Person authorized by
the Trustee pursuant to Section 10.13 to act on behalf of the Trustee to
authenticate Securities of one or more series.
Board of Directors:
The term "Board of Directors" means the Board of Directors of
the Company or any duly authorized committee of such Board.
Board Resolution:
The term "Board Resolution" means a copy of a resolution
delivered to the Trustee and certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification.
Business Day:
The term "Business Day," when used with respect to any Place
of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in that Place of Payment are authorized
or required by law or executive order to close.
Capital Lease:
The term "Capital Lease" means, with respect to any Person,
any lease of property (whether real, personal, or mixed) by such Person or any
of its Subsidiaries as lessee that would be capitalized on a balance sheet of
such Person or any of its Subsidiaries prepared in conformity with GAAP, other
than, in the case of such Person or any of its Subsidiaries, any such lease
under which such Person or any of its Subsidiaries is the lessor.
Capital Lease Obligations:
The term "Capital Lease Obligations" means, with respect to
any Person, the capitalized amount of all obligations of such Person and its
Subsidiaries under Capital Leases, as determined on a consolidated basis in
conformity with GAAP.
Commission:
The term "Commission" means the Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
Common Stock:
The term "Common Stock" means the common stock of the Company.
Company:
The term "Company" means Mercury Finance Company, a Delaware
corporation, until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" will mean such
successor Person.
Company Request or Company Order:
The term "Company Request" or "Company Order" means a written
request or order signed in the name of the Company by one of its Responsible
Officers and delivered to the Trustee.
Corporate Trust Office:
The term "Corporate Trust Office" means the office of the
Trustee at which at any particular time its corporate trust business is
principally administered, which on the date hereof is Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479.
Covenant Defeasance:
The term "Covenant Defeasance" has the meaning set forth in
Section 5.03.
Default:
The term "Default" means any event which, with notice or
passage of time or both, would constitute an Event of Default.
Defaulted Interest:
The term "Defaulted Interest" has the meaning set forth in
Section 2.09.
Defeasance:
The term "Defeasance" has the meaning set forth in Section
5.02.
Defeasible Series:
The term "Defeasible Series" has the meaning set forth in
Section 5.01.
Depositary:
The term "Depositary" means, with respect to Securities of any
series issuable in whole or in part in the form of one or more Global
Securities, a clearing agency registered under the Exchange Act that is
designated to act as Depositary for such Securities in accordance with Section
2.01.
Event of Default:
The term "Event of Default" has the meaning set forth in
Section 8.01(a).
Exchange Act:
The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as the same may be in effect from time to time.
GAAP:
The term "GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and The American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by any
successor entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination.
Global Security:
The term "Global Security" means a Security that evidences all
or part of the Securities of any series and is authenticated and delivered to,
and registered in the name of, the Depositary for such Securities or a nominee
thereof.
Holder:
The term "Holder" means a person in whose name a particular
Security is registered in the Security Register.
Indebtedness:
The term "Indebtedness" means, as applied to any Person,
without duplication, (a) indebtedness for borrowed money, all indebtedness
evidenced by notes, bonds, debentures or other evidences of indebtedness, and
all indebtedness under purchase money mortgages or other purchase money liens or
conditional sales or similar title retention agreements, in each case where such
indebtedness has been created, incurred, assumed or guaranteed by such Person or
where such Person is otherwise liable therefor, and (b) indebtedness for
borrowed money secured by any mortgage, pledge or other lien or encumbrance upon
property owned by such Person even though such Person has not assumed or become
liable for the payment of such indebtedness; provided, however, that
indebtedness of the type referred to in clause (b) above shall be included
within the definition of "Indebtedness" only to the extent of the lesser of: (i)
the amount of the underlying indebtedness referred to in the clause (b) above
and (ii) the aggregate value of the security for such indebtedness.
Indenture:
The term "Indenture" means this Indenture, as this Indenture
may be amended, supplemented or otherwise modified from time to time, including,
for all purposes of this Indenture 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. The term
"Indenture" will also include the terms of particular series of Securities
established in accordance with Section 2.01.
Interest:
The term "interest," (i) when used with respect to an Original
Issue Discount Security, which by its terms bears interest only after Maturity,
means interest which accrues from and after and is payable after Maturity and
(ii) when used with respect to any Security, means the amount of all interest
accruing on such Security, including any default interest and any interest that
would have accrued after any Event of Default but for the occurrence of such
Event of Default, whether or not a claim for such interest would be otherwise
allowable under applicable law.
Interest Payment Date:
The term "Interest Payment Date," when used with respect to
any Security, means the Stated Maturity of an installment of interest on such
Security.
Material Adverse Effect:
The term "Material Adverse Effect" means a material adverse
effect on the business, assets, financial condition or results of operations of
the Company (taken together with its Subsidiaries as a whole).
Maturity:
The term "Maturity," when used with respect to any Security,
means the date on which the principal of that Security or an installment of
principal becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for redemption, or
otherwise.
Notice of Default:
The term "Notice of Default" means a written notice of the
kind set forth in Section 8.01(a)(iv).
Officer's Certificate:
The term "Officer's Certificate" means a certificate executed
on behalf of the Company by a Responsible Officer and delivered to the Trustee.
Opinion of Counsel:
The term "Opinion of Counsel" means an opinion in writing
signed by legal counsel, who, subject to any express provisions hereof, may be
an employee of or counsel to the Company or any Subsidiary, reasonably
acceptable to the Trustee.
Original Issue Discount Security:
The term "Original Issue Discount Security" means any Security
which provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 8.01(b).
Outstanding:
The term "Outstanding" means, when used with reference to
Securities as of a particular time, all Securities theretofore issued by the
Company and authenticated and delivered by the Trustee under this Indenture,
except (a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation, (b) Securities in respect of which (i) notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made, and (ii) money in the amount required
for the redemption thereof has been deposited with the Trustee or any Paying
Agent (other than the Company) in trust for the Holders of such Securities, (c)
Securities paid pursuant to Section 2.07(c), and (d) Securities in exchange for
or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of the Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent, or waiver hereunder, (x) the principal amount of an Original Issue
Discount Security that will be deemed to be Outstanding will be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof to such date pursuant to
Section 8.01(b), (y) the principal amount of a Security denominated in one or
more foreign currencies or currency units will be the U.S. dollar equivalent,
determined in the manner contemplated by Section 2.01 on the date of original
issuance of such Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent on the date of
original issuance of such Security of the amount determined as provided in
clause (i) above) of such Security, and (z) Securities owned by the Company or
any other obligor upon the Securities or any Affiliate of the Company or of such
other obligor will be disregarded and deemed not to be Outstanding, except that,
in determining whether the Trustee will be protected in relying upon any such
request, demand, authorization, direction, notice, consent, or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned will be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
Paying Agent:
The term "Paying Agent" means any Person authorized by the
Company to pay the principal of or any premium or interest on any Securities on
behalf of the Company.
Person:
The term "Person" means any individual, partnership,
corporation, limited liability company, limited liability partnership, joint
stock company, business trust, trust, unincorporated association, joint venture,
or other entity, or a governmental or political subdivision or agency thereof.
Place of Payment:
The term "Place of Payment," when used with respect to the
Securities of any series, means the place or places for the payment of the
principal of and any premium and interest on the Securities of that series
established in accordance with Section 2.01.
Predecessor Security:
The term "Predecessor Security," when used with respect to any
particular Security, means every previous Security evidencing all or a portion
of the same debt as that evidenced by such Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section 2.07 in
exchange for or in lieu of a mutilated, destroyed, lost, or stolen Security will
be deemed to evidence the same debt as the mutilated, destroyed, lost, or stolen
Security.
Redemption Date:
The term "Redemption Date," when used with respect to any
Security to be redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
Redemption Price:
The term "Redemption Price," when used with respect to any
Security to be redeemed, means the price (including premium, if any) at which it
is to be redeemed pursuant to this Indenture.
Regular Record Date:
The term "Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means the date established
for that purpose in accordance with Section 2.01.
Responsible Officer:
The term "Responsible Officer," when used (a) with respect to
the Company, means the Chief Executive Officer, the President, the Chief
Financial Officer or the Secretary of the Company and (b) with respect to the
Trustee, means any Vice President, any Assistant Vice President, any Assistant
Secretary, any Assistant Treasurer, any trust officer or assistant trust
officer, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
are such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
Securities:
The term "Securities" has the meaning set forth in the first
recital of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture.
Security Register and Security Registrar:
The terms "Security Register" and "Security Registrar" have
the respective meanings set forth in Section 2.05.
Senior Indebtedness:
The term "Senior Debt" means (a) the Company's 10% Senior
Secured Notes, Series A issued under the Indenture dated as of ___________ __,
1999 (the "Senior Secured Notes Indenture") between the Company and the trustee
thereunder, (b) the Company's Senior Secured Notes, Series B issued under the
Senior Secured Notes Indenture, (c) any senior secured notes issued in the
future under the Senior Secured Notes Indenture, (d) Indebtedness with respect
to any Working Capital Facility and (e) any other Indebtedness which is not
expressed to be subordinate or junior in right of payment to any other
Indebtedness.
Special Record Date:
The term "Special Record Date" for the payment of any
Defaulted Interest means a date fixed by the Trustee pursuant to Section 2.09.
Stated Maturity:
The term "Stated Maturity," when used with respect to any
Security, any installment of interest thereon, or any other amount payable under
this Indenture or the Securities, means the date specified in this Indenture or
such Security as the regularly scheduled date on which the principal of such
Security, such installment of interest, or such other amount, is due and
payable.
Subsidiary:
The term "Subsidiary" means, as applied with respect to any
Person, any corporation, partnership, or other business entity of which, in the
case of a corporation, more than 50% of the issued and outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation has or might have voting power upon the
occurrence of any contingency), or, in the case of any partnership or other
legal entity, more than 50% of the ordinary equity capital interests, is at the
time directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries, or by one or more of such Person's
other Subsidiaries. Unless the context of this Indenture or any indenture
supplemental hereto otherwise expressly requires, the term "Subsidiary" shall
refer to a Subsidiary of the Company.
Trust Indenture Act:
The term "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended, 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.
Trustee:
The term "Trustee" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture and,
thereafter, "Trustee" will mean or include each Person who is then a Trustee
hereunder, and if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series will mean each Trustee with
respect to Securities of that series.
U.S. Government Obligation:
The term "U.S. Government Obligation" means (a) any security
that is (i) a direct obligation of the United States of America for the payment
of which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof and (b) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended) as custodian with respect to any U.S. Government Obligation
specified in clause (a), which U.S. Government Obligation is held by such
custodian for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal of or interest on any such U.S.
Government Obligation, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
Vice President:
The term "Vice President," when used with respect to the
Company or the Trustee, means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president."
Working Capital Facility:
The term "Working Capital Facility" means one or more funding
arrangements in an aggregate principal amount not to exceed at any one time $40
million with a financial institution or other lender or purchaser to finance or
refinance the purchase or origination of Receivables by the Company or any
Subsidiary or to otherwise provide funding for the general working capital needs
of the Company and its Subsidiaries in each case in the ordinary course of the
Finance Business.
(b) The words "Article" and "Section" refer to an Article and
Section, respectively, of this Indenture. The words "herein", "hereof," and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section, or other subdivision. Certain terms
used principally in Articles V, VI, and IX are defined in those Articles. Terms
in the singular include the plural and terms in the plural include the singular.
ARTICLE II. THE SECURITIES
SECTION 2.01. DESIGNATION AND AMOUNT OF SECURITIES
(a) The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is unlimited.
(b) The Securities may be issued in one or more series. There
will be established in or pursuant to a Board Resolution and, subject to Section
2.04, set forth or determined in the manner provided in an Officer's
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series: (i) the title of the Securities of
the series (which will distinguish the Securities of the series from Securities
of any other series); (ii) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in the exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.05, 2.06, 2.07, 3.05, or 11.07 and except for any
Securities which, pursuant to Section 2.04, are deemed never to have been
authenticated and delivered hereunder); (iii) the Person to whom any interest on
a Security of the series will be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest; (iv) the date or dates
on which the principal of the Securities of the series is payable; (v) the rate
or rates at which the Securities of the series will bear interest, if any, the
date or dates from which such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, and the Regular Record Date for any
interest payable on any Interest Payment Date; (vi) the place or places where
the principal of and any premium and interest on Securities of the series will
be payable; (vii) the period or periods within which, the price or prices at
which, and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any, of the Company to redeem or purchase Securities of the
series pursuant to any sinking fund or analogous provisions or at the option of
a Holder thereof and the period or periods within which, the price or prices at
which, and the terms and conditions upon which Securities of the series will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (ix) if
other than denominations of $1,000 and integral multiples thereof, the
denominations in which Securities of the series will be issuable; (x) the
currency, currencies, or currency units in which payment of the principal of and
any premium and interest on any Securities of the series will be payable if
other than the currency of the United States of America and the manner of
determining the equivalent thereof in the currency of the United States of
America for purposes of the definition of "Outstanding" in Section 1.01; (xi) if
the amount of payments of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index, based
upon a formula, or in some other manner, the manner in which such amounts will
be determined; (xii) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the Company or a
Holder thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies, or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election is
made will be payable, and the periods within which and the terms and conditions
upon which such election is to be made; (xiii) if other than the principal
amount thereof, the portion of the principal amount of Securities of the series
which will be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 8.01(b); (xiv) if applicable, that the Securities of the
series will be subject to either or both of Defeasance or Covenant Defeasance as
provided in Article V, provided that no series of Securities that is convertible
into Common Stock pursuant to Section 2.01(b)(xvi) or convertible into or
exchangeable for any other securities pursuant to Section 2.01(b)(xvii) will be
subject to Defeasance pursuant to Section 5.02; (xv) if and as applicable, that
the Securities of the series will be issuable in whole or in part in the form of
one or more Global Securities and, in such case, the Depositary or Depositaries
for such Global Security or Global Securities and any circumstances other than
those set forth in Section 2.05 in which any such Global Security may be
transferred to, and registered and exchanged for Securities registered in the
name of, a Person other than the Depositary for such Global Security or a
nominee thereof and in which any such transfer may be registered; (xvi) the
terms and conditions, if any, pursuant to which the Securities are convertible
into Common Stock; (xvii) the terms and conditions, if any, pursuant to which
the Securities are convertible into or exchangeable for any other securities,
including (without limitation) securities of Persons other than the Company; and
(xviii) any other terms of, or provisions, covenants, rights or other matters
applicable to, the series (which terms, provisions, covenants, rights or other
matters will not be inconsistent with the provisions of this Indenture, except
as permitted by Section 11.01(d)).
(c) All Securities of any one series will be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to the Board Resolution referred to below and (subject to Section
2.04) set forth or determined in the manner provided in the Officer's
Certificate referred to above or in any such indenture supplemental hereto.
(d) If any of the terms of the series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action will be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee concurrently with or prior to the delivery
of the Officer's Certificate setting forth the terms of the series.
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
(a) The Securities of each series will be in such form as may
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, and may have such letters, numbers, or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. If the form of Securities of
any series is established by action taken pursuant to a Board Resolution, a copy
of an appropriate record of such action will be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee concurrently
with or prior to the delivery of the Company Order contemplated by Section 2.04
for the authentication and delivery of such Securities.
(b) The definitive Securities will be printed, lithographed,
or engraved on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
(c) The Trustee's certificate of authentication will be in
substantially the following form:
[Form of Trustee's Certificate of Authentication for Securities]
Trustee's Certificate of Authentication
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
,
as Trustee
By:
Authorized Signatory
(d) Every Global Security authenticated and delivered
hereunder will bear a legend in substantially the following form:
[Form of Legend for Global Securities]
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee thereof. This Security may not be transferred to, or registered or
exchanged for Securities registered in the name of, any Person other than the
Depositary or a nominee thereof, and no such transfer may be registered, except
in the limited circumstances described in the Indenture. Every Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, this Security will be a Global Security subject to the
foregoing, except in such limited circumstances.
SECTION 2.03. DATE AND DENOMINATIONS
Each Security will be dated the date of its authentication.
The Securities of each series will be issuable only in registered form without
coupons in such denominations as may be specified in accordance with Section
2.01. In the absence of any such specified denomination with respect to the
Securities of any series, the Securities of such series will be issuable in
denominations of $1,000 and integral multiples thereof.
SECTION 2.04. EXECUTION, AUTHENTICATION, AND DELIVERY OF SECURITIES
(a) The Securities will be executed on behalf of the Company
by the Chief Executive Officer or the President of the Company and attested by
the Treasurer or the Secretary of the Company under its corporate seal. The
signature of any of these officers on the Securities may be manual or facsimile.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted, or otherwise reproduced on the Securities.
(b) Only such Securities bearing the Trustee's certificate of
authentication, signed manually by the Trustee, will be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such execution of
the certificate of authentication by the Trustee upon any Securities executed by
the Company will be conclusive evidence that the Securities so authenticated
have been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 2.08, for all
purposes of this Indenture such Security will be deemed never to have been
authenticated and delivered hereunder and will never be entitled to the benefits
of this Indenture.
(c) Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company will bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
(d) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order will authenticate and make such
Securities available for delivery. If the form or terms of the Securities of the
series have been established in or pursuant to one or more Board Resolutions as
permitted by Sections 2.01 and 2.02, in authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee will be entitled to receive, and (subject to
Section 10.01) will be fully protected in relying upon, an Opinion of Counsel
stating (i) if the form of such Securities has been established by or pursuant
to a Board Resolution as permitted by Section 2.02, that such form has been
established in conformity with the provisions of this Indenture, (ii) if the
terms of such Securities have been established by or pursuant to a Board
Resolution as permitted by Section 2.01, that such terms have been established
in conformity with the provisions of this Indenture, and (iii) that such
Securities, when authenticated and delivered by the Trustee and issued by the
Company in the manner and subject to any conditions specified in such Opinion of
Counsel, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
laws of general applicability relating to or affecting creditors' rights and by
general principles of equity.
(e) Notwithstanding the provisions of Sections 2.01 and
2.04(d), if all Securities of a series are not to be originally issued at one
time, it will not be necessary to deliver the Officer's Certificate otherwise
required pursuant to Section 2.01 or the Company Order and Opinion of Counsel
otherwise required pursuant to Section 2.04(d) at or prior to the time of
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
SECTION 2.05. REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Company will cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company will provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
(b) Upon surrender for registration of transfer of any
Security of any series at the office or agency in a Place of Payment for that
series, the Company will execute, and the Trustee will authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Securities of the same series, of any authorized denominations
and of a like aggregate principal amount and tenor.
(c) At the option of the Holder, Securities of any series may
be exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company will execute, and the
Trustee will authenticate and make available for delivery, the Securities which
the Holder making the exchange is entitled to receive.
(d) Every Security presented or surrendered for registration
of transfer or exchange will (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument or instruments of
transfer, in form reasonably satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing. No service charge will be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 2.06, 3.05, or 11.06 not involving any transfer.
The Company will not be required (i) to issue, register the transfer of, or
exchange Securities of any series during a period beginning at the opening of
business 15 calendar days before the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 3.02(c) and
ending at the close of business on the day of such mailing or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Securities to be redeemed in part, the
portion thereof not being redeemed.
(e) All Securities issued upon any registration of transfer or
exchange of Securities will be valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
(f) Notwithstanding any other provision in this Indenture, no
Global Security may be transferred to, or registered or exchanged for Securities
registered in the name of, any Person other than the Depositary for such Global
Security or any nominee thereof, and no such transfer may be registered, unless
(i) such Depositary (A) notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security or (B) ceases to be a clearing
agency registered under the Exchange Act, (ii) the Company executes and delivers
to the Trustee a Company Order that such Global Security shall be so
transferable, registrable, and exchangeable, and such transfers shall be
registrable, (iii) there shall have occurred and be continuing an Event of
Default with respect to the Securities evidenced by such Global Security or (iv)
there shall exist such other circumstances, if any, as have been specified for
this purpose in accordance with Section 2.01. Notwithstanding any other
provision in this Indenture, a Global Security to which the restriction set
forth in the preceding sentence shall have ceased to apply may be transferred
only to, and may be registered and exchanged for Securities registered only in
the name or names of, such Person or Persons as the Depositary for such Global
Security shall have directed and no transfer thereof other than such a transfer
may be registered. Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security to which the
restriction set forth in the first sentence of this Section 2.05(f) shall apply,
whether pursuant to this Section 2.05, Section 2.06, 2.07, 3.05, or 11.06 or
otherwise, will be authenticated and delivered in the form of, and will be, a
Global Security.
SECTION 2.06. TEMPORARY SECURITIES
Pending the preparation of definitive Securities of any
series, the Company may execute and register and upon Company Order the Trustee
will authenticate and make available for delivery temporary Securities (printed,
lithographed, or typewritten), of any authorized denomination, and substantially
in the form of the definitive Securities but with such omissions, insertions,
and variations as may be appropriate for temporary Securities, all as may be
determined by the officers executing such Securities as evidenced by their
execution of such Securities; provided, however, that the Company will use
reasonable efforts to have definitive Securities of that series available at the
times of any issuance of Securities under this Indenture. Every temporary
Security will be executed and registered by the Company and be authenticated by
the Trustee upon the same conditions and in substantially the same manner, and
with like effect, as the definitive Securities. The Company will execute and
register and furnish definitive Securities of such series as soon as practicable
and thereupon any or all temporary Securities of such series may be surrendered
in exchange therefor at the office or agency of the Company in the Place of
Payment for that series, and the Trustee will authenticate and make available
for delivery in exchange for such temporary Securities of such series one or
more definitive Securities of the same series, of any authorized denominations,
and of a like aggregate principal amount and tenor. Such exchange will be made
by the Company at its own expense and without any charge to the Holder therefor.
Until so exchanged, the temporary Securities of any series will be entitled to
the same benefits under this Indenture as definitive Securities of the same
series authenticated and delivered hereunder.
SECTION 2.07. MUTILATED, DESTROYED, LOST, AND STOLEN SECURITIES
(a) If any mutilated Security is surrendered to the Trustee,
the Company will execute and the Trustee will authenticate and make available
for delivery in exchange therefor a new Security of the same series and of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
(b) If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss, or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company will execute and the Trustee will authenticate
and make available for delivery, in lieu of any such destroyed, lost, or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
(c) In case any such mutilated, destroyed, lost, or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
(d) Upon the issuance of any new Security under this Section
2.07, 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.
(e) Every new Security of any series issued pursuant to this
Section 2.07 in exchange for any mutilated Security or in lieu of any destroyed,
lost, or stolen Security will constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost, or
stolen Security shall be at any time enforceable by anyone, and will be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Securities of that series duly issued hereunder.
(f) The provisions of this Section 2.07 are exclusive and will
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost, or stolen Securities.
SECTION 2.08. CANCELLATION OF SURRENDERED SECURITIES
All Securities surrendered for payment, redemption,
registration of transfer or exchange, or for credit against any sinking fund
payment will, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and will be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered will be promptly canceled by the Trustee. No Securities will be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 2.08, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee will be disposed of as directed by a
Company Order, provided, however, that the Trustee will not be required to
destroy canceled Securities except in accordance with its established policies.
SECTION 2.09. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED
(a) Except as otherwise provided in accordance with Section
2.01 with respect to any series of Securities, interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date will be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest.
(b) Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") will 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
together with interest thereon (to the extent permitted by law) at the rate of
interest applicable to such Security, at its election in each case, as provided
in clause (i) or (ii) below:
(i) The Company may elect to make payment of any
Defaulted Interest (and interest thereon, if any) to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
will be fixed in the following manner. The Company will notify the
Trustee in writing of the amount of Defaulted Interest (and interest
thereon, if any) proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company
will deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest (and
interest thereon, if any) or will 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 (and interest thereon, if
any) as in this clause (i) provided. Thereupon the Trustee will fix a
Special Record Date for the payment of such Defaulted Interest (and
interest thereon, if any) which will be not more than 15 calendar days
and not less than 10 calendar days prior to the date of the proposed
payment and not less than 10 calendar days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee will
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, will cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at such Holder's address as it appears in the
Security Register, not less than 10 calendar days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest
(and interest thereon, if any) and the Special Record Date therefor
having been so mailed, such Defaulted Interest will be paid to the
Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and will no longer be payable
pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted
Interest (and interest thereon, if any) on the Securities of any series
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and
upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause (ii), such manner of payment shall be deemed practicable by
the Trustee.
(c) Subject to the foregoing provisions of this Section 2.09,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security will carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 2.10. PERSONS DEEMED OWNERS
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee, and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and any
premium and (subject to Section 2.09) any interest on such Security and for all
other purposes whatsoever, whether or not such Security shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
will be affected by notice to the contrary.
SECTION 2.11. COMPUTATION OF INTEREST
Except as otherwise specified in accordance with Section 2.01
for Securities of any series, interest on the Securities of each series will be
computed on the basis of a 360-day year consisting of 12 30-day months.
SECTION 2.12. CUSIP NUMBERS
The Company, in issuing Securities of any series, may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee will use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice 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 a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption will
not be affected by any defect in or omission of such numbers. To the extent
applicable, the Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.
ARTICLE III. REDEMPTION OF SECURITIES
SECTION 3.01. APPLICABILITY OF ARTICLE
Securities of any series which are redeemable before their
Stated Maturity will be redeemable in accordance with their terms and (except as
otherwise specified in accordance with Section 2.01 for Securities of any
series) in accordance with this Article III.
SECTION 3.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE
(a) The election of the Company to redeem any Securities will
be evidenced by a Board Resolution. In case of any redemption at the election of
the Company, the Company will, at least 60 calendar 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, of the principal amount of
Securities of such series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Company will furnish the Trustee with an Officer's Certificate evidencing
compliance with such restriction.
(b) Notice of redemption of Securities to be redeemed at the
election of the Company will be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and will
be irrevocable. Notice of redemption will be given by mail, first-class postage
prepaid, not less than 30 or more than 60 calendar days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register. All notices of redemption will identify the Securities to
be redeemed (including the CUSIP numbers thereof, if applicable) and will state
(i) the Redemption Date, (ii) the Redemption Price, (iii) if less than all the
Outstanding Securities of any series are to be redeemed, the identification
(and, in the case of partial redemption of any Securities, the principal
amounts) of the particular Securities to be redeemed, (iv) that on the
Redemption Date the Redemption Price will become due and payable upon each such
Security to be redeemed and, if applicable, that interest thereon will cease to
accrue on and after said date, (v) the place or places where such Securities are
to be surrendered for payment of the Redemption Price, (vi) that the redemption
is for a sinking fund, if such is the case, and (vii) the specific provision of
this Indenture pursuant to which such Securities are to be redeemed.
(c) If less than all the Securities of any series are to be
redeemed, the particular Securities to be redeemed will be selected not more
than 60 calendar days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
such method as the Trustee may deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series. The Trustee
will promptly notify the Company in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
(d) For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities will
relate, in the case of any Securities redeemed or to be redeemed only in part,
to the portion of the principal amount of such Securities which has been or is
to be redeemed.
SECTION 3.03. DEPOSIT OF REDEMPTION PRICE
At or prior to 10:00 a.m., New York City time, on any
Redemption Date, the Company will 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 6.03) an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) any accrued interest on, all of the Securities that are to be
redeemed on that date.
SECTION 3.04. SECURITIES PAYABLE ON REDEMPTION DATE
(a) Notice of redemption having been given as aforesaid, the
Securities so to be redeemed will, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company defaults in the payment of the Redemption Price and accrued
interest) such Securities will cease to accrue interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security will
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified in
accordance with Section 2.01, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates in accordance with their terms
and the provisions of Section 2.09.
(b) If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and any premium will, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 3.05. SECURITIES REDEEMED IN PART
Any Security that is to be redeemed only in part will 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 will execute, and
the Trustee will authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities of the same
series and 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 Security so surrendered.
ARTICLE IV. SINKING FUNDS
SECTION 4.01. APPLICABILITY OF ARTICLE
The provisions of this Article IV will be applicable to any
sinking fund for the retirement of Securities of a series except as otherwise
specified in accordance with Section 2.01 for Securities of such series. The
minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." If provided for by the terms of Securities of any series, the
amount of any sinking fund payment may be subject to reduction as provided in
Section 4.02. Each sinking fund payment with respect to Securities of a
particular series will be applied to the redemption of Securities of such series
as provided for by the terms of Securities of such series.
SECTION 4.02. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES
The Company (a) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (b) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series, provided that such Securities have not been previously so credited. Such
Securities will be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such sinking fund payment will be reduced
accordingly.
SECTION 4.03. REDEMPTION OF SECURITIES FOR SINKING FUND
Not less than 60 calendar days prior to each sinking fund
payment date for any series of Securities, the Company will deliver to the
Trustee an Officer's Certificate specifying the amount of the next ensuing
sinking fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, that is to be satisfied by payment of cash and the
portion thereof, if any, that is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 4.02 and will also deliver to the
Trustee any Securities to be so delivered. Not less than 30 calendar days before
each such sinking fund payment date, the Trustee will select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 3.02(c) and cause notice of the redemption thereof to be given in the
name of and at the expense of the Company in the manner provided in Section
3.02(b). Such notice having been duly given, the redemption of such Securities
will be made upon the terms and in the manner stated in Sections 3.04 and 3.05.
ARTICLE V. DEFEASANCE AND COVENANT DEFEASANCE
SECTION 5.01. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE
The Company may elect, at its option by Board Resolution at
any time, to have either Section 5.02 or Section 5.03 applied to the Outstanding
Securities of any series designated pursuant to Section 2.01 as being defeasible
pursuant to this Article V (hereinafter called "Defeasible Series"), upon
compliance with the conditions set forth below in this Article V, provided that
Section 5.02 will not apply to any series of Securities that is convertible into
Common Stock pursuant to Section 2.01(b)(xvi) or convertible into or
exchangeable for any other securities pursuant to Section 2.01(b)(xvii).
SECTION 5.02. DEFEASANCE AND DISCHARGE
Upon the Company's exercise of the option provided in Section
5.01 to have this Section 5.02 applied to the Outstanding Securities of any
Defeasible Series and subject to the proviso to Section 5.01, the Company will
be deemed to have been discharged from its obligations with respect to the
Outstanding Securities of such series as provided in this Section 5.02 on and
after the date the conditions set forth in Section 5.04 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company will be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such series and to have satisfied
all its other obligations under the Securities of such series and this Indenture
insofar as the Securities of such series are concerned (and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging the same),
subject to the following which will survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Securities of such series to
receive, solely from the trust fund described in Section 5.04 and as more fully
set forth in Section 5.04, payments in respect of the principal of and any
premium and interest on such Securities of such series when payments are due,
(b) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 2.07, 6.02, 6.03, and 11.06, (c) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder, and (d) this Article V.
Subject to compliance with this Article V, the Company may exercise its option
provided in Section 5.01 to have this Section 5.02 applied to the Outstanding
Securities of any Defeasible Series notwithstanding the prior exercise of its
option provided in Section 5.01 to have Section 5.03 applied to the Outstanding
Securities of such series.
SECTION 5.03. COVENANT DEFEASANCE
Upon the Company's exercise of the option provided in Section
5.01 to have this Section 5.03 applied to the Outstanding Securities of any
Defeasible Series, (a) the Company will be released from its obligations under
Sections 6.04 through 6.07, inclusive, Section 12.01, and such provisions of any
Supplemental Indenture as may be specified in such Supplemental Indenture, and
(b) the occurrence of any event specified in Sections 8.01(a)(iii), 8.01(a)(iv)
(with respect to any of Sections 6.04 through 6.07, inclusive, Section 12.01,
and such provisions of any Supplemental Indenture as may be specified in such
Supplemental Indenture), 8.01(a)(v), 8.01(a)(vi), and 8.01(a)(ix) will be deemed
not to be or result in an Event of Default, in each case with respect to the
Outstanding Securities of such series as provided in this Section on and after
the date the conditions set forth in Section 5.04 are satisfied (hereinafter
called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means
that the Company may omit to comply with and will have no liability in respect
of any term, condition, or limitation set forth in any such specified Section or
provision (to the extent so specified in the case of Section 8.01(a)(iv)),
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section or provision or by reason of any reference in any such Section
or provision to any other provision herein or in any other document, but the
remainder of this Indenture and the Securities of such series will be unaffected
thereby.
SECTION 5.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE
The following will be the conditions to application of either
Section 5.02 or Section 5.03 to the Outstanding Securities of any Defeasible
Series:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee that satisfies the
requirements contemplated by Section 10.08 and agrees to comply with
the provisions of this Article V applicable to it) as trust funds in
trust for the benefit of the Holders of Outstanding Securities of such
series (i) money in an amount, or (ii) U.S. Government Obligations that
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, without
reinvestment, not later than one day before the due date of any
payment, money in an amount, or (iii) a combination thereof, in each
case sufficient to pay and discharge, and which will be applied by the
Trustee (or any such other qualifying trustee) to pay and discharge,
the principal of and any premium and interest on the Securities of such
series on the respective Stated Maturities or on any earlier date or
dates on which the Securities of such series shall be subject to
redemption and the Company shall have given the Trustee irrevocable
instructions satisfactory to the Trustee to give notice to the Holders
of the redemption of the Securities of such series, all in accordance
with the terms of this Indenture and the Securities of such series.
(b) In the case of an election under Section 5.02, the Company
shall have delivered to the Trustee an Opinion of Counsel (from a
counsel who shall not be an employee of the Company) to the effect that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) 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
shall confirm that, the Holders of the Outstanding Securities of such
series will not recognize gain or loss for federal income tax purposes
as a result of the deposit, Defeasance, and discharge to be effected
with respect to the Securities of such series and will be subject to
federal income tax on the same amount, in the same manner, and at the
same times as would be the case if such deposit, Defeasance, and
discharge were not to occur.
(c) In the case of an election under Section 5.03, the Company
shall have delivered to the Trustee an Opinion of Counsel (from a
counsel who shall not be an employee of the Company) to the effect that
the Holders of the Outstanding Securities of such series will not
recognize gain or loss for federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with respect to the
Securities of such series and will be subject to federal income tax on
the same amount, in the same manner, and at the same times as would be
the case if such deposit and Covenant Defeasance were not to occur.
(d) The Company shall have delivered to the Trustee an Opinion
of Counsel (from a counsel who shall not be an employee of the Company)
stating that the defeasance trust does not violate the Investment
Company Act of 1940.
(e) The Company shall have delivered to the Trustee the
opinion of a nationally recognized independent public accounting firm
certifying the sufficiency of the amount of the moneys, U.S. Government
Obligations, or a combination thereof, placed on deposit to pay,
without regard to any reinvestment, the principal of and any premium
and interest on the Securities on the Stated Maturity thereof or on any
earlier date on which the Securities shall be subject to redemption as
to which the Company has given irrevocable instructions satisfactory to
the Trustee to give notice to the Holders of the redemption of the
Securities of such series, all in accordance with the terms of this
Indenture and the Securities of such series.
(f) The Company shall have delivered to the Trustee an
Officer's Certificate (i) stating that the deposit was not made by the
Company with the intent of preferring the holders of the Securities
over the other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company
or others, and (ii) to the effect that the Securities of such series,
if then listed on any securities exchange, will not be delisted solely
as a result of such deposit.
(g) No Default or Event of Default shall have occurred and be
continuing at the time of such deposit or, with regard to any Event of
Default or any such event specified in Sections 8.01(a)(vii) and
(viii), at any time on or prior to the 124th calendar day after the
date of such deposit (it being understood that this condition will not
be deemed satisfied until after such 124th calendar day).
(h) Such Defeasance or Covenant Defeasance will not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(i) Such Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(j) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 5.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS
(a) Subject to the provisions of Section 6.03(e), all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section
5.05 and Section 5.06, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 5.04 in respect of the
Securities of any Defeasible Series will be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities of such series and
this Indenture, to the payment, either directly or through any such Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of Securities of such series, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.
(b) The Company will pay and indemnify the Trustee against any
tax, fee, or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 5.04 or the principal and interest
received in respect thereof other than any such tax, fee, or other charge that
by law is for the account of the Holders of Outstanding Securities.
(c) Notwithstanding anything in this Article V to the
contrary, the Trustee will deliver or pay to the Company from time to time upon
a Company Request any money or U.S. Government Obligations held by it as
provided in Section 5.04 with respect to Securities of any Defeasible Series
that are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Defeasance or Covenant Defeasance with respect
to the Securities of such series.
SECTION 5.06. REINSTATEMENT
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article V with respect to the Securities of any
series by reason of any order or judgment of any court or governmental authority
enjoining, restraining, or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Securities of such series
will be revived and reinstated as though no deposit had occurred pursuant to
this Article V with respect to Securities of such series until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust pursuant
to Section 5.05 with respect to Securities of such series in accordance with
this Article V; provided, however, that if the Company makes any payment of
principal of or any premium or interest on any Security of such series following
the reinstatement of its obligations, the Company will be subrogated to the
rights of the Holders of Securities of such series to receive such payment from
the money so held in trust.
ARTICLE VI. PARTICULAR COVENANTS OF THE COMPANY
SECTION 6.01. PAYMENT OF PRINCIPAL, PREMIUM, AND INTEREST ON SECURITIES
The Company, for the benefit of each series of Securities,
will duly and punctually pay the principal of and any premium and interest on
the Securities of that series in accordance with the terms of the Securities and
this Indenture.
SECTION 6.02. MAINTENANCE OF OFFICE OR AGENCY
(a) The Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices, and demands may be made or served at
the Corporate Trust Office, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
(b) The Company may also from time to time designate one or
more other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission will in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 6.03. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST
(a) If the Company shall at any time act as its own Paying
Agent with respect to any series of Securities, it will, on or before each due
date of the principal of or any premium or interest on any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
(b) Whenever the Company shall have one or more Paying Agents
for any series of Securities, it will, prior to each due date of the principal
of or any premium or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
(c) The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent will agree with the Trustee, subject to
the provisions of this Section 6.03, that such Paying Agent will (i) comply with
the provisions of the Trust Indenture Act applicable to it as a Paying Agent and
(ii) during the continuance of any default by the Company (or any other obligor
upon the Securities of that series) in the making of any payment in respect of
the Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
(d) 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 will be released from all further liability with
respect to such money.
(e) 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 on any Security of any series and remaining unclaimed for
two years after such principal, premium, or interest has become due and payable
will be paid to the Company upon a Company Request (or, if then held by the
Company, will be discharged from such trust); and the Holder of such Security
will 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, will 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 will not
be less than 30 calendar days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 6.04. 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, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary of
the Company or upon the income, profits, or property of the Company or any
Subsidiary of the Company, and (b) all lawful claims for labor, materials and
supplies, in each case which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary of the Company and would have a
Material Adverse Effect; provided, however, that (x) the Company will not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge, or claim the amount, applicability, or validity of which is
being contested in good faith by appropriate proceedings, and (y) any failure to
pay any such tax, assessment, charge, or claim shall not constitute a breach of
this Section 6.04 if such failure (i) was not willful and (ii) does not and will
not result in any Material Adverse Effect.
SECTION 6.05. EXISTENCE
Subject to Article XI, the Company will, and will cause each
of its Subsidiaries to, do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (charter and statutory),
and franchises; provided, however, that, except with respect to the preservation
of the Company's existence, nothing in this Section 6.06 will (i) require the
Company to take any action that it determines in good faith to be contrary to
its best interests, so long as the failure to take such action will not have a
Material Adverse Effect, or (ii) prevent the Company from taking any action that
it determines in good faith to be in its best interests, so long as the taking
of such action will not have a Material Adverse Effect.
SECTION 6.06. COMPLIANCE WITH LAWS
The Company will, and will cause each of its Subsidiaries to,
comply with all applicable federal, state, local, or foreign laws, rules,
regulations, or ordinances, including without limitation such laws, rules,
regulations, or ordinances relating to pension, environmental, employee, and tax
matters, to the extent that, in the aggregate, the failure so to comply would
have a Material Adverse Effect.
SECTION 6.07. STATEMENT BY OFFICERS AS TO DEFAULT
The Company will deliver to the Trustee, within 120 calendar
days after the end of each fiscal year of the Company ending after the date
hereof, an officer's certificate signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company
stating whether or not to the knowledge of such person after due inquiry the
Company is 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 is in
default, specifying all such defaults and the nature and status thereof of which
such person may have such knowledge.
SECTION 6.08. WAIVER OF CERTAIN COVENANTS
The Company may omit in any particular instance to comply with
any term, provision, or condition set forth in Sections 6.04 and 6.06 and such
provisions of any Supplemental Indenture as may be specified in such
Supplemental Indenture, with respect to the Securities of any series if the
Holders of a majority in principal amount of the Outstanding Securities of such
series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision, or condition,
but no such waiver will extend to or affect such term, provision, or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision, or condition will remain in full force and
effect.
SECTION 6.09. CALCULATION OF ORIGINAL ISSUE DISCOUNT
The Company will, to the extent applicable, file with the
Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of original issue discount (including daily rates and
accrual periods) accrued on Outstanding Securities as of the end of such year
and (ii) such other specific information relating to such original issue
discount as may then be required under the Internal Revenue Code of 1986, as
amended from time to time.
ARTICLE VII. SECURITIES HOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 7.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS
The Company will furnish or cause to be furnished to the
Trustee (a) semi-annually, not more than 15 calendar days after the applicable
Regular Record Date, a list for each series of Securities, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Securities of such series as of such Regular Record Date and (b) at such other
times as the Trustee may request in writing, within 30 calendar 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 calendar days prior to the time such list is
furnished; excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS
(a) The Trustee will 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 7.01 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 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
Securities, and the corresponding rights and privileges of the Trustee, will be
as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them will 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 7.03. REPORTS BY TRUSTEE
The Trustee will transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act or any rule or regulation of the Commission promulgated
pursuant thereto at the times and in the manner provided therein. If required by
Section 313(a) of the Trust Indenture Act, the Trustee will, within sixty 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). A copy of each such report will, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission, and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
SECTION 7.04. REPORTS BY COMPANY
The Company will file with the Trustee and the Commission, and
transmit to Holders, such information, documents, and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act or any
rule or regulation of the Commission promulgated pursuant thereto at the times
and in the manner provided therein; provided that any such information,
documents, or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act will be filed with the Trustee within 15
calendar days after the same is so required to be filed with the Commission.
Delivery of such reports, information, and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such will 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 Officer's Certificates).
ARTICLE VIII. DEFAULT
SECTION 8.01. EVENT OF DEFAULT
(a) "Event of Default," wherever used herein with respect to
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it may be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree, or order
of any court or any order, rule, or regulation of any administrative or
governmental body):
(i) default in the payment of any interest on any
Security of that series when it becomes due and payable, and
continuance of such default for a period of [30] calendar days;
(ii) default in the payment of principal of (or
premium, if any, on) any Security of that series when it becomes due
and payable, whether by redemption, repurchase, or otherwise;
(iii) default in the making of any sinking fund
payment when and as due by the terms of a Security of that series;
(iv) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty, a default in the performance or breach of which
is elsewhere in this Section 8.01 specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of one
or more series of Securities other than that series), and continuance
of such default or breach for a period of 30 calendar days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder;
(v) any default in the payment at maturity of
principal of any Indebtedness of the Company or any Subsidiary of the
Company in an aggregate principal amount of $25.0 million or more,
which, in any such case, (A) continues beyond any period of grace
provided with respect thereto and (B) results in such Indebtedness
becoming due prior to its stated maturity or occurs at the final
maturity of such Indebtedness; provided, however, that, subject to the
provisions of Section 10.01 and 8.08, the Trustee will not be deemed to
have knowledge of such nonpayment or other default unless either (1) a
Responsible Officer of the Trustee has actual knowledge of nonpayment
or other default or (2) the Trustee has received written notice thereof
from the Company, from any Holder, from the holder of any such
Indebtedness or from the trustee under the agreement or instrument
relating to such Indebtedness;
(vi) the entry of one or more judgments or orders for
the payment of money against the Company, which judgments and orders
create a liability of $25.0 million or more in excess of insured
amounts and have not been stayed (by appeal or otherwise), vacated,
discharged, or otherwise satisfied within 60 calendar days of the entry
of such judgments and orders;
(vii) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law or (B) a decree or order adjudging the Company or any
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Company or any Subsidiary under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official
of the Company or any Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
calendar days;
(viii) the commencement by the Company or any
Subsidiary of a voluntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief with respect to the Company under any
applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law, or the consent by it to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official
of the Company or any Subsidiary or of any substantial part of its
property pursuant to any such law, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Subsidiary in furtherance of
any such action; or
(ix) any other Event of Default provided in an
indenture supplemental hereto with respect to Securities of that series
created thereunder.
(b) If an Event of Default (other than an Event of Default
arising under Section 8.01(a)(vii) or (viii)) with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) will become immediately due and payable. If an Event of Default under
Section 8.01(a)(vii) or (viii) occurs, then the principal of, premium, if any,
and accrued interest on the Securities shall become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
(c) At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article VIII provided, the Holders of a majority in
principal amount of the outstanding Securities of that series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (i) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities of that series, (B)
the principal of (and premium, if any, on) any Securities of that series which
have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate or rates prescribed therefor in such Securities, and (D)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements, and advances of the Trustee and its
agents and counsel and (ii) all Events of Default with respect to Securities of
that series, other than the non-payment of the principal of Securities of that
series that has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 8.01(d). No such rescission will affect
any subsequent default or impair any right consequent thereon.
(d) The Holders of a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default (i) in the payment of the
principal of or any premium or interest on any Security of such series or (ii)
in respect of a covenant or provision hereof which under Article X cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected. Upon any such waiver, such default will cease
to exist, and any Event of Default arising therefrom will be deemed to have been
cured, for every purpose of this Indenture, but no such waiver will extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 8.02. COVENANT OF COMPANY TO PAY TO TRUSTEE WHOLE AMOUNT DUE ON
SECURITIES ON DEFAULT IN PAYMENT OF INTEREST OR PRINCIPAL;
SUITS FOR ENFORCEMENT BY TRUSTEE
(a) The Company covenants that if (i) default is made in the
payment of any interest on any Security when such interest becomes due and
payable and such default continues for a period of 30 calendar days or (ii)
default is made in the payment of the principal of (or premium, if any, on) any
Security when it becomes due and payable, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal and any premium and
interest and, to the extent that payment of such interest will be legally
enforceable, interest on any overdue principal and premium and on any overdue
interest, at the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as will be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel.
(b) If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
(c) In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its creditors, the
Trustee will 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 will be authorized to collect and receive
any money 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 consents to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements, and advances of the Trustee and its
agents and counsel, and any other amounts due the Trustee under Section 10.06.
(d) No provision of this Indenture will be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment, or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and be a member of a
creditors' or other similar committee.
(e) All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee will be
brought in its own name as trustee of an express trust, and any recovery of
judgment will, after provision for the payment of the reasonable compensation,
expenses, disbursements, and advances of the Trustee and its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 8.03. APPLICATION OF MONEY COLLECTED BY TRUSTEE
Any money collected by the Trustee pursuant to this Article
VIII will 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, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 10.06; and
SECOND: To the payment of the amounts then due and unpaid for
interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Securities for interest
thereon.
THIRD: To the payment of the amounts then due and unpaid for
principal of and any premium on the Securities in respect of
which or for the benefit of which such money has been
collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such
Securities for principal and any premium, respectively.
SECTION 8.04. LIMITATION ON SUITS BY HOLDERS OF SECURITIES
No Holder of any Security of any series will 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 (a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of that
series, (b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder, (c) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expenses, and liabilities to be
incurred in compliance with such request, (d) the Trustee for 60 calendar days
after its receipt of such notice, request, and offer of indemnity has failed to
institute any such proceeding, and (e) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding Securities of that
series, it being understood and intended that no one or more of such Holders
will 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 8.05. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION IN
EXERCISE OF RIGHTS NOT A WAIVER OF EVENT OF DEFAULT
(a) Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost, or stolen Securities in
the last paragraph of Section 2.07, 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 will, 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, will not
prevent the concurrent assertion or employment of any other appropriate right or
remedy.
(b) No delay or omission of the Trustee or of any Holder of
any Securities to exercise any right or remedy accruing upon any Event of
Default will impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article VIII 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 8.06. RIGHTS OF HOLDERS OF MAJORITY IN PRINCIPAL AMOUNT OF
OUTSTANDING SECURITIES TO DIRECT TRUSTEE
The Holders of a majority in principal amount of the
Outstanding Securities of any series will have the right to direct the Trustee
with respect to the time, method, and place of conducting any proceeding for any
remedy available to the Trustee and the exercise of any trust or power conferred
on the Trustee, in each case with respect to the Securities of such series,
provided that (a) such direction will not be in conflict with any rule of law or
with this Indenture and (b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 8.07. REQUIREMENT OF AN UNDERTAKING TO PAY COSTS IN CERTAIN SUITS
UNDER THE INDENTURE OR AGAINST THE TRUSTEE
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, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs, including legal fees and expenses, against any such party litigant, in
the manner and to the extent provided in the Trust Indenture Act; provided that
neither this Section 8.07 nor the Trust Indenture Act will be deemed to
authorize any court to require such an undertaking or to make such an assessment
in any suit instituted by the Trustee or by the Company.
SECTION 8.08. NOTICE OF DEFAULTS
If a Default occurs hereunder with respect to Securities of
any series, the Trustee will give the Holders of Securities of such series
notice of such Default actually known to it as and to the extent provided by the
Trust Indenture Act; provided, however, that in the case of any Default of the
character specified in Section 8.01(a)(iv) with respect to Securities of such
series no such notice to Holders will be given until at least 30 calendar days
after the occurrence thereof. The Company will give the Trustee notice of any
uncured Event of Default within 10 days after any Responsible Officer of the
Company becomes aware of or receives actual notice of such Event of Default.
SECTION 8.09. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, AND INTEREST
Notwithstanding any other provision in this Indenture, the
Holder of any Security will have the right, which is absolute and unconditional,
to receive payment of the principal of, premium, if any, and (subject to Section
2.09) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such Holder.
SECTION 8.10. 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 will
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders will continue
as though no such proceeding had been instituted.
SECTION 8.11. TRUSTEE MAY FILE PROOFS OF CLAIMS
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceeding relative to the Company or the
Subsidiaries (or any other obligor upon the Securities), their creditors or
their property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claim and to
distribute the same, and any custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements, and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
ARTICLE IX SUBORDINATION OF SECURITIES
SECTION 9.01 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS
To the extent and in the manner hereinafter set forth in this
Article IX, the payment of principal of, premium, if any, and interest on and
all other payments in respect of the Securities of any series issued under this
Indenture shall be subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, including (without limitation) all
principal thereof and all premium, if any, and interest thereon.
SECTION 9.02 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or
proceeding or other similar case or proceeding under any Federal or state
bankruptcy or similar law, or any receivership, liquidation, arrangement,
relief, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or to its assets, or (b) any liquidation,
dissolution, reorganization, compromise, arrangement, adjustment, protection,
composition, relief or other winding up of the Company or its debts, whether
voluntary or involuntary and whether or not involving any insolvency or
bankruptcy or any case or proceeding of any kind, or (c) any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of the
Company, then, and in each such event, the holders of Senior Indebtedness shall
be entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Indebtedness, before the Company may make, and before
any Holder of Securities is entitled to receive or retain, any payment or
distribution of any kind or character (whether in cash, property or securities)
on account of Securities, and to that end the Holders of Securities agree to
promptly pay over, or cause to be paid over, to the holders of Senior
Indebtedness (pro rata to each such holder on the basis of the respective
amounts of such Senior Indebtedness held by such holder) any payment or
distribution of any kind or character, whether in cash, property or securities,
received from the Company to the extent necessary to pay or prepay in full the
Senior Indebtedness.
Each Holder of Securities shall duly and promptly take such action as
is reasonably necessary to file appropriate claims or proofs of claims in any
such proceedings referred to in this Section 9.02 and to execute and deliver
such other instruments and take such other actions as may be reasonably
necessary to prove or realize upon such claims and to have the proceeds of such
claims paid as provided in this Section 9.02, and, in the event any Holder of
Securities shall not have made any such filing on or prior to the date 30 days
before the expiration of the time for such filing or shall not have timely
executed or delivered any such other instruments and taken such other actions,
the holders of not less than 25% of any series of Senior Indebtedness, acting
through a trustee, agent or otherwise, are hereby irrevocably authorized and
empowered (but shall have no obligation) to, as the agent and attorney-in-fact
for such holder for the specific and limited purpose set forth in this
paragraph, file such proof of claim for or on behalf of such holder, execute and
deliver such other instrument for or on behalf of such holder and take such
other action necessary under applicable law to collect any amounts due in
respect of such claim in such proceeding. Anything contained in this paragraph
notwithstanding, the right to vote any claim or claims in respect of any
Securities in connection with any proceedings referred to in this Section 9.02
is exclusively reserved to the holder of such Securities.
SECTION 9.03 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF
SECURITIES
In the event that Securities of any series are declared due
and payable before their Stated Maturity, then and in such event the holders of
Senior Indebtedness outstanding at the time such Securities so become due and
payable shall be entitled to receive payment in full on all amounts due or to
become due on or in respect of such Senior Indebtedness before the Company may
make, and before any Holder of such Securities is entitled to receive or retain,
any payment or distribution of assets of the Company or any Subsidiary of any
kind or character, whether in cash, property or securities on account of any
such Securities.
SECTION 9.04 PAYMENT LIMITATION
(a) In the event and during the continuance of any Senior
Default (as hereinafter in this paragraph defined) and prior to the declaration
of such Senior Indebtedness to be due and payable prior to its stated maturity,
the holders of not less than 25% of the aggregate principal amount of such
series of Senior Indebtedness, acting through a trustee, agent or otherwise may
give to both the Company and each Holder of Securities written notice referring
to the Securities and this Indenture and specifying that it is a notice of a
Senior Default (a "Senior Default Notice") and, thereafter, no payment or
distribution of any kind or character (whether in cash, property or securities)
shall be made on or in respect of any Securities, and no Holder of Securities
shall take or receive or retain from the Company or any Subsidiary, directly or
indirectly, in cash, property or securities, or by way of set-off or in any
other manner, payment of all or any of the Securities during the period (a
"Senior Default Blockage Period") commencing on the date of receipt by both the
Company and the Trustee of such notice and ending on the earliest of (i) the
date of the repayment in full of such Senior Indebtedness, (ii) the date on
which such Senior Indebtedness shall have been declared due and payable prior to
its stated maturity (in which case Section 9.04(b) shall govern), (iii) the date
on which such Senior Default shall have been cured or waived, (iv) the date on
which the holders of not less than 25% of the aggregate outstanding principal
amount of such series of Senior Indebtedness, acting through a trustee, agent or
otherwise, shall have delivered to the Company and the Trustee a notice
referring to the Securities and the immediately preceding Senior Default Notice
and stating that such Senior Default Notice has been withdrawn, or (v) the 180th
day following the receipt by both the Company and the Trustee of such Senior
Default Notice pursuant to this clause (a). Any number of Senior Default Notices
may be given, provided that (A) only one Senior Default Notice may be given with
respect to any single occurrence of a Senior Default and (B) no Senior Default
Notice shall be effective at any time to prevent any payment from being made by
or on behalf of the Company or any Subsidiary for or on account of any
Securities (and any such Senior Default Notice shall be or become null and void
ab initio) if, within the 360-day period next preceding the date on which such
Senior Default Notice shall have been delivered to the Company and the Trustee,
a Senior Default Blockage Period was in effect for all or part of such period.
All payments in respect of Securities postponed during any Senior Default
Blockage Period shall be immediately due and payable upon the termination
thereof (together with such additional interest as is provided herein, any
indentures supplemental hereto and in the Securities for late payment of
principal, premium or interest). As used herein, the term "Senior Default" means
any default with respect to any Senior Indebtedness which as of such time
permits the holders of not less than 25% of the aggregate outstanding principal
amount of such Senior Indebtedness to cause such Senior Indebtedness to become
due prior to its scheduled maturity.
(b) In the event that the holders of not less than 25% of the
aggregate outstanding principal amount of any series of Senior Indebtedness
shall declare such series of Senior Indebtedness to be due and payable prior to
its stated maturity as a result of the occurrence of a Senior Default in respect
thereof, no payment or distribution of any kind or character (whether in cash,
property or securities) shall be made on or in respect of any Securities, and no
Holder of Securities shall take or receive or retain from the Company or any
Subsidiary, directly or indirectly, in cash, property or securities, or by way
of set-off or in any other manner, payment of all or any of the Securities until
the earlier of (i) the payment in full of such series of Senior Indebtedness or
(ii) the rescission or termination of such declaration.
(c) The provisions of this Section 9.04 shall not apply to any
payment with respect to which Section 9.02 or Section 9.03 would be applicable.
SECTION 9.05 PAYMENT PERMITTED
Nothing contained in this Article IX or elsewhere in this
Indenture, any indenture supplemental hereto or in any Securities issued
hereunder shall prevent the Company at any time, except as expressly provided in
Section 9.02, Section 9.03, Section 9.04 or Section 9.06, from making payments
of principal of or premium, if any, or interest on Securities of any series in
accordance with the terms thereof.
SECTION 9.06 CERTAIN LIMITATIONS
As long as any Senior Indebtedness remains outstanding, no
Holder of Securities shall (a) exchange all or part of such for any equity
security of the Company, except as provided in Section 9.02, (b) forgive all or
any part of such Securities, except as provided in Section 9.02 or (c) accept
any optional prepayment with respect to such Securities if, after receipt of
written notice from the Company, such prepayment would constitute an event of
default under, and as defined in, any agreement or agreements with respect to
any Senior Indebtedness.
SECTION 9.07 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS
Holders of Securities of each series hereunder shall be
subrogated equally and ratably to the rights of the holders of Senior
Indebtedness at the time outstanding to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness; provided,
however, that no payment or distribution to any holder or owner of Senior
Indebtedness pursuant to this Article IX shall entitle any Holder of Securities
to exercise any rights of subrogation in respect thereof until all Senior
Indebtedness shall have been paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Holders of Securities would be entitled
except for the provisions of this Article IX, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the holders of Senior
Indebtedness and the Holders of Securities, be deemed to be a payment or
distribution by the Company to or on account of Senior Indebtedness.
SECTION 9.08 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS
The provisions of this Article IX are and are intended solely
for the purpose of defining the relative rights of the Holders of Securities on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article IX or elsewhere in this Indenture, any indenture
supplemental hereto or in the Securities issued hereunder is intended to or
shall (a) impair, as among the Company, its creditors (other than holders of
Senior Indebtedness) and the Holders of Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of
Securities the principal of, premium, if any, and interest on, and all other
amounts payable with respect to, the Securities as and when the same shall
become due and payable in accordance with their respective terms, (b) affect the
relative rights against the Company of the Holders of Securities and creditors
of the Company (other than the holders of Senior Indebtedness), (c) prevent the
Holder of any Securities from exercising all remedies otherwise permitted by
applicable law upon a Default or Event of Default under this Indenture, subject
to the rights under the provisions of Section 9.02, Section 9.03 and Section
9.04 hereof of the holders of Senior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to the Holders of Securities or (d)
restrict or otherwise impair the right of the Holders of Securities to, in
accordance with the terms of this Indenture, declare the Securities of any
series to be due and payable prior to their respective stated maturity upon the
occurrence of an Event of Default.
SECTION 9.09 AGREEMENT TO EFFECTUATE SUBORDINATION
(a) Each Holder of Securities by its acceptance thereof agrees
to take such action as may be reasonably necessary or appropriate to effectuate,
as between the holders of Senior Indebtedness and such Holder of Securities, the
subordination provided in this Article IX.
(b) The provisions of this Article IX (including, without
limitation, this Section 9.09) may not be amended, modified or waived without
the prior written consent of all the holders of Senior Indebtedness which is at
the time outstanding. The provisions set forth in Article IX constitute a
continuing agreement and shall (i) be and remain in full force and effect at any
time, and from time to time, during which any Senior Indebtedness shall remain
outstanding, (ii) be binding upon the Holders of Securities and the Company and
its successors, transferees and assigns, and (iii) inure to the benefit of, and
be enforceable, in accordance with the terms hereof, directly by, each of the
holders of the Senior Indebtedness and their respective successors, transferees
and assigns, against the Holders of Securities and the Company and their
successors, transferees and assigns.
SECTION 9.10 NO WAIVER OF SUBORDINATION PROVISIONS
(a) No right of any present or future holder of any Senior
Indebtedness to enforce its rights under this Indenture shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.
(b) Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to any Holder of Securities,
without incurring responsibility to any Holder of Securities and without
impairing or releasing the subordination provided in this Article IX or the
obligations hereunder of any Holder of Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, all or
any of the Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release, not
perfect or otherwise deal with any property pledged, assigned or mortgaged to
secure, or otherwise securing, Senior Indebtedness; (iii) as holders of Senior
Indebtedness, exercise or refrain from exercising any rights against the Company
and any other Person; and (iv) apply any sums from time to time received to the
payment of the Senior Indebtedness.
SECTION 9.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT
Upon any payment or distribution of assets of the Company
referred to in this Article IX, the Holders of Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which any insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article IX.
SECTION 9.12 PROHIBITED PAYMENTS HELD IN TRUST
In the event that, notwithstanding the provisions of this
Article IX, the Company or any Subsidiary shall make, or any Holder of
Securities shall receive or retain, any payment or distribution of the Company's
or such Subsidiary's assets of any kind or character, whether in cash, property
or securities, then and in such event such payment or distribution shall be
received and held by such Holder of Securities in trust for the benefit of the
holders of Senior Indebtedness, shall be paid over or delivered, in the same
form as so received (with any necessary endorsement) forthwith to such holders
of Senior Indebtedness (pro rata to each such holder on the basis of the
respective amounts of such Senior Indebtedness held by such holder) for
application to the payment or prepayment in full of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
ARTICLE X. CONCERNING THE TRUSTEE
SECTION 10.01. CERTAIN DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Trustee will be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture will require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee will be subject to the provisions of this Section 10.01.
SECTION 10.02. CERTAIN RIGHTS OF TRUSTEE
Subject to the provisions of Section 10.01: (a) the Trustee
may conclusively rely and will 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 will be sufficiently
evidenced by a Company Request or Company Order and any resolution of the Board
will 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 Officer's
Certificate; (d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel will 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
will 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
will 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 will be entitled to examine the books, records, and premises
of the Company, personally or by agent or attorney; (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 will 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 Trustee will not be
liable for any action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture, unless it shall be proved
that the Trustee acted, or failed to act, in a negligent manner; and (i) the
Trustee will not be deemed to have notice of any Default or Event of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof or
unless written notice of any event or circumstance which is in fact such a
Default or Event of Default is received by the Trustee at the Corporate Trust
Office of the Trustee, and such notice references the Securities (or the
applicable series thereof) and this Indenture.
SECTION 10.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, may be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent will not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
SECTION 10.04. MAY HOLD SECURITIES
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar, or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 10.07 and 10.12, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar, or such other agent.
SECTION 10.05. MONEY HELD IN TRUST
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required herein or by law. The
Trustee will be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
SECTION 10.06. COMPENSATION AND REIMBURSEMENT
(a) The Company will (i) pay to the Trustee from time to time
such compensation as shall be agreed to in writing between the Company and the
Trustee for all services rendered by it hereunder (which compensation will not
be limited to any provision of law in regard to the compensation of a trustee of
an express trust); (ii) except as otherwise expressly provided herein, reimburse
the Trustee upon its request for all reasonable expenses, disbursements, and
advances incurred or made by the Trustee in accordance with provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of agents and counsel), except any such expense, disbursement, or
advance as may be attributable to its negligence or bad faith; and (iii)
indemnify the Trustee and any predecessor Trustee for, and hold them harmless
against, any and all losses, liabilities, damages, claims and expenses,
including taxes (other than taxes based on the income of the Trustee or
predecessor Trustee and other taxes relating to the Trustee's or predecessor
Trustee's overall business and operations) incurred without negligence or bad
faith on its part arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
(b) The Trustee will have a lien prior to the Securities as to
all property and funds held by it hereunder for any amount owed to it or any
predecessor Trustee pursuant to this Section 10.06, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
(c) When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 8.01(a)(vii) or Section
8.01(a)(viii), such expenses (including the reasonable fees and expenses of its
counsel) and the Trustee's compensation for such services are intended to
constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency, or other similar law.
(d) The provisions of this Section 10.06 will survive the
termination of this Indenture.
SECTION 10.07. DISQUALIFICATION; CONFLICTING INTERESTS
If the Trustee has or acquires a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee will 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 10.08. CORPORATE TRUSTEE REQUIRED ELIGIBILITY
There will at all times be one or more Trustees hereunder with
respect to the Securities of each series, at least one of which will 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 $100,000,000 and its Corporate Trust
Office or principal office in New York City, or any other major city in the
United States that is acceptable to the Company. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of a supervising or examining state or federal authority, then for the purposes
of this Section 10.08, 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 10.08, it will resign
immediately in the manner and with the effect hereinafter specified in this
Article X.
SECTION 10.09. 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 X will become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 10.10.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 10.10 shall not have been delivered to the Trustee within 30 calendar
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 Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 10.10 shall not have been delivered to the Trustee within 30 calendar
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 Securities of such
series.
(d) If, at any time, (i) the Trustee fails to comply with
Section 10.07 after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for at least six months, (ii) the
Trustee ceases to be eligible under Section 10.08 and fails to resign after
written request therefor by the Company or by any such Holder, or (iii) the
Trustee becomes incapable of acting or is adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property is appointed or any public officer
takes 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,
(A) the Company by a Board Resolution may remove the Trustee with respect to all
Securities or (B) subject to Section 8.07, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee resigns, is removed, or becomes incapable
of acting, or if a vacancy occurs in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company by a Board
Resolution will promptly appoint a successor Trustee or Trustees with respect to
the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there will be only one Trustee with
respect to the Securities of any particular series) and will comply with the
applicable requirements of Section 10.10. If, within one year after such
resignation, removal, or incapability or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series is appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed will, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 10.10,
become the successor Trustee with respect to the Securities of such series and
to that extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 10.10, any Holder who has been a bona fide Holder of
a Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company will give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all holders of Securities of such series in the manner provided in Section
14.03. Each notice will include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
SECTION 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR
(a) In case of the appointment hereunder of a successor
Trustee with respect to all Securities, every such successor Trustee so
appointed will execute, acknowledge, and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee will become effective and such
successor Trustee, without any further act, deed, or conveyance, will 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 will, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers, and duties of the
retiring Trustee and will duly assign, transfer, and deliver to such Trustee all
property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee, and each successor Trustee with respect to the
Securities of one or more series will execute and deliver an indenture
supplemental hereto wherein such successor Trustee will accept such appointment
and which (i) will contain such provisions as may be necessary or desirable to
transfer and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (ii) if the retiring Trustee is not retiring with respect to
all Securities, will contain such provisions as may be deemed necessary or
desirable to confirm that all the rights, powers, trusts, and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring will continue to be vested in the
retiring Trustee, and (iii) will add to or change any of the provisions of this
Indenture as may be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, it being understood that nothing
herein or in such supplemental indenture will constitute such Trustees
co-trustees of the same trust and that each such Trustee will be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustees and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
will become effective to the extent provided therein and each such successor
Trustee, without any further act, deed, or conveyance, will become vested with
all the rights, powers, trusts, and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but on request of the Company or any successor
Trustee, such retiring Trustee will duly assign, transfer, and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
will execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all applicable rights, powers, and trusts
referred to in the preceding paragraphs of this Section 10.10.
(d) No successor Trustee will accept its appointment unless at
the time of such acceptance such successor Trustee is qualified and eligible
under this Article IX.
SECTION 10.11. 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 may be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, will be the successor of the Trustee hereunder,
provided such corporation is otherwise qualified and eligible under this Article
IX, without the execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion, or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 10.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
If and when the Trustee is or becomes a creditor of the
Company (or any other obligor upon the Securities), the Trustee will be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 10.13. APPOINTMENT OF AUTHENTICATING AGENT
(a) The Trustee may appoint an Authenticating Agent or Agents
with respect to one or more series of Securities which will be authorized to act
on behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer, or partial
redemption thereof or pursuant to Section 2.07, and Securities so authenticated
will be entitled to the benefits of this Indenture and will be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference will 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 10.13,
the combined capital and surplus of such Authenticating Agent will 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 10.13, such
Authenticating Agent will resign immediately in the manner and with the effect
specified in this Section 10.13.
(b) 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 may be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, will
continue to be an Authenticating Agent, provided such corporation is otherwise
eligible under this Section 10.13, without the execution or filing of any paper
or any further act on the part of the Trustee or the Authenticating Agent.
(c) 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 this Section 10.13, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and will mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
will become vested with all the rights, powers, and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent will be appointed unless eligible under the
provisions of this Section 10.13.
(d) The Trustee agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under this Section
10.13, and the Trustee will be entitled to be reimbursed for such payments,
subject to the provisions of Section 10.06.
(e) If an appointment with respect to one or more series of
Securities is made pursuant to this Section 10.13, the Securities of such series
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative form of certificate of authentication in the
following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
,
as Trustee
By:
As Authenticating Agent
By:
Authorized Signatory
ARTICLE XI. SUPPLEMENTAL INDENTURES AND CERTAIN ACTIONS
SECTION 11.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE ENTERED
INTO WITHOUT CONSENT OF HOLDERS
Without the consent of or notice to 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 Securities, all to the extent otherwise
permitted hereunder;
(b) to make any change to the provisions of this Indenture
that would provide any additional rights or benefits to the Holders of
the Securities;
(c) to add to or change any of the provisions of this
Indenture to such extent as may be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form;
(d) to add to, change, or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change, or elimination (i) will neither (A)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (B) modify the rights of the Holder of any such Security
with respect to such provision or (ii) will become effective only when
there is no such Security Outstanding;
(e) to establish the form or terms of Securities of any series
as permitted by Sections 2.01 and 2.02;
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as may be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 10.10; or
(g) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this clause (g) will not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
SECTION 11.02. MODIFICATION OF INDENTURE WITH CONSENT OF HOLDERS OF AT
LEAST A MAJORITY IN PRINCIPAL AMOUNT OF OUTSTANDING SECURITIES
(a) With the consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture will, without the consent of the Holder of
each Outstanding Security affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Sections 8.01(b), or change any Place of Payment where, or
the coin or currency in which, any Security or any premium or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, or the consent
of the Holders of which is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture; or
(iii) modify any of the provisions of this Section 11.02,
Section 8.01(d) or Section 6.08, except to increase the percentage in
principal amount of Holders required under any such Section or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, provided, however, that this
clause (c) will not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant
changes in this Section 11.02 and Section 6.08, or the deletion of this
proviso, in accordance with the requirements of Sections 10.10 and
11.01(f).
(b) A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, will be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
(c) It will not be necessary for any Act of Holders under this
Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it will be sufficient if such Act approves the substance thereof.
SECTION 11.03. NO AMENDMENTS TO ARTICLE IX
Notwithstanding the provisions of Sections 11.01 and 11.02, no
amendments shall be made to the provisions of Article IX and this Section 11.03
without the unanimous consent of the holders of Outstanding Senior Indebtedness.
SECTION 11.04. EXECUTION OF SUPPLEMENTAL INDENTURES
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article X or the modifications
thereby of the trusts created by this Indenture, the Trustee will be entitled to
receive, and (subject to Section 10.01) will 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 will 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 11.05. EFFECT OF SUPPLEMENTAL INDENTURES
Upon the execution of any supplemental indenture under this
Article X, this Indenture will be modified in accordance therewith, and such
supplemental indenture will form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder will be bound thereby.
SECTION 11.06. CONFORMITY WITH TRUST INDENTURE ACT
Every supplemental indenture executed pursuant to this Article
X will conform to the requirements of the Trust Indenture Act.
SECTION 11.07. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article X may, and will
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE XII. CONSOLIDATION, MERGER, SALE, OR TRANSFER
SECTION 12.01. CONSOLIDATIONS AND MERGERS OF COMPANY AND SALES PERMITTED
ONLY ON CERTAIN TERMS
(a) The Company shall not consolidate with or merge with or
into any other Person, or transfer (by lease, assignment, sale, or otherwise)
its properties and assets substantially as an entirety to another Person unless
(i) either (A) the Company shall be the continuing or surviving Person in such a
consolidation or merger or (B) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company are transferred substantially as an
entirety (the Company or such other Person being referred to as the "Surviving
Person") shall be a corporation organized and validly existing under the laws of
the United States, any state thereof, or the District of Columbia, and shall
expressly assume, by an indenture supplement, all the obligations of the Company
under the Securities and the Indenture, (ii) immediately after the transaction
and the incurrence or anticipated incurrence of any Indebtedness to be incurred
in connection therewith, no Default will exist, and (iii) an Officer's
Certificate has been delivered to the Trustee to the effect that the conditions
set forth in the preceding clauses (i) and (ii) have been satisfied and an
Opinion of Counsel (from a counsel who shall not be an employee of the Company)
has been delivered to the Trustee to the effect that the conditions set forth in
the preceding clause (i) have been satisfied.
(b) The Surviving Person will succeed to and be substituted
for the Company with the same effect as if it had been named herein as a party
hereto, and thereafter the predecessor corporation (if it is not the Surviving
Person) will be relieved of all obligations and covenants under this Indenture
and the Securities.
ARTICLE XIII. SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. SATISFACTION AND DISCHARGE OF INDENTURE
This Indenture will upon a Company Request cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense the Company, will execute proper instruments acknowledging satisfaction
and discharge of this Indenture, when: (a) either (i) all Securities theretofore
authenticated and delivered (other than (A) Securities which have been
destroyed, lost, or stolen and which have been replaced or paid as provided in
Section 2.07 and (B) Securities for the payment of which money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided in
Section 6.03) have been delivered to the Trustee for cancellation or (ii) all
such Securities not theretofore delivered to the Trustee for cancellation (A)
have become due and payable, (B) will become due and payable at their Stated
Maturity within one year, or (C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company, in the case of clause (A), (B), or (C) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for such purpose
an amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; (b) the Company has paid or caused to be
paid all other sums payable hereunder by the Company; and (c) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 10.06, the obligations
of the Company to any Authenticating Agent under Section 10.13, and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) of this Section 13.01, the obligations of the Trustee under Sections 6.03(e)
and 13.02, will survive.
SECTION 13.02. APPLICATION OF TRUST MONEY
Subject to provisions of Section 6.03(e), all money deposited
with the Trustee pursuant to Section 13.01 will be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and any premium and interest for whose
payment such money has been deposited with the Trustee.
ARTICLE XIV. MISCELLANEOUS PROVISIONS
SECTION 14.01. SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE
All the covenants, stipulations, promises, and agreements in
this Indenture contained by or on behalf of the Company will bind its successors
and assigns, whether so expressed or not.
SECTION 14.02. SERVICE OF REQUIRED NOTICE TO TRUSTEE AND COMPANY
Any request, demand, authorization, direction, notice,
consent, waiver, Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with (a) the Trustee
by any Holder or by the Company will, upon receipt, be sufficient for every
purpose hereunder if made, given, furnished, or filed in a writing received by
the Trustee at its Corporate Trust Office (addressed to the attention of:
Corporate Trust Trustee Administration) or (b) the Company by the Trustee or by
any Holder will, upon receipt, be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished, or filed in a
writing received by the Company at its principal executive offices (addressed to
the attention of both its Chief Financial Officer and its General Counsel).
SECTION 14.03. SERVICE OF REQUIRED NOTICE TO HOLDERS; WAIVER
Where this Indenture provides for notice to Holders of any
event, such notice will be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date (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 will 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 will be the equivalent of such notice. Waivers of notice by Holders
will be filed with the Trustee, but such filing will 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 will be impracticable to give such notice by mail, then such
notification as may be made with the approval of the Trustee will constitute a
sufficient notification for every purpose hereunder.
SECTION 14.04. INDENTURE AND SECURITIES TO BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK
This Indenture and the Securities will be deemed to be a
contract made under the laws of the State of New York, and for all purposes will
be construed in accordance with the laws of said State without giving effect to
principles of conflict of laws of such State.
SECTION 14.05. COMPLIANCE CERTIFICATES AND OPINIONS
Upon any application or request by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
will furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion will be given in
the form of an Officer's Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and will comply
with the requirements of the Trust Indenture Act and any other requirements set
forth in this Indenture.
SECTION 14.06. 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. 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 14.07. PAYMENTS DUE ON NON-BUSINESS DAYS
In any case where any Interest Payment Date, Redemption Date,
or Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of the Securities of any series which
specifically states that such provision will apply in lieu of this Section
14.07)) payment of interest or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day 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, and
no interest shall accrue for the intervening period.
SECTION 14.08. PROVISIONS REQUIRED BY TRUST INDENTURE ACT TO CONTROL
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed on any Person by Sections 310 through 317 of
the Trust Indenture Act (including provisions automatically deemed included in
this Indenture pursuant to the Trust Indenture Act unless this Indenture
provides that such provisions are excluded), which are deemed to be a part of
and govern this Indenture, whether or not contained herein, then such imposed
duties will control.
SECTION 14.09. INVALIDITY OF PARTICULAR PROVISIONS
In case any one or more of the provisions contained in this
Indenture or in the Securities is for any reason held to be invalid, illegal, or
unenforceable in any respect, such the validity, illegality, or enforceability
will not affect any other provision of this Indenture or of the Securities, but
this Indenture and such Securities will be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 14.10. INDENTURE MAY BE EXECUTED IN COUNTERPARTS
This instrument may be executed in any number of counterparts,
each of which will be an original, but such counterparts will together
constitute but one and the same instrument.
SECTION 14.11. ACTS OF HOLDERS; RECORD DATES
(a) Any request, demand, authorization, direction, notice,
consent, waiver, or other action provided or permitted 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 will become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent will be sufficient for any
purpose of this Indenture and (subject to Section 10.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section
14.11.
(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 will also constitute sufficient proof of
his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities will be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver, or other Act of the Holder of any Security will bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange thereof or in lieu thereof
in respect of anything done, omitted, or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(e) The Company may, in the circumstances permitted by the
Trust Indenture Act, set any day as the record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to give
or take any request, demand, authorization, direction, notice, consent, waiver,
or other action provided or permitted by this Indenture to be given or taken by
Holders of Securities of such series. With regard to any record date set
pursuant to this paragraph, the Holders of Outstanding Securities of the
relevant series on such record date (or their duly appointed agents), and only
such Persons, will be entitled to give or take the relevant action, whether or
not such Holders remain Holders after such record date. With regard to any
action that may be given or taken hereunder only by Holders of a requisite
principal amount of Outstanding Securities of any series (or their duly
appointed agents) and for which a record date is set pursuant to this paragraph,
the Company may, at its option, set an expiration date after which no such
action purported to be given or taken by any Holder will be effective hereunder
unless given or taken on or prior to such expiration date by Holders of the
requisite principal amount of Outstanding Securities of such series on such
record date (or their duly appointed agents). On or prior to any expiration date
set pursuant to this paragraph, the Company may, on one or more occasions at its
option, extend such date to any later date. Nothing in this paragraph will
prevent any Holder (or any duly appointed agent thereof) from giving or taking,
after any such expiration date, any action identical to, or, at any time,
contrary to or different from, the action or purported action to which such
expiration date relates, in which event the Company may set a record date in
respect thereof pursuant to this paragraph. Nothing in this Section 14.11(e)
will be construed to render ineffective any action taken at any time by the
Holders (or their duly appointed agents) of the requisite principal amount of
Outstanding Securities of the relevant series on the date such action is so
taken. Notwithstanding the foregoing or the Trust Indenture Act, the Company
will not set a record date for, and the provisions of this Section 14.11(e) will
not apply with respect to, any notice, declaration, or direction referred to in
the next paragraph.
(f) Upon receipt by the Trustee from any Holder of Securities
of a particular series of (a) any notice of default or breach referred to in
Section 8.01(a)(iv) or 8.01(a)(v) with respect to Securities of such series, if
such default or breach has occurred and is continuing and the Trustee shall not
have given such notice to the Company, (b) any declaration of acceleration
referred to in Section 8.01(b), if an Event of Default with respect to
Securities of such series has occurred and is continuing and the Trustee shall
not have given such a declaration to the Company, or (c) any direction referred
to in Section 8.06 with respect to Securities of such series, if the Trustee
shall not have taken the action specified in such direction, then a record date
will automatically and without any action by the Company or the Trustee be set
for determining the Holders of Outstanding Securities of such series entitled to
join in such notice, declaration, or direction, which record date will be the
close of business on the tenth calendar day following the day on which the
Trustee receives such notice, declaration, or direction. Promptly after such
receipt by the Trustee, and in any case not later than the fifth calendar day
thereafter, the Trustee will notify the Company and the Holders of Outstanding
Securities of such series of any such record date so fixed. The Holders of
Outstanding Securities of such series on such record date (or their duly
appointed agents), and only such Persons, will be entitled to join in such
notice, declaration, or direction, whether or not such Holders remain Holders
after such record date; provided that, unless such notice, declaration, or
direction shall have become effective by virtue of Holders of the requisite
principal amount of Outstanding Securities of such series on such record date
(or their duly appointed agents) having joined therein on or prior to the 90th
calendar day after such record date, such notice, declaration, or direction will
automatically and without any action by any Person be canceled and of no further
effect. Nothing in this Section 14.11(f) will be construed to prevent a Holder
(or a duly appointed agent thereof) from giving, before or after the expiration
of such 90-day period, a notice, declaration, or direction contrary to or
different from, or, after the expiration of such period, identical to, the
notice, declaration, or direction to which such record date relates, in which
event a new record date in respect thereof will be set pursuant to this Section
14.11(f). Nothing in this Section 14.11(f) will be construed to render
ineffective any notice, declaration, or direction of the type referred to in
this Section 14.11(f) given at any time to the Trustee and the Company by
Holders (or their duly appointed agents) of the requisite principal amount of
Outstanding Securities of the relevant series on the date such notice,
declaration, or direction is so given.
(g) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the principal amount of
such Security 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.
SECTION 14.12. EFFECT OF HEADINGS AND TABLE OF CONTENTS
The Article and Section headings herein and the Table of
Contents are for convenience only and will not affect the construction hereof.
SECTION 14.13. BENEFITS OF INDENTURE
Nothing in this Indenture or in the Securities, express or
implied, will give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy, or claim under this Indenture.
--------------------
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
[Seal] MERCURY FINANCE COMPANY
By:
Name:
Title:
Attest:
By:
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
AS TRUSTEE
By:
Name:
Title:
Attest:
By:
Name:
Title:
STATE OF )
)SS:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of MERCURY FINANCE COMPANY, one of the
entities described in and which executed the above instrument; that he/she knows
the seal of said entity; that the seal or a facsimile thereof affixed to said
instrument is such seal; that it was so affixed by authority of the Board of
Directors of said entity, and that he/she signed his/her name thereto by like
authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF )
) SS:
COUNTY OF )
On this ____ day of , 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
Notary Public
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
WARRANT AGREEMENT
between
MERCURY FINANCE COMPANY
and
HARRIS TRUST AND SAVINGS BANK
as Warrant Agent
--------------------------
Dated as of __________, 1998
TABLE OF CONTENTS
PAGE
Section 1. Definitions................................................ 1
Section 2. Form of Warrant; Execution; Registration....................3
2.1 Form of Warrant; Execution of Warrants......................3
2.2 Registration................................................3
2.3 Countersignature of Warrants................................3
Section 3. Transfer and Exchange of Warrants...........................4
Section 4. Term of Warrants; Exercise of Warrants; Compliance with
Government Regulation.......................................4
4.1 Term of Warrants............................................4
4.2 Exercise of Warrants........................................5
4.3 Compliance with Government Regulations; Qualification under
Securities Laws.............................................6
Section 5. Payment of Taxes............................................6
Section 6. Mutilated or Missing Warrant Certificates...................7
Section 7. Reservation of Warrant Shares...............................7
Section 8. Stock Exchange Listings.....................................7
Section 9. Adjustment of Exercise Price, Number of Warrant Shares and
Shares of Capital Stock Warrants Are Exercisable Into.......8
9.1 Mechanical Adjustments......................................8
(a) Adjustment for Change in Capital Stock.............8
(b) Adjustment for Rights Issue........................8
(c) Adjustment for Other Distributions.................9
(d) Adjustment for Common Stock and Convertible
Securities Issue...................................9
(e) Current Market Price; Price Per Share..............10
(f) When De Minimis Adjustment May Be Deferred.........12
(g) Adjustment in Exercise Price.......................12
(h) When No Adjustment Required........................12
(i) Capitalization, Reclassification or Consolidation..13
(j) Shares of Common Stock.............................13
(k) Expiration of Rights, etc..........................13
9.2 Voluntary Adjustment by the Company.........................14
9.3 Notice of Adjustment........................................14
9.4 Preservation of Purchase Rights upon Merger or
Consolidation...............................................15
9.5 Statement on Warrants.......................................15
Section 10. Fractional Interests........................................15
Section 11. No Rights as Stockholders; Notices to Holders...............15
Section 12. Payments in U.S. Currency...................................16
Section 13. Merger or Consolidation or Change of Name of Warrant Agent..16
Section 14. Appointment of Warrant Agent................................17
14.1 Concerning the Warrant Agent................................17
14.2 Correctness of Statements...................................17
14.3 Breach of Covenants.........................................17
14.4 Performance of Duties.......................................17
14.5 Reliance on Counsel.........................................17
14.6 Proof of Actions Taken......................................18
14.7 Compensation and Indemnification............................18
14.8 Legal Proceedings...........................................18
14.9 Other Transactions in Securities of Company.................18
14.10 Liability of Warrant Agent..................................19
14.11 Reliance on Documents.......................................19
14.12 Validity of Agreement.......................................19
14.13 Instructions from Company...................................19
Section 15. Change of Warrant Agent.....................................19
Section 16. Notices.....................................................20
Section 17. Cancellation of Warrants....................................20
Section 18. Supplements and Amendments..................................20
Section 19. Successors..................................................21
Section 20. Applicable Law..............................................21
Section 21. Benefits of this Agreement..................................21
Section 22. Counterparts................................................21
Section 23. Captions....................................................21
WARRANT AGREEMENT, dated as of __________, 1998, between Mercury
Finance Company, a Delaware corporation (the "Company"), and [Harris Trust and
Savings Bank], as Warrant Agent (together with any successors and assigns, the
"Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company was a Debtor and Debtor-in-Possession in the case
(the "Chapter 11 Case") filed in the United States Bankruptcy Court for the
District of ___________________ (the "Bankruptcy Court"), entitled "In re
Mercury Finance Company, Debtor," Chapter 11 Case No. ________, under the
Bankruptcy Code;
WHEREAS, in connection with and as part of the transactions to be
consummated pursuant to the confirmation of a Plan of Reorganization (as
amended, modified or supplemented from time to time) of the Company in the
Chapter 11 Case (the "Plan"), the Company has agreed to issue three series of
Warrants (the "Series A Warrants", the "Series B Warrants" and the "Series C
Warrants" and collectively, the "Warrants") with each series of Warrants
exercisable for the purchase of 580,000 shares of Common Stock of the Company.
WHEREAS, by Order dated __________ __, 1998, the Bankruptcy Court
confirmed the Plan;
WHEREAS, the Plan contemplates that the Company will enter into certain
agreements, including, without limitation, this Warrant Agreement;
WHEREAS, the Company desires to issue the Warrants, each of which
entitles the holder thereof to purchase one share of its Common Stock (each of
said shares of Common Stock deliverable upon exercise of the Warrants, a
"Warrant Share"); and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, division, transfer, exchange and exercise of Warrants.
NOW, THEREFORE, in consideration of the foregoing, to implement the
terms of the Plan, and for the purpose of defining the terms and provisions of
the Warrants and the respective rights and obligations thereunder of the Company
and the registered owners of the Warrants (the "Holders") and any security into
which they may be exchanged, the Company and the Warrant Agent hereby agree as
follows:
Section 1. Definitions. The following terms, as used herein, have the
following meanings (all terms defined in the singular to have the correlative
meanings when used in the plural and vice versa):
"Agreement" means this Warrant Agreement, as the same may be amended,
modified or supplemented from time to time.
"Assets" has the meaning ascribed to such term in Section 9.1(c)
hereof.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) any
day on which banking institutions located in the City of New York, New York or
Chicago, Illinois are required or authorized by law or by local proclamation to
close, or (c) any day on which the New York Stock Exchange is closed.
"Commercially Reasonable Efforts", when used with respect to any
obligation to be performed or term or provision to be observed hereunder, means
such efforts as a prudent Person seeking the benefits of such performance or
action would make, use, apply or exercise to preserve, protect or advance its
rights or interests, provided that such efforts do not require such Person to
incur a material financial cost or a substantial risk of material liability
unless such cost or liability (i) would customarily be incurred in the course of
performance or observance of the relevant obligation, term or provision, (ii) is
caused by or results from the wrongful act or negligence of the Person whose
performance or observance is required hereunder, or (iii) is not excessive or
unreasonable in view of the rights or interests to be preserved, protected or
advanced. Such efforts may include, without limitation, the expenditure of such
funds and retention by such Person of such accountants, attorneys or other
experts or advisors as may be necessary or appropriate to effect the relevant
action; the undertaking of any special audit or internal investigation that may
be necessary or appropriate to effect the relevant action; and the commencement,
termination or settlement of any action, suit or proceeding involving such
Person to the extent necessary or appropriate to effect the relevant action.
"Common Stock" means the common stock, par value $___, of the Company
after the Effective Date (as defined in the Plan).
"Convertible Securities" has the meaning ascribed to such term in
Section 9.1(d) hereof.
"Exercise Period" has the meaning ascribed to such term in Section 4.1
hereof.
"Exercise Price" means (i) $_____________ per share for the Series A
Warrants, (ii) $_____________ per share for the Series B Warrants, and (iii)
$______________ per share for the Series C Warrants, as adjusted pursuant to
Section 9 hereof.
"Holder" has the meaning ascribed to such term in the preamble hereto.
"NASD" has the meaning ascribed to such term in Section 4.2 hereof.
"Person" means a natural person, a corporation, a partnership, a trust,
a joint venture, any regulatory authority or any other entity or organization.
"Plan" has the meaning ascribed to such term in the preamble hereto.
"Price Per Share" has the meaning ascribed to such term in Section
9.1(e)(ii) hereof.
"Rights" has the meaning ascribed to such term in Section 9.1(b)
hereof.
"Transfer Agent" has the meaning ascribed to such term in Section 7
hereof.
"SEC" means the United States Securities and Exchange Commission, or
any successor governmental agency or authority thereto.
"Series A Warrants" has the meaning ascribed to such term in the
preamble hereto.
"Series B Warrants" has the meaning ascribed to such term in the
preamble hereto.
"Series C Warrants" has the meaning ascribed to such term in the
preamble hereto.
"Subsidiary" has the meaning ascribed to such term in Section 9.1(c)
hereof.
"Warrant" has the meaning ascribed to such term in the preamble hereto.
"Warrant Certificate" has the meaning ascribed to such term in Section
2.1 hereof.
"Warrant Register" has the meaning ascribed to such term in Section 2.2
hereof.
"Warrant Share" has the meaning ascribed to such term in the preamble
hereto.
Section 2. Form of Warrant; Execution; Registration.
2.1 Form of Warrant; Execution of Warrants. The certificates evidencing
the Warrants (the "Warrant Certificates") shall be in registered form only and
shall be in the form set forth as Exhibit A hereto. The Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board,
President, Chief Executive Officer or one of its Vice Presidents. The signature
of any such officer on the Warrant Certificates may be manual or by facsimile.
Any Warrant Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Warrant Certificate, shall be a
proper officer of the Company to sign such Warrant Certificate. Each Warrant
Certificate shall be dated the date it is countersigned by the Warrant Agent
pursuant to Section 2.3 hereof.
2.2 Registration. The Warrant Certificates shall be numbered and shall
be registered on the books of the Company maintained at the principal office of
the Warrant Agent initially in Chicago, Illinois (or such other place in the
continental United States as the Warrant Agent shall from time to time notify
the Company and the Holders in writing) (the "Warrant Register") as they are
issued. The Company and the Warrant Agent shall be entitled to treat the
registered owner of any Warrant as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person.
2.3 Countersignature of Warrants. The Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. Warrant Certificates may be countersigned, however, by the
Warrant Agent and may be delivered by the Warrant Agent notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall, upon written
instructions of the Chairman of the Board, the President, the Chief Executive
Officer, any Vice President, the Treasurer or the Secretary of the Company,
countersign, issue and deliver Warrant Certificates entitling the Holders
thereof to purchase not more than an aggregate of 1,740,000 Warrant Shares
(subject to adjustment pursuant to Section 9 hereof) and shall countersign,
issue and deliver Warrant Certificates as otherwise provided in this Agreement.
Section 3. Transfer and Exchange of Warrants. Subject to the terms
hereof, the Warrant Agent shall initially countersign, register in the Warrant
Register and deliver Warrants hereunder in accordance with the written
instructions of the Company. Subject to the terms hereof and the receipt of such
documentation as the Warrant Agent may reasonably require, the Warrant Agent
shall thereafter from time to time register the transfer of any outstanding
Warrants upon the Warrant Register upon surrender of the Warrant Certificate or
Certificates evidencing such Warrants duly endorsed or accompanied (if so
required by it) by a written instrument or instruments of transfer in form
reasonably satisfactory to the Warrant Agent, duly executed by the registered
Holder or Holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney. Subject to the terms of this Agreement, each
Warrant Certificate may be exchanged for another Warrant Certificate or
Certificates entitling the Holder thereof to purchase a like aggregate number of
Warrant Shares, at the same exercise price and having the same term, as the
surrendered Warrant Certificate or Certificates then entitles such Holder to
purchase. Any Holder desiring to exchange a Warrant Certificate or Certificates
shall make such request in writing delivered to the Warrant Agent, and shall
surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by
a written instrument or instruments of transfer in form reasonably satisfactory
to the Warrant Agent, the Warrant Certificate or Certificates to be so
exchanged. Upon registration of transfer, the Company shall issue and the
Warrant Agent shall countersign and deliver by certified mail a new Warrant
Certificate or Certificates to the persons entitled thereto. Upon any partial
transfer, a new Warrant Certificate of like tenor and representing in the
aggregate the number of warrants which were not so transferred, shall be issued
to, and in the name of, the holder.
No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any stamp tax or other tax or
other governmental charge that is imposed in connection with any such exchange
or registration of transfer pursuant to Section 5 hereof.
By accepting the initial delivery, transfer or exchange of Warrants,
each Holder shall be deemed to agree to the terms of this Agreement as it may be
in effect from time to time, including any amendments or supplements duly
adopted in accordance with Section 18 hereof.
Section 4. Term of Warrants; Exercise of Warrants; Compliance with
Government Regulation.
4.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, until the expiration of the applicable Exercise
Period for the Warrants held, to receive from the Company the number of Warrant
Shares which the Holder may at the time be entitled to receive upon exercise of
such Warrants and payment of the Exercise Price then in effect for such Warrant
Shares, and the Warrant Shares issued to a Holder upon exercise of its Warrants
shall be duly authorized, validly issued, fully paid, nonassessable and shall
not have been issued in violation of or subject to any preemptive rights. Each
Warrant not exercised prior to the expiration of its Exercise Period shall
become void, and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of the expiration of such Exercise Period. The
Exercise Period for the Warrants shall begin at 9:00 a.m., New York City time,
on the date of their issuance, and end at 5:00 p.m., New York City time, on (a)
____________________, 2001 (three years after the Effective Date (as defined in
the Plan)) for the Series A Warrants, (b) _______________, 2002 (four years
after the Effective Date) for the Series B Warrants, and (c) _______________,
2003 (five years after the Effective Date) for the Series C Warrants.
4.2 Exercise of Warrants. During the Exercise Period, each Holder may,
subject to this Agreement, exercise from time to time some or all of the
Warrants evidenced by its Warrant Certificate(s) by (i) surrendering to the
Company at the principal office of the Warrant Agent such Warrant Certificate(s)
with the form of election to purchase on the reverse thereof duly filled in and
signed which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered securities exchange or the National Association of
Securities Dealers, Inc. (the "NASD"), or , to the extent held in "street" name,
Holder shall comply with applicable law, and (ii) paying to the Warrant Agent
for the account of the Company the aggregate Exercise Price for the number of
Warrant Shares in respect of which such Warrants are exercised. Warrants shall
be deemed exercised on the date such Warrant Certificate(s) are surrendered to
the Warrant Agent and tender of payment of the aggregate Exercise Price is made.
Payment of the aggregate Exercise Price shall be made in cash by wire transfer
of immediately available funds to the Warrant Agent for the account of the
Company or by certified or official bank check or checks to the order of the
Company or by any combination thereof.
Upon the exercise of any Warrants in accordance with this Agreement,
the Company shall issue and cause to be delivered with all reasonable dispatch,
to or upon the written order of the Holder and in such name or names as the
Holder may designate, a certificate or certificates for the number of full
Warrant Shares issuable upon the exercise of such Warrants and shall take such
other actions at its sole expense as are necessary to complete the exercise of
such Warrants (including, without limitation, payment of any cash with respect
to fractional interests required under Section 10 hereof). The Warrant Agent
shall have no responsibility or liability for such issuance or the determination
of the number of Warrant Shares issuable upon such exercise. The certificate or
certificates representing such Warrant Shares shall have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date such Warrants are exercised
hereunder. Each Warrant Share, when issued upon exercise of the Warrants, shall
be duly authorized, validly issued, fully paid and non-assessable and will not
have been issued in violation of or subject to any preemptive rights.
In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised, the Holder thereof shall be entitled to receive a new
Warrant Certificate or Certificates as specified by such Holder evidencing the
remaining Warrant or Warrants, and the Warrant Agent is hereby irrevocably
authorized by the Company to countersign, issue and deliver the required new
Warrant Certificate or Certificates evidencing such remaining Warrant or
Warrants pursuant to the provisions of this Section 4.2 hereof and of Section 3
hereof. The Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrant Certificates duly executed on behalf to the Company
for such purpose.
Upon delivery of the Warrant Shares issuable upon exercise in
accordance herewith and of any required new Warrant Certificates, the Company
shall direct the Warrant Agent by written order to cancel the Warrant
Certificates surrendered upon exercise. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner permitted by applicable
laws and satisfactory to the Company in accordance with its written instructions
to the Warrant Agent. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
amounts received by the Warrant Agent upon exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its office. The Company shall at its sole expense
supply the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may reasonably request.
4.3 Compliance with Government Regulations; Qualification under
Securities Laws. The Company is issuing the Warrants based upon the belief that
the issuance and the exercise of the Warrants, and the issuance of the Common
Stock upon exercise of the Warrants, are exempt from registration under the
Federal securities laws pursuant to Section 1145 of the Bankruptcy Code. The
Company covenants that if following a due demand to exercise warrants any shares
of Common Stock required to be reserved for purposes of exercise of such
Warrants require, under any federal or state law, registration with or approval
of any governmental authority before such shares may be issued upon exercise
and/or subsequently transferred, and the Holder requesting the exercise of a
Warrant provides an opinion of counsel acceptable to the Company to the effect
that the exercise of the Warrant and/or the transfer of the underlying Common
Stock require registration, then, the Company will, unless the Company has
received an opinion of counsel to the effect that such registration is not then
required by such laws, use its Commercially Reasonable Efforts to cause such
shares to be duly so registered or approved, as the case may be; provided that
in no event shall such shares of Common Stock be issued, and the exercise of all
such Warrants shall be suspended, for the period from the date of such due
demand for exercise until such registration or approval is in effect; provided,
further, that the Exercise Period for such Warrants (but only such Warrants)
shall be extended one day for each day (or portion thereof) that any such
suspension is in effect. The Company shall promptly notify the Warrant Agent of
any such suspension, and the Warrant Agent shall have no duty, responsibility or
liability in respect of any shares of Common Stock issued or delivered prior to
its receipt of such notice. The Company shall promptly notify the Warrant Agent
of the termination of any such suspension, and such notice shall set forth the
number of days that the Exercise Period with respect to such Warrants shall be
extended as a result of such suspension.
Section 5. Payment of Taxes. The Company will pay all documentary stamp
and other like taxes, if any, attributable to the initial issuance and delivery
of the Warrants and the initial issuance and delivery of the Warrant Shares upon
the exercise of Warrants, provided, that the Company shall not be required to
pay any tax or taxes which may be payable in respect of any transfer of the
Warrants or involved in the issuance or delivery of any Warrant Shares in a name
other than that of the Holder of the Warrants being exercised, and the Warrant
Agent shall not register any such transfer or issue or deliver any Warrant
Certificate(s) or Warrant Shares unless or until the persons requesting the
registration or issuance shall have paid to the Warrant Agent for the account of
the Company the amount of such tax, if any, or shall have established to the
reasonable satisfaction of the Company that such tax, if any, has been paid.
Section 6. Mutilated or Missing Warrant Certificates. In the event that
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, and at the direction of the Company by written order the
Warrant Agent shall countersign and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence reasonably satisfactory to the
Company and the Warrant Agent of such loss, theft or destruction of such Warrant
Certificate and an indemnity or bond, if requested by the Company or the Warrant
Agent, also reasonably satisfactory to them. An applicant for such a substitute
Warrant Certificate shall also comply with such other reasonable procedures as
the Company or the Warrant Agent may reasonably require.
Section 7. Reservation of Warrant Shares. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized Common
Stock, free of all preemptive rights, a number of shares of Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Common Stock and every
subsequent or other transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants (each, a "Transfer Agent") will be
and are hereby irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. The Company
will keep a copy of this Agreement on file with each Transfer Agent. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from the
Company or a Transfer Agent, as the case may be, the certificates for Warrant
Shares required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply its
Transfer Agents with duly executed stock certificates for such purposes and will
itself provide or otherwise make available any cash which may be payable as
provided in Section 10 hereof. The Company will furnish to its Transfer Agents a
copy of all notices of adjustments and certificates related thereto, transmitted
to each Holder pursuant to Section 9.3 hereof. The Company will give the Warrant
Agent prompt notice of any change in any Transfer Agent or any change of address
of any Transfer Agent.
Before taking any action which would cause an adjustment pursuant to
Section 9 reducing the Exercise Price, the Company will take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
Section 8. Stock Exchange Listings. The Company shall use its
Commercially Reasonable Efforts (including requests for waivers) to have each
series of the Warrants included for quotation in The Nasdaq National Market or
the Nasdaq Small Cap Market or listed on the American Stock Exchange, and shall
use its Commercially Reasonable Efforts to maintain such listing or inclusion.
In the event the Warrants do not qualify for such listing or inclusion, the
Company will use its Commercially Reasonable Efforts (including, requests for
waivers) to effect such inclusion or listing whenever the Warrants qualify
therefor, and prior to such time, shall use Commercially Reasonable Efforts to
cause some other customary trading market to admit the warrants for trading. Any
such listing and inclusion shall be at the Company's sole expense.
Section 9. Adjustment of Exercise Price, Number of Warrant Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant, and the Exercise
Price, shall be subject to adjustment from time to time upon the happening of
certain events, as hereinafter described. The Warrant Agent shall be fully
protected in relying on the certificate described in Section 9.3 below regarding
the adjustment and on any adjustment therein contained, and shall not be
obligated or responsible for calculating any adjustment, nor shall it be deemed
to have knowledge of such an adjustment unless and until it shall have received
such certificate.
9.1 Mechanical Adjustments. The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) Adjustment for Change in Capital Stock. Subject to
paragraphs (f) and (h) below, in case the Company shall (i)
pay a dividend on its outstanding shares of Common Stock in
shares of Common Stock or make a distribution of shares of
Common Stock on its outstanding shares of Common Stock, (ii)
make a distribution on its outstanding shares of Common Stock
in shares of its capital stock other than Common Stock, (iii)
subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iv) combine its
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (v) issue, by reclassification of
its shares of Common Stock, other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
entity), then the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Holder of each Warrant shall be entitled
to receive upon the exercise of the Warrant the kind and
number of Warrant Shares or other securities of the Company
which such Holder would have owned or have been entitled to
receive upon the happening of any of the events described
above had such Warrant been exercised in full immediately
prior to the happening of such event or any record date with
respect thereto. If a Holder is entitled to receive shares of
two or more classes of capital stock of the Company pursuant
to the foregoing upon exercise of Warrants, the allocation of
the adjusted Exercise Price between such classes of capital
stock shall be determined reasonably and in good faith by the
Board of Directors of the Company. After such allocation, the
exercise privilege and the Exercise Price with respect to
each class of capital stock shall thereafter be subject to
adjustment on terms substantially identical to those
applicable to Common Stock in this Section 9. An adjustment
made pursuant to this paragraph (a) shall become effective
immediately after the record date for such event or, if none,
immediately after the effective date of such event. Such
adjustment shall be made successively whenever such an event
occurs.
(b) Adjustment for Rights Issue. Subject to paragraphs
(f) and (h) below, in case the Company shall issue rights,
options or warrants (collectively, "Rights") to all holders
of its outstanding Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a Price Per Share
(as defined in paragraph (e) below) which is lower at the
record date mentioned below than the Current Market Price (as
defined in paragraph (e) below) per share of Common Stock on
such record date, then the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of
such Rights plus the additional Number of Shares (as defined
in paragraph (e) below) of Common Stock offered for
subscription or purchase in connection with such Rights and
the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such
Rights plus the number of shares of Common Stock which the
aggregate Proceeds (as defined in paragraph (e) below)
received or receivable by the Company upon exercise of such
Rights would purchase at the Current Market Price per share
of Common Stock at such record date. Such adjustment shall be
made whenever Rights are issued, and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive Rights.
(c) Adjustment for Other Distributions. Subject to
paragraphs (f) and (h) below, in case the Company shall
distribute to all holders of its shares of Common Stock (x)
evidences of indebtedness or assets (excluding cash dividends
or distributions payable out of the consolidated earnings or
surplus legally available for such dividends or distributions
and dividends or distributions referred to in paragraphs (a)
or (b) above) of the Company or any corporation or other
legal entity a majority of the voting equity or equity
interests of which are owned, directly or indirectly, by the
Company (a "Subsidiary"), or (y) shares of capital stock of a
Subsidiary (such evidences of indebtedness, assets and
securities as set forth in clauses (x) and (y) above,
collectively, "Assets"), then in each case the number of
Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of
each Warrant by a fraction, the numerator of which shall be
the Current Market Price per share of Common Stock on the
date of such distribution and the denominator of which shall
be such Current Market Price per share of Common Stock less
the fair value as of such record date as determined
reasonably and in good faith by the Board of Directors of the
Company of the portion of the Assets applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Adjustment for Common Stock and Convertible
Securities Issue. Subject to paragraphs (f) and (h) below, in
case the Company shall issue shares of its Common Stock, or
securities convertible into, or exchangeable or exercisable
for Common Stock or Rights to subscribe for or purchase such
securities (collectively, "Convertible Securities")
(excluding the issuance of (i) Common Stock or Convertible
Securities issued in any of the transactions described in
paragraphs (a), (b) or (c) above or (ii) Warrant Shares
issued upon the exercise of the Warrants), at a Price Per
Share of Common Stock, in the case of the issuance of Common
Stock, or at a Price Per Share of Common Stock initially
deliverable upon conversion, exercise or exchange of such
Convertible Securities, in each case, together with any other
consideration received by the Company in connection with such
issuance, below the Current Market Price per share of Common
Stock on the date the Company fixed the offering, conversion
or exercise or exchange price of such additional shares, then
the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of
which shall be the total number of shares of Common Stock
outstanding on such date plus the additional Number of Shares
(as defined below) offered for subscription or purchase and
the denominator of which shall be the number of shares
outstanding on such date plus the additional Number of Shares
which the aggregate Proceeds (as defined below) of the total
amount of Convertible Securities so offered would purchase at
the Current Market Price per share of Common Stock at such
record date. In case the Company shall issue and sell
Convertible Securities for a consideration consisting, in
whole or in part, of property other than cash or its
equivalent, then in determining the "Price Per Share" of
Common Stock and the "consideration received by the Company"
for purposes of this paragraph (d), the Board of Directors of
the Company shall reasonably and in good faith determine the
fair value of such property. The determination of whether any
adjustment is required under this paragraph (d), by reason of
the sale and issuance of any Convertible Securities and the
amount of such adjustment, if any, shall be made at such time
and not at the subsequent time of issuance of shares of
Common Stock upon the exercise, conversion or exchange of
Convertible Securities.
(e) Current Market Price; Price Per Share. (i) For the
purpose of any computation under Section 4.2 hereof or this
Section 9.1, the "Current Market Price" per share of Common
Stock at any date shall be the average of the daily closing
prices for the 20 consecutive trading days preceding the date
of such computation. The closing price for each day shall be
(x) if the Common Stock shall be then listed or admitted to
trading on the New York Stock Exchange, the closing price on
the NYSE - Consolidated Tape (or any successor composite tape
reporting transactions on the New York Stock Exchange) or,
(y) if such a composite tape shall not be in use or shall not
report transactions in the Common Stock, or if the Common
Stock shall be listed on a stock exchange other than the New
York Stock Exchange, the last reported sales price regular
way or, in case no such reported sale takes place on such
day, the average of the closing bid and asked prices regular
way for such day, in each case on the principal national
securities exchange on which the shares of Common Stock are
listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of
the Common stock have been traded during such 20 consecutive
trading days) or (z) if the Common Stock is not listed or
admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as
reported by The Nasdaq National Market or any comparable
system or, if the Common Stock is not included for quotation
in The Nasdaq National Market or a comparable system, the
average of the closing bid and asked prices as furnished by
two members of the NASD selected reasonably and in good faith
from time to time by the Board of Directors for that purpose.
In the absence of one or more such quotations, the Current
Market Price per share of the Common Stock shall be
determined reasonably and in good faith by the Board of
Directors of the Company.
(ii) For purposes of this Section 9.1, "Price Per Share"
shall be defined and determined according to the following
formula:
P = R/N
where
P = Price Per Share;
R = the "Proceeds" received or receivable by
the Company which (x) in the case of shares
of Common Stock is the total amount received
or receivable by the Company in
consideration for the issuance and sale of
such shares; (y) in the case of Rights or of
Convertible Securities with respect to
shares of Common Stock, is the total amount
received or receivable by the Company in
consideration for the issuance and sale of
Rights or such Convertible Securities, plus
the minimum aggregate amount of additional
consideration, other than the surrender of
such Convertible Securities, payable to the
Company upon exercise, conversion or
exchange thereof; and (z) in the case of
Rights to subscribe for or purchase such
Convertible Securities, is the total amount
received or receivable by the Company in
consideration for the issuance and sale of
such Rights plus the minimum aggregate
amount of additional consideration, other
than the surrender of such Convertible
Securities, payable upon the exercise of the
Right and the conversion or exchange or
exercise of such Convertible Securities;
provided that in each case the proceeds
received or receivable by the Company shall
be the net cash proceeds after deducting
therefrom any compensation paid or discount
allowed in the sale, underwriting or
purchase thereof by underwriters or dealers
or other performing similar services;
N = the "Number of Shares," which (x) in the
case of Common Stock is the number of shares
issued; and (y) in the case of Rights or of
Convertible Securities with respect to
shares of Common Stock, is the maximum
number of shares of Common Stock initially
issuable upon exercise, conversion or
exchange thereof.
(f) When De Minimis Adjustment May Be Deferred. No
adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%)
in the number of Warrant Shares purchasable upon the exercise
of each Warrant, provided that any adjustments which by
reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the
nearest one-thousandth of a Warrant Share and the nearest
cent.
(g) Adjustment in Exercise Price. Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant
is adjusted as herein provided, the Exercise Price payable
upon exercise of each Warrant immediately prior to such
adjustment shall be adjusted by multiplying such Exercise
Price by a fraction, the numerator of which shall be the
number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment and the
denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(h) When No Adjustment Required. No adjustment in the
number of Warrant Shares purchasable upon the exercise of
each Warrant or in the exercise price need be made under this
Section 9.1 in connection with: (i) the issuance of Common
Stock, options, rights, Warrants or other securities pursuant
to the Plan; (ii) shares of Common Stock, options, rights,
warrants or other securities issued pursuant to any plan
adopted by the Company or its subsidiaries for the benefit of
employees or directors; (iii) any issuance of shares of
Common Stock or securities convertible into or exchangeable
for shares of Common Stock pursuant to an underwritten public
offering for a price per share of Common Stock in the case of
an issuance of shares of Common Stock, or for a price per
share of Common Stock initially deliverable upon conversion
or exchange of such securities, that is equal to or greater
than 95% of the Current Market Price per share of Common
Stock on the date the Company fixed the offering, conversion
or exchange price of such additional shares of Common Stock;
(iv) sales of Common Stock pursuant to a plan adopted by the
Company for reinvestment of dividends or interest; provided,
however, that if such sales of Common Stock are at a discount
of 20% to the Current Market Price, such issuances shall
require adjustment under this Section, or (v) shares of
Common Stock issued to shareholders of any corporation that
is acquired by, merged into or made a part or subsidiary of
the Company in an arm's-length transaction. Additionally, no
adjustment need be made if the Company issues or distributes
to each Holder of Warrants the shares, rights, options,
warrants, evidences of indebtedness, assets or other
securities referred to in those paragraphs which each Holder
of Warrants would have been entitled to receive had the
Warrants been exercised for the number of Warrant Shares for
which Warrants are then exercisable prior to the happening of
such event or the record date with respect thereto. No
adjustment in the number of Warrant Shares will be made for a
change in the par value of the shares of Common Stock.
(i) Capitalization, Reclassification or Consolidation.
If any capital reorganization of the Company, or any
reclassification of the Common Stock, or any consolidation of
the Company with or merger of the Company with or into any
other Person or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other
Person, shall be effected in such a way that the holders of
the Common Stock shall be entitled to receive stock, other
securities, cash or other assets (whether such stock, other
securities, cash or other assets are issued or distributed by
the Company or another Person) with respect to or in exchange
for the Common Stock, then, upon exercise of each Warrant,
the Warrantholder shall have the right to receive the kind
and amount of stock, other securities, cash or other assets
receivable upon such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, by a
holder of the number of Warrant Shares that such Warrant
holder would have been entitled to receive upon exercise of
such Warrant had such Warrant been exercised immediately
before such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer, subject to
adjustments (as determined in good faith by the Board of
Directors of the Company). Adjustments for events subsequent
to the effective date of such a reorganization,
reclassification, consolidation, merger, sale or transfer of
assets shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Agreement. In any such
event, effective provisions shall be made in the certificate
or articles of incorporation of the resulting or surviving
corporation, in any contract of sale, merger, conveyance,
lease transfer or otherwise so that the provisions set forth
herein for the protection of the rights of the Warrantholders
shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the
obligation to deliver, upon exercise, such shares of stock,
other securities, cash and property. The provisions of
Section 9 shall similarly apply to successive consolidations,
mergers, sales, leases or transfers.
(j) Shares of Common Stock. For all purposes of this
Agreement, the term "shares of Common Stock" shall mean (i)
the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other
class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes
in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9.1,
the Holders shall become entitled to purchase any securities
of the Company other than shares of Common Stock, thereafter
the number of such other shares so purchasable upon exercise
of each Warrant and the Exercise Price of such shares shall
be subject to adjustment from time to time in a manner and on
terms substantially identical to the provisions with respect
to the Warrant Shares contained in paragraphs (a) through (h)
above, and the provisions of this Agreement with respect to
the Warrant Shares shall apply on like terms to any such
other securities.
(k) Expiration of Rights, etc. Upon the expiration of
any Rights or conversion or exchange or exercise rights, if
any thereof shall not have been exercised, the Exercise Price
and the number of Warrant Shares purchasable upon the
exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (A)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such Rights or conversion or exchange or exercise
rights and (B) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the
Company upon such exercise plus the aggregate consideration,
if any, actually received by the Company for the issuance,
sale or grant of all of such Rights or conversion or exchange
or exercise rights whether or not exercised, provided that no
such readjustment shall have the effect of increasing the
Exercise Price or decreasing the number of Warrant Shares
purchasable upon the exercise of each Warrant by an amount in
excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such Rights or
conversion or exchange or exercise rights.
9.2 Voluntary Adjustment by the Company. (a) The Company may at its
option, at any time during the term of the Warrants, reduce the then current
Exercise Price, and/or increase the number of Warrant shares issuable upon
exercise of the Warrant, to any amount deemed appropriate by the Board of
Directors of the Company.
(b) If, after one or more adjustments to the Exercise Price pursuant
to Section 9, the Exercise Price cannot be reduced further without falling below
the greater of (i) $0.01 or (ii) the lowest positive exercise price legally
permissible for warrants to acquire shares of Common Stock, the Company shall
make further adjustments to compensate the Holder, consistent with the foregoing
principles, as the Board of Directors, acting in good faith, deems necessary,
including an increase in the number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or cash payment to the Holders.
9.3 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of Warrant
Shares is adjusted, as herein provided, the Company shall cause the Warrant
Agent promptly to mail to each Holder, at the sole expense of the Company by
first class mail, postage prepaid, notice of such adjustment or adjustments and
shall deliver to the Warrant Agent a certificate of a firm of independent public
accounts (who may be the regular accountants employed by the Company) setting
forth the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth in
reasonable detail the computations by which such adjustment was made. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder requesting an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holder to determine whether any
facts exist which may require any adjustment of the Exercise Price or the number
of Warrant Shares or other stock or property purchasable on exercise of
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment.
9.4 Preservation of Purchase Rights upon Merger or Consolidation. In
case of any consolidation of the Company with or merger of the Company into
another entity, the Company or such successor entity shall execute and deliver
to the Warrant Agent an agreement, which shall be binding on the Holders, that
each Holder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action (after giving effect to any
applicable adjustments under Section 9.1 hereof) to purchase upon exercise of
each Warrant (and in lieu of the Common Stock issuable upon exercise of the
Warrant) the kind and amount of shares and other securities and property
(including cash) which such Holder would have owned or have been entitled to
receive after the happening of such consolidation or merger had such Warrant
been exercised immediately prior to such action. The Company shall at its sole
expense mail by first class mail, postage prepaid, to each Holder notice of the
execution of any such agreement. Such agreement shall provide for adjustments,
which shall be substantially identical to the adjustments provided for in this
Section 9. In addition, the Company shall not merge or consolidate with or into,
any other entity unless the successor entity (if not the Company), shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Agent in its sole judgment and executed and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company. The provisions of this Section 9.4 shall similarly apply to
successive consolidations or mergers. The Warrant Agent shall be under a good
faith duty and responsibility to determine the correctness of any provisions
contained in any such agreement relating to the kind or amount of shares of
stock or other securities or property receivable upon exercise of Warrants or
with respect to the method employed and provided therein for any adjustments and
shall be entitled to rely upon the provisions contained in any such agreement.
In the event of any conflict between Section 9.4 and Section 9.1(i), Section
9.1(i) shall prevail. 9.5 Statement on Warrants. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same Exercise Price and number and kind of Warrant Shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
Section 10. Fractional Interests. Neither the Company nor the Warrant
Agent shall be required to issue fractional Warrant Shares on the exercise of
Warrants. If more than one Warrant shall be exercised at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrants so
exercised. If any fraction of a Warrant Share would, except for the provisions
of this Section 10, be issuable on the exercise of any Warrant, then the Company
shall pay an amount in cash equal to the closing price for one share of Common
Stock on the date the Warrant Certificate is presented for exercise (determined
in accordance with the second sentence of Section 9.1(e)(i) hereof), multiplied
by such fraction.
Section 11. No Rights as Stockholders; Notices to Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring upon the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common stock of securities or assets (other than cash
dividends); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required,
or of the conveyance or transfer of a substantial portion of the
properties and assets of the Company for which approval of any
stockholders of the Company is required, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Holder at its address appearing on the Warrant Register, at
least twenty (20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first class mail, postage prepaid, a written notice stating (i) the date as
of which the holders of record of shares of Common Stock entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, as well as the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation, or winding up. The failure to give the
notice required by this Section 11 or any defect therein shall not affect the
legality or validity of any distribution, right, option, Warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, winding up or action, or the vote upon any of the foregoing.
Section 12. Payments in U.S. Currency. All payments required to be made
hereunder shall be made in lawful money of the United States of America.
Section 13. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporation trust business of the Warrant Agent, shall be the successor to
the Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 15 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in its name;
and in all such cases such Warrant Certificates shall be fully valid and
effective as provided therein and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall be
fully valid and effective as provided therein and in this Agreement.
Section 14. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company hereunder and in accordance
with the terms and conditions hereof, and the Warrant Agent hereby accepts such
appointment.
14.1 Concerning the Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, and no implied duties or obligations shall be read into this Warrant
Agreement against the Warrant Agent, by all of which the Company and the
Holders, by their acceptance of Warrant Certificates, shall be bound.
14.2 Correctness of Statements. The statements contained herein and in
the Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except statements that describe the Warrant Agent or action taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrant Certificates or Warrants except as herein otherwise provided.
14.3 Breach of Covenants. The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants contained in
this Agreement or in the Warrant to be complied with by the Company.
14.4 Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and shall not be
responsible for the misconduct or negligence of any attorney or agent (which
shall not include an employee of the Warrant Agent) appointed with due care.
14.5 Reliance on Counsel. Before the Warrant Agent acts or refrains
from acting, the Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder in
respect to any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
14.6 Proof of Actions Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed conclusively to
be proved and established by a certificate signed by any of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
14.7 Compensation and Indemnification. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the Warrant
Agent in the performance of its duties under this Agreement, to reimburse the
Warrant Agent for all reasonable expenses, taxes and governmental charges and
other charges of any kind and nature incurred by the Warrant Agent in the
performance of its duties under this Agreement (including but not limited to
legal fees and expenses), and to indemnify the Warrant Agent and its officers,
agents and directors for and to hold each harmless from any and all losses,
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent or any of its agents in the performance of its
duties under this Agreement, except as a result of the Warrant Agent's gross
negligence or willful misconduct as determined in a final judgment of a court of
competent jurisdiction and authority. The Company's obligations under this
Section 14.7 and any claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge of the Company's
obligations under this Agreement. The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company.
14.8 Legal Proceedings. The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or any one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred or any liabilities which may arise, but this
provision shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without any such security
or indemnity. All rights of action of any Holder under this Agreement or under
any of the Warrants may be enforced by the Warrant Agent without the possession
of any of the Warrant Certificates or the production thereof at any trial or
other proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
14.9 Other Transactions in Securities of Company. The Warrant Agent and
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or any other securities of the Company or
have a pecuniary interest in any transaction in which the Company may be
interested or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
14.10 Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own
negligence or bad faith.
14.11 Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
14.12 Validity of Agreement. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or for
any of the statements of fact or recitals contained in this Agreement or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereof) or any Warrant; nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other securities) to be
issued pursuant to this Agreement or any Warrant, or as to whether any Warrant
Shares (or other securities) will, when issued, be validly issued, fully paid
and nonassessable, or as to the Exercise Price or the number or amount of
Warrant Shares or other securities or any Assets or other property issuable upon
exercise of any Warrant.
14.13 Instructions from Company. The Warrant Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from any person believed in good faith by the Warrant Agent to
be one of the Chairman of the Board, the President, a Vice President, the
Treasurer or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or officers or any delay in acting while
waiting for these instructions..
Section 15. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
thirty (30) days' written notice. The Warrant Agent may be removed by like
notice to the Warrant Agent and the Holders from the Company, such notice to
specify the date when removal shall become effective. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, then the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after such
removal or written notification of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any Holder (who shall with such
notice submit his Warrant Certificate or Certificates for inspection by the
Company), then any Holder may apply to any court of competent jurisdiction for
the appointment of a successor to the Warrant Agent. Any successor Warrant
Agent, whether appointed by the Company or such a court, shall be a bank or
trust company, in good standing, incorporated under the laws of the United
States of America or any state thereof and having at the time of its appointment
as Warrant Agent a combined capital and surplus of at least $100,000,000. After
appointment and acceptance of such appointment in writing, the successor Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor Warrant
Agent any property at the time held by it hereunder, and shall execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Failure to file any notice provided for in this Section 15, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant
Agent, as the case may be. In the event of such resignation or removal, the
successor Warrant Agent shall mail, by first class mail, postage prepaid, to
each Holder, written notice of such removal or resignation and the name and
address of such successor Warrant Agent.
Section 16. Notices. Any notice pursuant to this Agreement by the
Company or by any Holder to the Warrant Agent, shall be in writing and shall be
delivered in person or sent by registered or certified mail and shall be deemed
given upon receipt at its offices at Harris Trust & Savings Bank, 311 W. Monroe
Street, Chicago, IL 60606 Attention: Thomas Blatchford. Any notice pursuant to
this Agreement by the Warrant Agent or by any Holder to the Company, shall be in
writing and shall be delivered in person or by confirmed facsimile transmission
(plus a copy delivered by overnight mail) or first class mail, postage prepaid
at its offices at Mercury Finance Company, 100 Field Drive, Lake Forest,
Illinois 60045, Attention: Corporate Secretary, Telecopier No.:
___________________. Each party hereto may from time to time change the address
to which its notices are to be delivered or mailed hereunder by notice to the
other party. Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders shall be in writing and shall be mailed first
class, postage prepaid, or otherwise delivered, to such Holders at their
respective addresses in the Warrant Register. The initial address of each Holder
shall be as provided by the Company to the Warrant Agent. Any Holder may change
its address by notice to the Company and the Warrant Agent given in accordance
with this Section 16.
Section 17. Cancellation of Warrants. In the event the Company shall
purchase or otherwise acquire Warrants, the same shall thereupon be delivered to
the Warrant Agent and be cancelled by it and retired. The Warrant Agent shall
cancel any Warrant Certificate surrendered for exchange, substitution, transfer
or exercise in whole or in part.
Section 18. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement, the Warrants and
the Warrant Certificates without approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to comply with
the requirements of any national securities exchange or The Nasdaq National
Market, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Warrant Agent may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and this Agreement. Any other supplement or amendment to this Agreement
may be made with the approval of the Holders of a majority of outstanding
Warrants of each series of Warrants, voting separately as three classes.
Notwithstanding the foregoing, any amendment or supplement that (i) increases
the Exercise Price; (ii) decreases the number of shares of Common Stock issuable
upon exercise of a Warrant; or (iii) shortens the period during which the
Warrants may be exercised shall require the consent of each Holder of a Warrant
affected thereby. Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Warrant Agent
under this Agreement will be effective against the Warrant Agent without the
execution of such supplement or amendment by the Warrant Agent.
Section 19. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure solely to the benefit of the Company or the Warrant Agent and their
respective successors hereunder.
Section 20. Applicable Law. This Agreement and each Warrant issued
hereunder shall be governed by and construed in accordance with the laws of the
state of Delaware without giving effect to the principles of conflict of laws
thereof, except as to the rights and obligations of the Warrant Agent, which
shall be governed by and construed in accordance with the laws of the Sate of
Illinois.
Section 21. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the Holders any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent, their respective successors, and the
Holders of the Warrants.
Section 22. Counterparts. This Agreement may be executed in any number
of counterparts; each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 23. Captions. The captions of the Sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
MERCURY FINANCE COMPANY
By:
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
as Warrant Agent
By:
Name:
Title:
No. __________ __________ Warrants
Series A
Warrant Certificate
MERCURY FINANCE COMPANY
This Warrant Certificate certifies that ____________________ or
registered assigns, is the registered holder of Series A Warrants (the
"Warrants") expiring at 5:00 p.m., New York City time, on __________ __, 2002
[Three years from the Effective Date] (the "Expiration Date"), to purchase
Common Stock, $___ par value per share (the "Common Stock"), of MERCURY FINANCE
COMPANY, a Delaware corporation (the "Company"). The Warrants may be exercised
at any time from 9:00 am., New York City time, on __________ __, 1998 to 5:00
p.m., New York City time, on the Expiration Date. Each Warrant entitles the
holder upon exercise to receive from the Company, if exercised before 5:00 p.m.,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (a "Warrant Share") at the Exercise Price (as defined in
the Warrant Agreement referred to on the reverse side hereof), payable in lawful
money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events as set forth in the Warrant Agreement.
WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
__________ __, 2002 [THREE YEARS FROM THE EFFECTIVE DATE] SHALL BECOME VOID.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, MERCURY FINANCE COMPANY has caused this Warrant
Certificate to be duly executed.
MERCURY FINANCE COMPANY
By:
Title:
Dated:
Countersigned:
[HARRIS TRUST AND SAVINGS BANK],
as Warrant Agent
By:
Authorized Signatory
[Form of Warrant Certificate]
(Reverse)
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of __________,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
Harris Trust and Savings Bank, as Warrant Agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company. By accepting initial delivery, transfer or exchange of this Warrant,
the duly registered holder shall be deemed to have agreed to the terms of the
Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in the manner described below at the office
of the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or its
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
Payment of the Exercise Price may be made in cash by wire transfer to
the Warrant Agent for the account of the Company or by certified or official
bank check or checks to the order of the Company or by any combination thereof.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant, and the Exercise Price of each Warrant, may, subject to certain
conditions, be adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company shall pay the cash value
thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise this Series A
Warrant, according to the terms and conditions hereof, to the extent of
purchasing __________ shares of Common Stock and hereby makes payment of
$________ in payment of the exercise price thereof. If the number of shares
shall not be all of the shares purchasable under this Warrant, then a new
Warrant Certificate for the balance remaining shall be issued in the name of the
undersigned or its assignee as indicated on the Assignment Form.
Dated:
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(please typewrite or print in block letters)
Address:
Signature
Note: The signature must conform in all respects to
name of holder as specified on the face of this
Warrant Certificate
Signature Guaranteed:
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
Name:
(please typewrite or print in block letters)
Address:
its right to purchase __________ shares of Common Stock represented by this
Series A Warrant and does hereby irrevocably constitute and appoint __________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Dated:
Signature:
Social Security or other identifying Note: The signature must
number of holder conform in all respects to
name of holder as specified on the
face of this Warrant Certificate
Signature Guaranteed:
No. __________ __________ Warrants
Series B
Warrant Certificate
MERCURY FINANCE COMPANY
This Warrant Certificate certifies that ____________________ or
registered assigns, is the registered holder of Series B Warrants (the
"Warrants") expiring at 5:00 p.m., New York City time, on __________ __, 2003
[Four years from the Effective Date] (the "Expiration Date"), to purchase Common
Stock, $___ par value per share (the "Common Stock"), of MERCURY FINANCE
COMPANY, a Delaware corporation (the "Company"). The Warrants may be exercised
at any time from 9:00 am., New York City time, on __________ __, 1998 to 5:00
p.m., New York City time, on the Expiration Date. Each Warrant entitles the
holder upon exercise to receive from the Company, if exercised before 5:00 p.m.,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (a "Warrant Share") at the Exercise Price (as defined in
the Warrant Agreement referred to on the reverse side hereof), payable in lawful
money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events as set forth in the Warrant Agreement.
WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
__________ __, 2003 [FOUR YEARS FROM THE EFFECTIVE DATE] SHALL BECOME VOID.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, MERCURY FINANCE COMPANY has caused this Warrant
Certificate to be duly executed.
MERCURY FINANCE COMPANY
By:
Title:
Dated:
Countersigned:
[HARRIS TRUST AND SAVINGS BANK],
as Warrant Agent
By:
Authorized Signatory
[Form of Warrant Certificate]
(Reverse)
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of __________,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
Harris Trust and Savings Bank, as Warrant Agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company. By accepting initial delivery, transfer or exchange of this Warrant,
the duly registered holder shall be deemed to have agreed to the terms of the
Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in the manner described below at the office
of the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or its
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
Payment of the Exercise Price may be made in cash by wire transfer to
the Warrant Agent for the account of the Company or by certified or official
bank check or checks to the order of the Company or by any combination thereof.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant, and the Exercise Price of each Warrant, may, subject to certain
conditions, be adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company shall pay the cash value
thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise this Series B
Warrant, according to the terms and conditions hereof, to the extent of
purchasing __________ shares of Common Stock and hereby makes payment of
$________ in payment of the exercise price thereof. If the number of shares
shall not be all of the shares purchasable under this Warrant, then a new
Warrant Certificate for the balance remaining shall be issued in the name of the
undersigned or its assignee as indicated on the Assignment Form.
Dated:
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(please typewrite or print in block letters)
Address:
Signature
Note: The signature must conform in all respects to
name of holder as specified on the face of this
Warrant Certificate
Signature Guaranteed:
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
Name:
(please typewrite or print in block letters)
Address:
its right to purchase __________ shares of Common Stock represented by this
Series B Warrant and does hereby irrevocably constitute and appoint __________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Dated:
Signature:
Social Security or other identifying Note: The signature must
number of holder conform in all respects to
name of holder as specified on the
face of this Warrant Certificate
Signature Guaranteed:
No. __________ __________ Warrants
Series C
Warrant Certificate
MERCURY FINANCE COMPANY
This Warrant Certificate certifies that ____________________ or
registered assigns, is the registered holder of Series C Warrants (the
"Warrants") expiring at 5:00 p.m., New York City time, on __________ __, 2003
[Five years from the Effective Date] (the "Expiration Date"), to purchase Common
Stock, $___ par value per share (the "Common Stock"), of MERCURY FINANCE
COMPANY, a Delaware corporation (the "Company"). The Warrants may be exercised
at any time from 9:00 am., New York City time, on __________ __, 1998 to 5:00
p.m., New York City time, on the Expiration Date. Each Warrant entitles the
holder upon exercise to receive from the Company, if exercised before 5:00 p.m.,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (a "Warrant Share") at the Exercise Price (as defined in
the Warrant Agreement referred to on the reverse side hereof), payable in lawful
money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events as set forth in the Warrant Agreement.
WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
__________ __, 2003 [FIVE YEARS FROM THE EFFECTIVE DATE] SHALL BECOME VOID.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, MERCURY FINANCE COMPANY has caused this Warrant
Certificate to be duly executed.
MERCURY FINANCE COMPANY
By:
Title:
Dated:
Countersigned:
[HARRIS TRUST AND SAVINGS BANK],
as Warrant Agent
By:
Authorized Signatory
[Form of Warrant Certificate]
(Reverse)
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of __________,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
Harris Trust and Savings Bank, as Warrant Agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company. By accepting initial delivery, transfer or exchange of this Warrant,
the duly registered holder shall be deemed to have agreed to the terms of the
Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in the manner described below at the office
of the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or its
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
Payment of the Exercise Price may be made in cash by wire transfer to
the Warrant Agent for the account of the Company or by certified or official
bank check or checks to the order of the Company or by any combination thereof.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant, and the Exercise Price of each Warrant, may, subject to certain
conditions, be adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company shall pay the cash value
thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise this Series C
Warrant, according to the terms and conditions hereof, to the extent of
purchasing __________ shares of Common Stock and hereby makes payment of
$________ in payment of the exercise price thereof. If the number of shares
shall not be all of the shares purchasable under this Warrant, then a new
Warrant Certificate for the balance remaining shall be issued in the name of the
undersigned or its assignee as indicated on the Assignment Form.
Dated:
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(please typewrite or print in block letters)
Address:
Signature
Note: The signature must conform in all respects to
name of holder as specified on the face of this
Warrant Certificate
Signature Guaranteed:
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
Name:
(please typewrite or print in block letters)
Address:
its right to purchase __________ shares of Common Stock represented by this
Series C Warrant and does hereby irrevocably constitute and appoint __________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Dated:
Signature:
Social Security or other identifying Note: The signature must
number of holder conform in all respects to
name of holder as specified on the
face of this Warrant Certificate
Signature Guaranteed:
[SALOMON SMITH BARNEY LETTERHEAD]
May 13, 1998
Board of Directors
Mercury Finance Company
100 Field Drive,
Suite 340
Lake Forest, IL 60045
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the holders of common stock, $1.00
par value ("Company Common Stock"), of Mercury Finance Company (the "Company")
of the consideration to be received by such holders in connection with the
proposed Mercury Finance Company Restructuring Plan (the "Plan"), to be
implemented pursuant to an Agreement and Plan of Reorganization to be entered
into between the Company and its senior creditors. The Plan contemplates the
filing by the Company of a bankruptcy petition and will be implemented and
become effective only upon approval of the Plan by the appropriate bankruptcy
court. Upon effectiveness of the Plan, each holder of the Company's commercial
paper, short-term loans, senior term debt, and other allowed general unsecured
claims against the Company (a "Senior Lender") will receive in respect of its
claims: (i) its pro rata share of new senior secured notes to be issued by the
reorganized company under the Plan (the "New Senior Secured Notes"); and (ii)
its pro rata share of 100% of the equity in the reorganized Company (the "New
Common Stock"). The New Senior Secured Notes will be issued pursuant to section
1145 of the Bankruptcy Code, will be secured by assets of the Company and its
subsidiaries, will have a principal amount equal to 75.0% of the outstanding
principal amount due under Senior Lender claims after giving effect to the
payment of Senior Lender claims with all cash at the Company in excess of $20
million on the effective date, will mature on the third anniversary of the
effective date and will pay a coupon of 9.0% per annum. Upon the effectiveness
of the Plan and subject to acceptance of the Plan by the holders of the
Company's subordinated notes (the "Subordinated Notes"), the Senior Lenders
shall allocate to the holders of Subordinated Notes $22.5 million in New Junior
Subordinated Notes which will mature five years after the effective date and
will pay a coupon of 9.0% per annum. Upon the effectiveness of the Plan, the
holders of issued and outstanding shares of Company Common Stock and the holders
of allowed claims against the Company based on securities fraud causes of action
will receive, in exchange for such Company Common Stock and such other claims,
warrants (the "Warrants") entitling the holders thereof to purchase in aggregate
up to 15% of the New Common Stock on a pro forma basis. One third of the
Warrants shall have a three-year term and the exercise price will reflect a
recovery of par by the Senior Lenders. One third of the Warrants shall have a
four-year term and the exercise price will reflect a recovery of 110% of par by
the Senior Lenders. One third of the Warrants shall have a five year term and
the exercise price will reflect a recovery of 120% of par by the Senior Lenders.
The exercise price of the Warrants with a par recovery strike price
will be set by multiplying the aggregate amount of Senior Lender claims by 1.0,
subtracting the amount issued in the form of New Secured Notes and dividing the
result by the number of New Common Stock shares issued to the Senior Lenders.
The exercise price of the Warrants with a 110% recovery strike price will be set
by multiplying the aggregate amount of Senior Lender claims by 1.1, subtracting
the amount issued in the form of New Secured Notes and dividing the result by
the number of New Common Stock shares issued to the Senior Lenders. The exercise
price of the Warrants with a 120% recovery strike price will be set by
multiplying the aggregate amount of Senior Lender claims by 1.2, subtracting the
amount issued in the form of New Secured Notes and dividing the result by the
number of New Common Stock shares issued to the Senior Lenders.
In connection with rendering our opinion, we have reviewed and
analyzed, among other things, the following: (i) a preliminary Restructuring
Term Sheet; (ii) certain publicly available information concerning the Company,
including the Annual Reports on Form 10-K of the Company, as amended, for each
of the years of the three-year period ended December 31,1997, and the Quarterly
reports on Form 10-Q of the Company for the quarters ended March 31, 1997, June
30, 1997 and September 30, 1997; (iii) certain financial forecasts concerning
the business and operations of the Company that were prepared by management of
the Company and Development Specialists, Inc. ("DSI"); and (iv) certain publicly
available information with respect to certain other companies that we believe to
be comparable in certain respects to the Company and the trading markets for
such other companies' securities. We have also met with certain officers and
employees of the Company to discuss the foregoing, including the past and
current business operations and financial condition of the Company, as well as
other matters we believe relevant to our inquiry. We have also considered such
financial and other factors as we have deemed appropriate under the
circumstances, including, among other factors, the following: (i) the historical
and current financial position and results of operations of the Company; (ii)
the historical and current market for the equity securities of the Company, and
of certain other companies that we believe to be comparable in certain respects
to the Company; and (iii) the nature and terms of other transactions we believe
to be relevant. We have also taken into account our assessment of general
economic, market and financial conditions and our knowledge of the consumer
finance industry, as well as our experience in connection with similar
transactions and securities valuation generally.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of the financial and other
information provided us or publicly available and have neither attempted to
independently verify nor assumed responsibility for verifying any such
information. With respect to the financial projections of the Company, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company or
DSI, as the case may be, as to the future financial performance of the Company
and we express no opinion with respect to such forecasts or the assumptions on
which they are based. We have not made or obtained or assumed any responsibility
for making or obtaining any independent evaluations or appraisals of any of the
assets (including properties and facilities) or liabilities of the Company. At
the request of the Company, we did solicit third party offers to acquire the
Company and organized two sale processes for prospective buyers, one in
September of 1997 and the second in January of 1998. The first process failed to
produce a binding offer and the second process resulted in an offer deemed
unsatisfactory by the Senior Lenders and the Company.
Our opinion necessarily is based upon conditions as they exist and can
be evaluated on the date hereof, and we assume no responsibility to update or
revise our opinion based upon circumstances or events occurring after the date
hereof. Our opinion as expressed below does not imply any conclusion as to the
likely trading range of the New Common Stock or the Warrants following the
consummation of the Plan, which may vary depending upon, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
Our opinion does not address the Company's underlying business decision to
effect the Plan. Our opinion is directed only to the fairness, from a financial
point of view, of the Plan and does not constitute a recommendation concerning
how holders of Company Common Stock should vote with respect to the Plan.
In rendering our opinion we have assumed that the Plan will conform to
the preliminary Restructuring Term Sheet reviewed by us, and will not deviate in
any material respect there from, and that in the course of obtaining the
necessary regulatory and court approvals for the Plan, no restrictions will be
imposed that would have an adverse affect on the operations of the Company
during or after the restructuring.
As you are aware, we will receive a fee from the Company for the
delivery of this fairness opinion in addition to the fees paid for our
investment banking services already rendered. In addition, in the ordinary
course of our business, we may actively trade the securities of the Company for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the consideration to be received by the holders of the Company
Common Stock under the Plan is fair to such holders from a financial point of
view.
Very truly yours,
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
FOOTNOTE ACTUAL ACTUAL PROJECTED PROJECTED
REF. ASSETS: 1997 OCTOBER 2 MONTHS 1998 1999 2000 2001 2002 2003
- ---- ------- ---- -------- -------- ---- ---- ---- ---- ---- ----
1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash & Equivalents $ 53,896 $118,360 $ 195,511 $ 195,511 $ 66,879 $ 57,136 $ 45,943 $ 37,852 $ 30,859
(1) Finance Receivables 971,377 712,876 691,702 691,702 665,323 685,836 712,113 735,825 758,876
Less: Allowance for
Credit Losses - - - - - - - - -
Less: Allowance for
Finance Credit Losses (102,204) (64,170) (82,078) (82,078) (58,370) (59,969) (62,275) (64,345) (66,358)
Less: Nonrefundable
Dealer Reserves (52,731) (36,315) (31,180) (31,180) (32,849) (34,073) (35,480) (36,780) (38,053)
------- ------- ------- ------- ------- ------- ------- ------- -------
NET FINANCE RECEIVABLES $ 816,442 $612,391 $ 578,445 $ 578,445 574,104 $591,793 $614,358 $634,700 $654,465
Deferred Income Taxes,
Net - - - - - - - - -
(2) Income Taxes Receivable 79,941 52,868 2,473 2,473 2,473 2,473 2,473 2,473 2,473
PP&E (@ cost less
depreciation) 5,899 4,255 4,872 4,872 8,093 7,664 7,235 6,806 6,377
(3) Goodwill 13,604 13,031 12,888 12,888 - - - - -
Other Assets (incl.
Repos) 9,622 9,638 6,883 6,883 6,883 6,883 6,883 6,883 6,883
----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL ASSETS $ 979,404 $810,545 $ 801,072 $ 801,072 $ 658,432 $665,948 $676,892 $688,714 $701,057
LIABILITIES & EQUITY:
---------------------
New Revolving Facility - - - - - - - - -
(4) Senior Debt 829,245 675,245 692,155 692,155 434,107 434,107 434,107 434,107 434,107
(4) Subordinated
Notes 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500
(5) Accounts Payable & Other
Liabilities 44,959 45,947 45,947 45,947 31,231 31,233 31,235 31,235 31,234
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL LIABILITIES $ 896,704 $743,692 $ 760,602 $ 760,602 $ 487,838 $487,840 $487,842 $487,842 $487,841
Common Stock 177,901 177,901 177,901 177,901 167,722 167,722 167,722 167,722 167,722
Paid-in Capital 8,244 8,244 8,244 8,244 - - - - -
(6) Retained Earnings (49,781) (65,628) (92,012) (92,012) 2,872 10,386 21,328 33,150 45,494
Treasury Stock (53,664) (53,664) (53,664) (53,664) - - - - -
------- ------- ------- -------
TOTAL EQUITY $ 82,700 $ 66,853 $ 40,469 $ 40,469 $ 170,594 $178,108 $189,050 $200,872 $213,216
TOTAL LIABILITIES & $ 979,404 $810,545 $ 801,072 $ 801,072 $ 658,432 $665,948 $676,892 $688,714 $701,057
Working Capital
(Excluding Cash) 861,046 628,951 541,854 541,854 552,229 569,916 592,480 612,821 632,587
Debt as a % of Finance 87.7% 97.9% 103.3% 103.3% 68.6% 66.6% 64.1% 62.1% 60.2%
Receivables
Avg. NFR 1,065,900 842,126 702,289 831,540 678,513 675,579 698,974 723,969 747,351
Cash & Finance Receivables
to Liabilities 1.1 1.1 1.0 1.0 1.3 1.3 1.4 1.4 1.4
Debt to Worth 10.8 11.1 18.8 18.8 2.9 2.7 2.6 2.4 2.3
</TABLE>
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
<CAPTION>
ACTUAL PROJECTED
1997 OCTOBER 1998 2 MONTHS
---- ------------ --------
* *
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Finance Charges & Loan Fees $ 228,028 21.4% $152,175 21.7% $ 27,031 23.1%
Investment Income 7,593 0.7% 2,773 0.4% 1,131 1.0%
(7) Less: Interest Expense (86,529) -8.1% (54,976) -7.8% (10,687) -9.1%
(8) Less: Provision for
Credit Losses (106,374) 10.0% (44,521) -6.3% (27,972) -23.9%
-------- ---- ------- --- ------- ----
NET INTEREST INCOME $ 42,718 4.0% $ 55,451 7.9% $(10,497) -9.0%
OTHER INCOME
Insurance Commissions 5,784 0.5% 3,932 0.6% 585 0.5%
Insurance Premiums 35,660 3.3% 3,349 0.5% 234 0.2%
Fees & Other Income 5,636 0.5% 3,526 0.5% 708 0.5%
-------- ---- ------- --- ------- ----
TOTAL OTHER INCOME 47,080 4.4% 10,807 1.5% 1,527 1.3%
OTHER EXPENSES
Salaries and Employee Benefits 56,799 5.3% 41,207 5.9% 7,999 6.8%
Occupancy Expense 5,897 0.6% 3,880 0.6% 591 0.5%
Equipment Expense 3,870 0.4% 2,784 0.4% 552 0.5%
Data Processing Expense 2,059 0.2% 1,585 0.2% 309 0.3%
Other Operating Expenses 35,189 3.3% 20,810 3.0% 3,879 3.3%
Insurance Claims 20,466 1.9% - 0.0% - 0.0%
-------- ---- ------- --- ------- ----
(9) TOTAL OTHER EXPENSES 124,280 11.7% 70,266 10.0% 13,330 11.4%
OPERATING INCOME (LOSS)
$ (34,482) -3.2% $ (4,008) -0.6% $(22,300) -19.1%
NON-RECURRING EXPENSES
(10) Reorganization Expenses 20,683 1.9% 11,839 1.7% 4,084 3.5%
Closed Branch Expenses &
Lyndon Sale 35,278 3.3% - 0.0% - 0.0%
-------- ---- ------- --- ------- ----
Profit (Loss) Before Taxes (90,443) -8.5% (15,847) -2.3% (26,384) -22.5
(11) Income Tax (16,250) -1.5% - 0.0% - 0.0%
Provision (Credit) 38.0%
-------- ---- ------- --- ------- ----
NET INCOME (LOSS) $ (74,193) -7.0% $(15,847) -2.3% $(26,384) -22.5%
========== === ======== === ======== ====
EBIT $ (3,914) -0.4% $ 39,129 5.6% $(15,697) -13.4%
AVERAGE NFR $1,065,900 $842,126 $702,289
PROJECTED
1998 1999 2000 2001 200 2003
---- ---- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance Charges & Loan Fees $179,206 21.6% $ 148,832 21.9% 154,280 22.8% $ 161,137 23.1% $ 166,962 23.1% $ 172,380 23.1%
Investment Income 3,904 0.5% 4,898 0.7% 3,661 0.5% 2,972 0.4% 2,500 0.3% 2,115 0.3%
(7) Less: Interest Expense (65,663) -7.9% (49,228) -7.3% (45,886) -6.8% (45,886) -6.6% (45,886) -6.3% (45,886 -6.1%
(8) Less: Provision for
Credit Losses (72,493) -8.7% (41,249) -6.1% (36,084) -5.3% (34,331) -4.9% (35,725) -4.9% (36,820)-4.9%
------- ------- ------- ------- ------- -------
NET INTEREST INCOME $ 44,954 5.4% $ 63,253 9.3% $75,971 11.2% $ 83,892 12.0% $87,851 12.1% $ 91,789 12.3%
OTHER INCOME
Insurance Commissions 5,586 0.7% 4,024 0.6% 3,972 0.6% 4,142 0.6% 4,286 0.6% 4,185 0.6%
Insurance Premiums 2,871 0.3% 30 0.0% - 0.0% - 0.0% - 0.0% - 0.0%
Fees & Other Income 3,877 0.5% 3,142 0.5% 3,349 0.5% 3,485 0.5% 3,602 0.5% 3,517 0.5%
------- ------- ------- ------- ------- -------
TOTAL OTHER INCOME 12,334 1.5% 7,196 1.1% 7,321 1.1% 7,627 1.1% 7,888 1.1% 7,703 1.0%
OTHER EXPENSES
Salaries and Employee Benefits 49,206 5.9% 44,732 6.6% 46,319 6.9% 48,172 6.9% 50,099 6.9% 52,103 7.0%
Occupancy Expense 4,472 0.5% 3,227 0.5% 3,309 0.5% 3,408 0.5% 3,510 0.5% 3,615 0.5%
Equipment Expense 3,335 0.4% 3,078 0.5% 3,219 0.5% 3,380 0.5% 3,549 0.5% 3,726 0.5%
Data Processing Expense 1,894 0.2% 1,661 0.2% 1,734 0.3% 1,821 0.3% 1,912 0.3% 2,008 0.3%
Other Operating Expenses 24,689 3.0% 16,157 2.4% 16,591 2.5% 17,089 2.4% 17,602 2.4% 18,130 2.4%
Insurance Claims - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%
------- ------- ------- ------- ------- -------
(9) TOTAL OTHER EXPENSES 83,596 10.1% 68,854 10.1% 71,172 10.5% 73,870 10.6% 76,672 10.6% 79,582 10.6%
OPERATING INCOME (LOSS) $(26,308) -3.2% $ 1,595 0.2% $12,120 1.8% $17,649 2.5% $19,067 2.6% $ 19,910 2.7%
NON-RECURRING EXPENSES
(10) Reorganization Expenses 15,922 1.9% 15,922 0.0% - 0.0% - 0.0% - 0.0% - 0.0%
Closed Branch Expenses &
Lyndon Sale - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%
------- ------- ------- ------- ------- -------
Profit (Loss) Before Taxes (42,231) -5.1% 1,595 0.2% 12,120 1.8% 17,649 2.5% 19,067 2.6% 19,910 2.7%
(11) Income Tax - 0.0% 606 0.1% 4,606 0.7% 6,707 1.0% 7,245 1.0% 7,566 1.0%
Provision (Credit) 38.0%
------- ------- ------- ------- ------- -------
NET INCOME (LOSS) $(42,231) -5.1% $ 989 0.1% $ 7,514 1.1% $10,942 1.6% $11,822 1.6% $ 12,344 1.7%
======== ====== ======= ======= ======= ========
EBIT $ 23,432 2.8% $ 50,823 7.5% $58,006 8.6% $63,535 9.1% $64,953 9.0% $ 65,796 8.8%
AVERAGE NFR $831,540 $678,513 $675,579 $698,974 $723,969 $747,351
* Annualized percentage of average net finance receivables.
</TABLE>
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
<CAPTION>
ACTUAL PROJECTED PROJECTED
OCTOBER 2 MONTHS 1998 1999 2000 2001 2002 2003
-------- -------- ---- ---- ---- ---- ---- ----
1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income (Loss) $(15,847) $ (26,384) $ (42,231) $ 989 $ 7,514 $ 10,942 $ 11,822 $ 12,344
Add: Income Tax Provision - - - 606 4,606 6,707 7,245 7,566
Add: Interest Expense 54,976 10,687 65,663 49,228 45,886 45,886 45,886 45,886
------ ------ ------ ------ ------ ------ ------ ------
EBIT $ 39,129 $ (15,697) $ 23,432 $ 50,823 $ 58,006 $ 63,535 $ 64,953 $ 65,796
Depreciation & Amortization 1,381 705 2,086 1,779 1,779 1,779 1,779 1,779
EBITDA $ 40,510 $ (14,992) $ 25,518 $ 52,602 $ 59,785 $ 65,314 $ 66,732 $ 67,575
Less: Interest Paid (54,976) (10,687) (65,663) (49,228) (45,886) (45,886) (45,886) (45,886)
Less: Taxes Paid - - - (606) (4,606) (6,707) (7,245) (7,566)
------ ------ ------ ------ ------ ------ ------ ------
Subtotal
(14,466) (25,679) (40,145) 2,768 9,293 12,721 13,601 14,123
Working Capital Changes:
232,095 87,097 319,192 (10,375) (17,687) (22,563) (20,342) (19,766)
CASH FROM OPERATIONS 217,630 61,418 279,047 (7,607) (8,394) (9,842) (6,741) (5,643)
Less: CAPEX
- (1,058) (1,058) (5,000) (1,350) (1,350) (1,350) (1,350)
Less: Decrease (Increase)
in Cash (64,464) (77,151) (141,615) 128,632 9,743 11,193 8,091 6,993
Less: Class Action
Settlement - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------
CASH AVAILABLE FOR DEBT
REDUCTION $153,166 $ (16,792) $ 136,374 $ 116,025 $ (0) $ 1 $ (1) $ 0
======== ========= ========= ========= ====== ====== ====== ======
</TABLE>
1). The following assumptions have been made with respect to the finance
receivable balances.
A) ORIGINATIONS
Receivable originations are projected as follows: (in millions)
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C>
Direct $135.8 $137.7 $141.8 $146.1 $150.4 $155.0
Sales Finance $392.5 $548.0 $564.4 $581.4 $598.8 $616.8
</TABLE>
B) CHARGE-OFFS:
Charge offs are assumed at the following rates, based on
average net finance receivables.
1998 21.7% (includes credit card portfolio)
1999 17.1%
2000 12.2%
2001 11.6%
2002 11.6%
2003 11.6%
C) DISCOUNT ACQUIRED:
The projection assumes that company is able to purchase new
sales finance contracts at a 6.5% discount from the gross
amount of the loan for Mercury and 4% for Midland.
2). The company received an income tax refund of $50.4 million in December
1998. No further refunds are projected.
3). Goodwill of $12.9 million relates to various subsidiaries purchased by
Mercury. It is anticipated that the remaining goodwill will be written
off as of the restructure date.
4). Senior debt and subordinated debt are assumed to remain in place, or to
be re-financed upon maturity at similar terms including interest at
10.0% for the senior debt an 11.0% for the subordinated debt.
5). Included in the accounts payable as of December 1997 are accrued
dividends of $12.9 million and a reserve for closed office expenses of
$1.8 million. It is assumed that the accrued dividend will be reversed
to retained earnings at the time of the restructure. The remaining
reserve for closed office expenses will be paid out at the time of the
restructure.
6). This projection assumes that the restructure will be confirmed February
28, 1999. Prior to the conversion of debt, the Debtor will utilize $100
million of excess cash to reduce debt. As a part of the restructure,
the balance sheet of the company will be adjusted :
1. 25% of the senior debt will be converted to common stock.
2. A cash payment of $18 million will be made on equity claims.
3. The remaining Goodwill outstanding will be written off.
4. The remaining retained deficit will be eliminated.
The following table provides a summary of the expected adjustments:
<TABLE>
<CAPTION>
Projected Balances As of
Restructure Date Conversion & Pro-Forma
Adjustments
ASSETS
<S> <C> <C> <C>
Cash & Equivalents $113,540 ($18,000) $95,540
Net 545,256 -0- 545,256
Finance
Receivables
Goodwill (12,888) -0-
12,888
Other Assets 14,765 -0- 14,765
---------------------- ----------------- -------------
Total Assets 686,449 (30,888) $655,561
LIABILITIES
Debt $601,309 ($144,702) $456,607
Accounts Payable and (14,715) 31,233
Other Liabilities 45,948
---------------------- ----------------- -------------
Total Liabilities $647,257 ($159,417) $487,840
SHAREHOLDERS EQUITY
Common Equity 39,192 128,529 167,721
---------------------- ----------------- -------------
Total Shareholders 39,192 128,529 167,721
Equity
====================== ================= =============
TOTAL LIABILITIES AND $686,449 ($30,888) $655,561
SHAREHOLDERS EQUITY
====================== ================= =============
</TABLE>
7). For comparability, a restructuring fee of $14.5 million paid to senior
lenders in June 1998 is included in interest expense on a pro-forma
basis.
8). The provision expense for the two months ending December 1998 includes
and additional provision of $18.7 million to recognize the anticipated
loss on the sale of the credit card portfolio. The projections assume
the company will receive net cash of $25 million in January 1999.
9). The operating expense projection includes further reductions in
branches in 1999 with increased expenses thereafter as a result of
receivable growth and inflation.
10). Reorganization expenses in 1998 include $14 million in fees paid to the
company's and the creditors' professionals.
11). Provision for income taxes is projected at 34% for federal income taxes
and 4% for state. For projection purposes, it is assumed that the
cancellation of debt income will offset the net operating loss created
during the fiscal year ending December 1998. The actual tax liability
for these periods could differ substantially.
MERCURY FINANCE COMPANY
Liquidation Analysis
(000's omitted)
FOOTNOTES:
(1) Overall Liquidation Strategy:
The liquidation is assumed to commence on March 1, 1999. Under the
liquidation scenario, the Debtor ceases the acquisition of new loans
immediately and collects its loan portfolio through its branch network
for approximately 10 months. The number of branches and employees would
decline as the portfolio shrinks. At the end of 1999, it is assumed
that the remaining portfolio is sold for 80% (based upon net finance
receivables net of the bad debt allowance). Employees would be offered
a stay bonus to induce them to remain with the Debtor until their
services are no longer required. This stay bonus is based upon the same
successful compensation plan used when the Debtor downsized its
operations from 260 to 185 branches in late 1997. A brief summary of
the Debtor's operating structure through the course of the liquidation
is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Actual Quarter Beginning
- -------------------------------------------------------------------------------------------
9/30/98 1/1/99 4/1/99 7/1/99 10/1/99 1/1/2000
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
# of Branches 184 153 133 132 112 92
- -------------------------------------------------------------------------------------------
# of Employees 1,328 1,015 905 905 785 640
- -------------------------------------------------------------------------------------------
</TABLE>
Midland Finance Company ("Midland"), the Debtor's wholly owned
subsidiary, is not included in the above summary. Midland is a $38
million consumer loan company and operates from two facilities in
Chicago. It is assumed that Midland would be liquidated in the same
manner as the Debtor, i.e., it would cease new loan originations
immediately, collect its portfolio through a downsized operation
through December, 1999 and the remaining portfolio would be sold at
that time.
The Debtor also owns a $53 million unsecured credit card portfolio,
which is administered and serviced by a third party vendor. It is
assumed that a sale of the credit card portfolio will be completed by
January 1999. The sale will result in cash of $25 million upon closing
and payment of $1.5 million in June 1999 and an additional $1.5 million
in December 1999.
Once the Debtor's various loan portfolios are sold by December, 1999,
it is assumed that a core staff of employees would continue to market
and sell repossessions that were in the "pipeline" at December, 1999,
prepare final financial statements, tax and payroll reports, exit all
facilities, pay final bills and wind down all administrative affairs of
the Debtor. It is assumed that all functions would cease by March 31,
2000.
FOOTNOTE
REFERENCE
CASH PROCEEDS
(1) & (2) Monthly Cash Collections $ 305,336
(3) Receivable Sale 200,275
Income Tax Refunds 2,364
Asset Sales 3,000
-----
Gross Cash Proceeds 510,975
(4) Less: Cost of Operations (55,867)
Professional fees (4,210)
-------
Net Cash Provided 450,898
Plus Begining Cash on Hand 211,192
-------
NET CASH PROCEEDS 662,090
PRIORITY CLAIMS
Medical Claims 600
(5) Unfunded Pension Liability 2,000
Taxes 1,471
-----
Total Priority Claims 4,071
CASH AVAILABLE FOR UNSECURED CLAIMS 658,019
=======
Unsecured Claims
Long Term Note Holders 335,131
CP Holders 339,340
Midland Debt 773
Subordinated Debt 22,500
------
Total Debt 697,744
All Other Unsecured 12,920
------
TOTAL UNSECURED CLAIMS $ 710,664
=========
Distribution 92.6%
(6) PERCENTAGE NET PRESENT VALUE DISTRIBUTION
(9% DISCOUNT RATE) 89.1%
====
FOOTNOTES (CONTINUED)
(2) Monthly cash collections 3/99 thru 12/99
Cash collected from portfolio $ 307,457
Recoveries 14,481
Less: Claims with Offset Rights
Progressive Insurance (7,350)
Outstanding Checks for Purchased Contracts (8,886)
Unpaid insurance premiums (366)
----
(16,602)
-------
Monthly Cash Collections $ 305,336
=========
(3) Assumes remaining receivables are sold December
1999 as follows:
Gross Receivables at 12/99
Direct $ 50,983
Sales Finance 317,908
-------
Total Gross Receivables 368,891
Less:
Unearned Interest (71,350)
Allowance for Credit Losses (35,699)
Unamortized Dealer Reserve (11,498)
--------
(118,547)
Net Receivables 250,344
Estimated Sales Price 80%
------
Final Cash Receipts $ 200,275
=========
(4) Cost of Operations
Home Office Expense $ 12,101
Branch Operations 24,900
Closing Expenses 2,082
Midland Expenses 1,522
Credit Card Expenses 4,008
Employee Stay Bonues 11,254
------
$ 55,867
========
(5) The PBGC has claimed that the Debtor has an
unfunded pension liability in the amount of $2
million. Although the Debtor disputes this claim,
it has been included in this analysis.
(6) The 92.6% dividend to debtholders will be paid
periodically over the liquidation period. The net
present value of these payments, discounted at 9%,
is as follows:
Total Unsecured Claims 710,664
Net Present Value of Payments to Claimants 633,234
Percentage Net Present Value Distribution 89.1%
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT
IS CONTAINED IN THE MATERIALS MAILED WITH THIS BALLOT.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
MASTER BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 4 - HOLDERS OF SENIOR DEBT CLAIMS AGAINST
MERCURY FINANCE COMPANY ("MERCURY")
This Master Ballot may not be used FOR any purpose other than FOR casting votes
to accept or reject Mercury's Second Amended Plan of Reorganization dated
December 29, 1998 (the "Plan") under chapter 11, title 11 of the United States
Code (the "Bankruptcy Code"). All capitalized terms used in the Master Ballot or
Voting Instructions but not otherwise defined therein shall have the meanings
ascribed to them in the Plan.
This Master Ballot is being sent to brokers, proxy intermediaries, and other
nominees of Beneficial Holders (as defined herein) and is to be used by brokers,
proxy intermediaries or other nominees FOR casting votes to accept or reject the
Plan on behalf of and in accordance with the Ballot/Voting Instructions cast by
the Beneficial Holders holding Class 4 Claims through such brokers, proxy
intermediaries, or other nominees. MASTER BALLOTS MUST BE RECEIVED BY LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT") ON OR BEFORE 5:00 P.M. EST ON FEBRUARY 12,
1999.
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE MASTER BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
ITEM 1. AMOUNT OF CLASS 4 CLAIMS.
On December 28, 1998, the Record Date, the undersigned was the record
holder of $__________________________ senior notes issued by Mercury, the record
holder of $______________________________ commercial paper issued by Mercury and
the record holder of $____________________________ short-term notes issued by
Mercury ( the "Class 4 Claims"), FOR which voting instructions have been
received from beneficial holders (the "Beneficial Holders") as listed in Item 3
below.
ITEM 2. CLASS 4 VOTE
As instructed by the Beneficial Holders of the aggregate number of
Class 4 Claims as set forth in Item 1 above, the undersigned transmits the
following votes of such Beneficial Holders in respect of their Class 4 Claims.
To Accept (Vote FOR) the Plan.
Aggregate Amount of Class 4 Claims Aggregate number of holders
To Reject (Vote AGAINST) the Plan.
Aggregate Amount of Class 4 Claims Aggregate number of holders
ITEM 3. CLASS 4 VOTE - NUMBER OF HOLDERS OF CLASS 4 CLAIMS
The undersigned certifies that the following vote of the Beneficial
Holders of Class 4 Claims, as identified by their respective customer account
numbers or the respective sequence numbers set forth below, has been delivered
to the undersigned by Ballots casting the following votes (indicate the
aggregate current principal amount for each respective account under the
appropriate column):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
INSERT AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
Customer Account No. and/or Issue Accept the Plan Reject the Plan
Customer Name for each Description (VOTE FOR) (VOTE AGAINST)
Beneficial Holder or CUSIP # Short- Commercial Short- Commercial
Sr. Notes Term Notes Paper Sr. Notes Term Notes Paper
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.
- -----------------------------------------------------------------------------------------------------------------------------------
2.
- -----------------------------------------------------------------------------------------------------------------------------------
3.
- -----------------------------------------------------------------------------------------------------------------------------------
4.
- -----------------------------------------------------------------------------------------------------------------------------------
5.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 4. CERTIFICATION
By signing this Master Ballot, the undersigned certifies:
(a) that each Beneficial Holder of Class 4 Claim whose votes
are being transmitted by this Master Ballot has been provided with a
copy of the Disclosure Statement relating to the Plan, together with a
copy of the Plan; and
(b) that the undersigned is the registered or record owner of
the aggregate amount of Class 4 Claims set forth in Item 1 and has full
power and authority to vote to accept or reject the Plan. The
undersigned also acknowledges that the solicitation of votes herein is
subject to all the terms and conditions set forth in the Disclosure
Statement.
Dated: Name of Voter:
(Print or Type)
Social Security or Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Street Address:
City, State and Zip Code:
Telephone No.:
Participant No.:
THIS MASTER BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN N.J. 07030
TELEPHONE: (201) 798-1031
FACSIMILE: (201) 798-4157
BY 5:00 P.M. EASTERN STANDARD TIME ON OR BEFORE FEBRUARY 12, 1999,
OR YOUR VOTE WILL NOT BE COUNTED
THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT,
LOGAN & C0MPANY, INC. BY 5:00 P.M., EASTERN STANDARD TIME, ON OR BEFORE
FEBRUARY 12, 1999 (UNLESS EXTENDED) OR THE VOTES TRANSMITTED
HEREBY WILL NOT BE COUNTED.
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
Mercury is soliciting the votes of holders of Class 4 Claims with
respect to the Second Amended Plan of Reorganization dated December 29, 1998 of
Mercury Finance Company (the "Plan") referred to in the Disclosure Statement (a
copy of which is enclosed herewith).
The Plan can be confirmed by the Bankruptcy Court and thereby made
binding upon the Beneficial Holders if it is accepted by the holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
impaired Class of Claims that vote on the Plan and by the holders of at least
two-thirds in amount of the Equity Interests in each impaired Class of Equity
Interests that vote on the Plan, and if the Plan otherwise satisfies the
requirements of section 1129(a) of the Bankruptcy Code. If the requisite
acceptances are not obtained, the Bankruptcy Court may nonetheless confirm the
Plan if it finds that the Plan provides fair and equitable treatment to, and
does not discriminate unfairly against, the Class or Classes of Claims or Equity
Interests rejecting it, and otherwise satisfies the requirements of section
1129(b) of the Bankruptcy Code. As described in Article VIII.E of the Disclosure
Statement, Mercury will seek confirmation of the Plan under section 1129(b) of
the Bankruptcy Code (known as the cram-down section) because of the deemed
non-acceptance of the holders of Equity Interests in Class 8. Mercury also
reserves the right to proceed under section 1129(b), if any impaired Class of
Claims or other impaired Class of Equity Interests does not accept the Plan. To
have the votes of your Beneficial Holders count, you must complete and return
this Master Ballot.
You should deliver the Beneficial Holder Ballot and other documents
relating to the Plan, including the Disclosure Statement (collectively,
"Solicitation Materials"), to each Beneficial Holder of Class 4 Claims and take
any action required to enable each such Beneficial Holder to vote the Class 4
Claims held by such Beneficial Holder. With regard to any Beneficial Holder
Ballots returned to you, to have the vote of your Beneficial Holder count, you
must not later than February 12, 1999, subject to extension in the sole
discretion of Mercury (the "Voting Deadline"), either (i) forward such
Beneficial Holder Ballots to the Balloting Agent (as defined herein) indicating
the appropriate authority to vote from such Beneficial Holder Ballot submitted
or (ii) (a) retain such Beneficial Holder Ballots in your files and transfer the
requested information from each such Beneficial Holder Ballot onto the attached
Master Ballot or your computer generated version of the Master Ballot that
contains the same information (b) execute the Master Ballot, and (c) arrange FOR
delivery by courier, overnight mail or facsimile of such Master Ballot to Logan
& Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
, Facsimile (201) 798-4157 (the "Balloting Agent"). Please keep any records of
the voting instructions received from Beneficial Holders, including all
Beneficial Holder Ballots, until February 28, 2000 (or such other date as is set
by subsequent Bankruptcy Court order).
The Master Ballot is not a letter of transmittal and may not be used
for any purpose other than to vote to accept or reject the Plan. Accordingly,
Holders of Class 4 Claims should not surrender instruments or certificates
representing or evidencing their Class 4 Claims, and neither Mercury nor the
Balloting Agent will accept delivery of such instruments or certificates
surrendered together with a Ballot. The remittance of your instruments or other
evidence of your claims FOR exchange pursuant to the Plan may only be made by
you, and will only be accepted if instruments or certificates representing your
Class 4 Claims (in proper form FOR transfer) are delivered together with a
letter of transmittal that will be furnished to you as provided under the Plan
or as notified following confirmation of the Plan by the Bankruptcy Court.
To properly complete the Master Ballot take the following steps:
(a) provide appropriate information FOR each of the items on
the Master Ballot. Please note that Item 3 requests information for each
individual beneficial holder FOR whom you hold Class 4 Claims in your name (the
"Beneficial Holders"). To identify such Beneficial Holders without disclosing
their names, please use the customer account number assigned by you to identify
each such Beneficial Holder or, if no such customer account number exists,
please use the sequential numbers provided (making sure to retain a separate
list of each Beneficial Holder and his or her assigned sequential number);
(b) vote to accept or reject the Plan in Item 2 for the Class
4 Claims held by you as the registered holder on behalf of the Beneficial
Holders.
(c) sign and date your Master Ballot;
(d) if you are completing this Master Ballot on behalf of
another entity, state your title of such entity, and
(e) provide your name and mailing address if different from
the preprinted address on the Master Ballot or if no preprinted address appears
on the Master Ballot.
THE DEBTOR REQUESTS THAT YOU RETAIN IN YOUR FILES THE BALLOTS RECEIVED FROM THE
BENEFICIAL HOLDERS AT LEAST UNTIL FEBRUARY 28, 2000 (OR SUCH OTHER DATE AS IS
SET BY SUBSEQUENT BANKRUPTCY COURT ORDER).
- You should deliver the Salmon colored Ballot to each
Beneficial Holder of Class 4 Claims and take any action
required to enable each such Beneficial Holder to vote his
respective Class 4 Claims to accept or reject the Plan. With
regard to any Ballots returned to you, you must either (1)
forward such Ballots to the Balloting Agent or (2)(a) retain
such Ballots in your files and transfer the requested
information from each such Ballot onto the attached Master
Ballot, (b) execute the Master Ballot and (c) arrange FOR
delivery of such Master Ballot to the Balloting Agent.
- If you are both the registered holder and beneficial holder
of any of the Class 4 Claims and you wish to vote such Class 4
Claims, you may return either a Ballot or a Master Ballot.
- THE MASTER BALLOT MUST BE DELIVERED TO THE BALLOTING AGENT BY
U.S. MAIL,OVERNIGHT DELIVERY, HAND DELIVERY, OR FACSIMILE
PRIOR TO THE VOTING DEADLINE, OTHERWISE SUCH MASTER BALLOT
WILL NOT BE COUNTED.
VOTING DEADLINE AND EXTENSIONS. If a Master Ballot must be completed by
you, please complete, sign and return this Master Ballot so that it is
received by the Balloting Agent no later than 5:00 p.m., Eastern
Standard Time, on February 12, 1999. The Debtor reserves the right to
extend the Voting Deadline.
IF YOU HAVE ANY QUESTIONS REGARDING THIS
MASTER BALLOT OR THE VOTING PROCEDURES,
PLEASE CALL THE INFORMATION AGENT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF MERCURY OR THE BALLOTING AGENT, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE PLAN, EXCEPT
FOR THE STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 4- HOLDERS OF SENIOR DEBT OF MERCURY FINANCE COMPANY ("MERCURY")
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
- --------------------------------------------------------------------------------
IF THIS BALLOT IS ACCOMPANIED BY A RETURN ENVELOPE THAT IS ADDRESSED TO LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT"), THIS BALLOT MUST BE RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN STANDARD TIME, FEBRUARY 12, 1999 ("THE
VOTING DEADLINE"). IF YOU RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER,
BANK, NOMINEE OR PROXY INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO YOUR BROKER,
BANK, NOMINEE OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED
AND THEN FORWARDED BY THE BROKER, BANK, NOMINEE OR PROXY INTERMEDIARY TO THE
BALLOTING AGENT BY THE VOTING DEADLINE. THEREFORE, PLEASE ALLOW ADDITIONAL TIME.
- --------------------------------------------------------------------------------
The Bankruptcy Court has approved the second amended disclosure
statement (the "Disclosure Statement") with respect to Mercury's Second Amended
Plan of Reorganization dated December 29, 1998 (the "Plan"). The Disclosure
Statement provides information to assist you in deciding how to vote your
Ballot. If you do not have a Disclosure Statement you may obtain a copy from the
Information Agent. Court approval of the Disclosure Statement does not indicate
approval of the Plan by the Bankruptcy Court.
YOU SHOULD REVIEW THE DISCLOSURE STATEMENT AND THE PLAN BEFORE YOU
VOTE. YOU MAY WISH TO SEEK LEGAL ADVICE CONCERNING THE PLAN AND YOUR
CLASSIFICATION AND TREATMENT UNDER THE PLAN. YOUR CLAIM HAS BEEN PLACED IN CLASS
4 UNDER THE PLAN. IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS, YOU WILL RECEIVE A
BALLOT FOR EACH CLASS IN WHICH YOU ARE ENTITLED TO VOTE. IF YOUR BALLOT IS NOT
RECEIVED BY THE BALLOTING AGENT ON OR BEFORE 5:00 P.M. EST ON FEBRUARY 12, 1999,
AND SUCH DEADLINE IS NOT EXTENDED, YOUR VOTE WILL NOT COUNT AS EITHER AN
ACCEPTANCE OR REJECTION OF THE PLAN. IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY
COURT IT WILL BE BINDING ON YOU WHETHER OR NOT YOU VOTE.
ITEM 1. AMOUNT OF CLASS 4 CLAIM
On December 28, 1998, the Record Date, the undersigned was the
beneficial owner of $____ _________________ senior notes issued by Mercury, the
beneficial owner of $_____________________________ commercial paper issued by
Mercury, and the beneficial owner of $_____________________________ short-term
notes issued by Mercury.
ITEM 2. CLASS 4 VOTE
The beneficial owner of the Claim set forth in Item 1, votes (please
check one):
/ / To Accept the Plan / / To Reject the Plan
ITEM 3. CERTIFICATION AS TO CLASS 4 CLAIM.
With respect to Item I, the undersigned, hereby certifies the
information in the following table (use additional sheets of paper if
necessary):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Senior Notes Commercial Paper
Name of Holder* -------------------------------------------------------------------------------------
Current Principal Current Principal
Issue Description Amount CUSIP# Amount
<S> <C> <C> <C> <C>
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
- ------------------ ----------------------- ---------------------- --------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------- -------------------------------------------------
Name of Holder* Short-Term Notes
--------------------- ------------------------------------------------
Issue Description Current Principal
Amount
<S> <C> <C>
--------------------- --------------------------- --------------------
--------------------- --------------------------- --------------------
--------------------- --------------------------- --------------------
--------------------- --------------------------- --------------------
--------------------- --------------------------- --------------------
</TABLE>
* Insert your name if the Class 4 Claims are held by you in record name,
or, if held by a nominee (or agent thereof), insert the name of the
nominee(or agent thereof) through which you own the Class 4 Claims.
ITEM 4. CERTIFICATIONS.
By signing this Ballot, the undersigned certifies:
(a) that no other Ballots cast with respect to the amount of
the Class 4 Claims identified in Item 1 have been cast with respect to
such Class 4 Claims; or if earlier Ballots were cast, such earlier
Ballots are hereby revoked;
(b) that a copy of the Disclosure Statement relating to the
Plan together with a copy of the Plan has been provided to and reviewed
by the undersigned; and
(c) that as the holder of the amount of Class 4 Claims set
forth in Item 1, the undersigned has full power and authority to vote
to accept or reject the Plan. The undersigned also acknowledges that
this solicitation is subject to all the terms and conditions set forth
in the Disclosure Statement relating to the Plan.
ITEM 5. YOU ARE URGED TO VOTE TO ACCEPT THE PLAN.
Dated______ Name of Voter:_________________________________________
(Print or Type)
Social Security or Tax I.D. No.:_______________________
Signature:_____________________________________________
By:____________________________________________________
(If Appropriate)
Title:_________________________________________________
(If Appropriate)
Street Address:________________________________________
City, State and Zip Code:______________________________
Telephone No.:_________________________________________
VOTING INSTRUCTIONS
PLEASE COMPLETE, SIGN AND DATE
THE BALLOT AND RETURN IT PROMPTLY
YOUR BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
BY 5:00 P.M. EASTERN STANDARD TIME ON OR
BEFORE FEBRUARY 12, 1999, OR YOUR VOTE WILL NOT BE COUNTED
1. All capitalized terms used in the Ballot or Voting Instructions but not
otherwise defined therein shall have the meanings ascribed to them in the Second
Amended Plan of Reorganization dated December 29, 1998 of Mercury Finance
Company (the "Plan").
2. The Plan can be confirmed by the Bankruptcy Court and thereby made binding
upon you if it is accepted by the holders of at least two-thirds in amount and
more than one-half in number of the Claims in each impaired Class of Claims that
vote on the Plan and by the holders of at least two-thirds in amount of the
Equity Interests in each impaired Class of Equity Interests that vote on the
Plan, and if the Plan otherwise satisfies the requirements of section 1129(a) of
the Bankruptcy Code. If the requisite acceptances are not obtained, the
Bankruptcy Court may nonetheless confirm the Plan if it finds that the Plan
provides fair and equitable treatment to, and does not discriminate unfairly
against, the Class or Classes of Claims or Equity Interests rejecting it, and
otherwise satisfies the requirements of section 1129(b) of the Bankruptcy Code.
As described in Article VIII.E of the Disclosure Statement, Mercury will seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code (known as
the cram-down section) because of the deemed non-acceptance of the holders of
Interests in Class 8. Mercury also reserves the right to proceed under section
1129(b), if any other impaired Class of Claims or Equity Interests do not accept
the Plan. To have your vote count you must complete and return this Ballot.
Please review the Disclosure Statement for more information.
3. To ensure that your vote is counted, you must (i) complete the Ballot, (ii)
indicate your decision either to accept or reject the Plan in the boxes provided
in Item 2 of the Ballot, (iii) sign and return the Ballot to the address set
forth on the enclosed prepaid envelope. Your Ballot must be received by Logan &
Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
(the "Balloting Agent") by 5:00 p.m. Eastern Standard Time on or before February
12, 1999 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. IF YOU RECEIVED A RETURN ENVELOPE ADDRESSED TO
A BROKER, BANK NOMINEE OR PROXY INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO
YOUR BROKER, BANK, NOMINEE OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO
BE PROCESSED AND THEN FORWARDED BY THE BROKER, BANK, NOMINEE OR PROXY
INTERMEDIARY TO THE BALLOTING AGENT BY THE VOTING DEADLINE. THEREFORE, PLEASE
ALLOW ADDITIONAL TIME.
4. If multiple Ballots are received from an individual holder of Class 4 Claims
with respect to the same Class 4 Claims prior to the Voting Deadline, the last
Ballot timely received will supersede and revoke any earlier received Ballot.
5. The Ballot is not a letter of transmittal and may not be used for any purpose
other than to vote to accept or reject the Plan. Accordingly, at this time,
holders should not surrender certificates or instruments presenting or
evidencing their Class 4 Claims, and neither Mercury nor the Balloting Agent
will accept delivery of such certificates or instruments surrendered together
with a Ballot. The remittance of your notes or other evidence of your claims for
exchange pursuant to the Plan may only be made by you, and will only be accepted
if certificates or instruments representing your Class 4 Claims (in proper form
for transfer) are delivered together with a letter of transmittal that will be
furnished to you as provided under the Plan or as notified following
confirmation of the Plan by the Bankruptcy Court.
6. This Ballot does not constitute, and shall not be deemed to be, a proof of
claim or equity interest or an assertion or admission of a claim or equity
interest.
7. Please be sure to sign and date your Ballot. If you are completing the Ballot
on behalf of an entity, indicate your relationship with such entity and the
capacity in which you are signing. In addition, please provide your name and
mailing address if different from that set forth on the attached mailing label
or if no such mailing label is attached to the Ballot.
8. If you hold Claims in more than one Class under the Plan, you may receive
more than one Ballot coded for each different Class. Each Ballot votes only your
Claims indicated on that Ballot. Please complete and return each Ballot you
received.
9. The Ballot must be returned in sufficient time to allow it to be RECEIVED by
the Balloting Agent by no later than 5:00 p.m. Eastern Standard Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Balloting Agent or your broker or bank immediately.
PLEASE MAIL YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING
PROCEDURES, PLEASE CALL THE
INFORMATION AGENT AT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 5- HOLDERS OF SUBORDINATED NOTES OF MERCURY FINANCE COMPANY ("MERCURY")
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
- --------------------------------------------------------------------------------
IF THIS BALLOT IS ACCOMPANIED BY A RETURN ENVELOPE THAT IS ADDRESSED TO LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT"), THIS BALLOT MUST BE RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN STANDARD TIME, FEBRUARY 12, 1999 ("THE
VOTING DEADLINE"). IF YOU RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER,
BANK, NOMINEE OR PROXY INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO YOUR BROKER,
BANK, NOMINEE OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED
AND THEN FORWARDED BY THE BROKER, BANK, NOMINEE OR PROXY INTERMEDIARY TO THE
BALLOTING AGENT BY THE VOTING DEADLINE. THEREFORE, PLEASE ALLOW ADDITIONAL TIME.
- --------------------------------------------------------------------------------
The Bankruptcy Court has approved the second amended disclosure
statement (the "Disclosure Statement") with respect to Mercury's Second Amended
Plan of Reorganization dated December 29, 1998 (the "Plan"). The Disclosure
Statement provides information to assist you in deciding how to vote your
Ballot. If you do not have a Disclosure Statement you may obtain a copy from the
Information Agent. Court approval of the Disclosure Statement does not indicate
approval of the Plan by the Bankruptcy Court.
YOU SHOULD REVIEW THE DISCLOSURE STATEMENT AND THE PLAN BEFORE YOU
VOTE. YOU MAY WISH TO SEEK LEGAL ADVICE CONCERNING THE PLAN AND YOUR
CLASSIFICATION AND TREATMENT UNDER THE PLAN. YOUR CLAIM HAS BEEN PLACED IN CLASS
5 UNDER THE PLAN. IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS, YOU WILL RECEIVE A
BALLOT FOR EACH CLASS IN WHICH YOU ARE ENTITLED TO VOTE. IF YOUR BALLOT IS NOT
RECEIVED BY THE BALLOTING AGENT ON OR BEFORE 5:00 P.M. EST ON FEBRUARY 12, 1999,
AND SUCH DEADLINE IS NOT EXTENDED, YOUR VOTE WILL NOT COUNT AS EITHER AN
ACCEPTANCE OR REJECTION OF THE PLAN. IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY
COURT IT WILL BE BINDING ON YOU WHETHER OR NOT YOU VOTE.
ITEM 1. AMOUNT OF CLASS 5 CLAIM
On December 28, 1998, the Record Date, the undersigned was the
beneficial owner of $________________ subordinated notes issued by Mercury.
ITEM 2. CLASS 5 VOTE
The beneficial owner of the Claim set forth in Item 1, votes (please
check one):
/ / To Accept the Plan / / To Reject the Plan
ITEM 3. CERTIFICATION AS TO CLASS 5 CLAIM.
By returning this Ballot, the undersigned, certifies that it has not
submitted any Ballots with respect to the amounts identified in Item 1, except
as specified in the table immediately below. Please provide the information
required by this Item 3 in the following table (use additional sheets of paper
if necessary):
- -------------------------- ------------------------- -------------------------
Current Principal
ISSUE DESCRIPTION Amount of Subordinated
Names of Holder* Notes
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
- -------------------------- ------------------------- -------------------------
* Insert your name if the Class 5 Claims are held by you in record name,
or, if held by a nominee, insert the name of the nominee (or agent
thereof) through which you own the Class 5 Claims.
ITEM 4. CERTIFICATIONS.
By signing this Ballot, the undersigned certifies:
(a) that no other Ballots cast with respect to the amount of
the Class 5 Claims identified in Item 1 have been cast with respect to
such Class 5 Claims, or if earlier Ballots have been cast, such earlier
Ballots are hereby revoked;
(b) that a copy of the Disclosure Statement relating to the
Plan together with a copy of the Plan has been provided to and reviewed
by the undersigned; and
(c) that as the holder of the amount of Class 5 Claims set
forth in Item 1, the undersigned has full power and authority to vote
to accept or reject the Plan. The undersigned also acknowledges that
this solicitation is subject to all the terms and conditions set forth
in the Disclosure Statement relating to the Plan.
ITEM 5. YOU ARE URGED TO VOTE TO ACCEPT THE PLAN.
Dated___________ Name of Voter:_________________________________________
(Print or Type)
Social Security or Tax I.D. No.:_______________________
Signature:_____________________________________________
By:____________________________________________________
(If Appropriate)
Title:_________________________________________________
(If Appropriate)
Street Address:________________________________________
City, State and Zip Code:______________________________
Telephone No.:_________________________________________
Nominee, if any, who holds notes:______________________
VOTING INSTRUCTIONS
PLEASE COMPLETE, SIGN AND DATE
THE BALLOT AND RETURN IT PROMPTLY
YOUR BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
BY 5:00 P.M. EASTERN STANDARD TIME ON OR
BEFORE FEBRUARY 12, 1999, OR YOUR VOTE WILL NOT BE COUNTED
1. All capitalized terms used in the Ballot or Voting Instructions but not
otherwise defined therein shall have the meanings ascribed to them in the Second
Amended Plan of Reorganization dated December 29, 1998 of Mercury Finance
Company (the "Plan").
2. The Plan can be confirmed by the Bankruptcy Court and thereby made binding
upon you if it is accepted by the holders of at least two-thirds in amount and
more than one-half in number of the Claims in each impaired Class of Claims that
vote on the Plan and by the holders of at least two-thirds in amount of the
Equity Interests in each impaired Class of Equity Interests that vote on the
Plan, and if the Plan otherwise satisfies the requirements of section 1129(a) of
the Bankruptcy Code. If the requisite acceptances are not obtained, the
Bankruptcy Court may nonetheless confirm the Plan if it finds that the Plan
provides fair and equitable treatment to, and does not discriminate unfairly
against, the Class or Classes of Claims or Equity Interests rejecting it, and
otherwise satisfies the requirements of section 1129(b) of the Bankruptcy Code.
As described in Article VIII.E of the Disclosure Statement, Mercury will seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code (known as
the cram-down section) because of the deemed non-acceptance of the holders of
Interests in Class 8. Mercury also reserves the right to proceed under section
1129(b), if any other impaired Class of Claims or Equity Interests do not accept
the Plan. To have your vote count you must complete and return this Ballot.
Please review the Disclosure Statement for more information.
3. To ensure that your vote is counted, you must (i) complete the Ballot, (ii)
indicate your decision either to accept or reject the Plan in the boxes provided
in Item 2 of the Ballot, (iii) sign and return the Ballot to the address set
forth on the enclosed prepaid envelope. Your Ballot must be received by Logan &
Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
(the "Balloting Agent") by 5:00 p.m. Eastern Standard Time on or before February
12, 1998 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. IF YOU RECEIVED A RETURN ENVELOPE ADDRESSED TO
A BROKER, BANK NOMINEE OR PROXY INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO
YOUR BROKER, BANK, NOMINEE OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO
BE PROCESSED AND THEN FORWARDED BY THE BROKER, BANK, NOMINEE OR PROXY
INTERMEDIARY TO THE BALLOTING AGENT BY THE VOTING DEADLINE. THEREFORE, PLEASE
ALLOW ADDITIONAL TIME.
4. If multiple Ballots are received from an individual holder of Class 5 Claims
with respect to the same Class 5 Claims prior to the Voting Deadline, the last
Ballot timely received will supersede and revoke any earlier received Ballot.
5. The Ballot is not a letter of transmittal and may not be used for any purpose
other than to vote to accept or reject the Plan. Accordingly, at this time,
holders should not surrender certificates or instruments presenting or
evidencing their Class 5 Claims, and neither Mercury nor the Balloting Agent
will accept delivery of such certificates or instruments surrendered together
with a Ballot. The remittance of your notes or other evidence of your claims for
exchange pursuant to the Plan may only be made by you, and will only be accepted
if certificates or instruments representing your Class 5 Claims (in proper form
for transfer) are delivered together with a letter of transmittal that will be
furnished to you as provided under the Plan or as notified following
confirmation of the Plan by the Bankruptcy Court.
6. This Ballot does not constitute, and shall not be deemed to be, a proof of
claim or interest or an assertion or admission of a claim or equity interest.
7. Please be sure to sign and date your Ballot. If you are completing the Ballot
on behalf of an entity, indicate your relationship with such entity and the
capacity in which you are signing. In addition, please provide your name and
mailing address if different from that set forth on the attached mailing label
or if no such mailing label is attached to the Ballot.
8. If you hold Claims in more than one class under the Plan, you may receive
more than one Ballot coded for each different class. Each Ballot votes only your
claims indicated on that Ballot. Please complete and return each Ballot you
received.
9. The Ballot must be returned in sufficient time to allow it to be RECEIVED by
the Balloting Agent by no later than 5:00 p.m. Eastern Standard Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Information Agent.
PLEASE MAIL YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS
REGARDING THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL
THE INFORMATION AGENT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 6- HOLDERS OF INDEMNIFICATION CLAIMS AGAINST
MERCURY FINANCE COMPANY ("MERCURY")
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
- --------------------------------------------------------------------------------
THIS BALLOT IS ACCOMPANIED BY A RETURN ENVELOPE THAT IS ADDRESSED TO LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT"), THIS BALLOT MUST BE RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN STANDARD TIME, FEBRUARY 12, 1999 ("THE
VOTING DEADLINE"), OR YOUR VOTE TO ACCEPT OR REJECT THE PLAN WILL NOT BE COUNTED
- --------------------------------------------------------------------------------
The Bankruptcy Court has approved the second amended disclosure
statement (the "Disclosure Statement") with respect to Mercury's Second Amended
Plan of Reorganization dated December 29, 1998 (the "Plan"). The Disclosure
Statement provides information to assist you in deciding how to vote your
Ballot. If you do not have a Disclosure Statement you may obtain a copy from the
Information Agent. Court approval of the Disclosure Statement does not indicate
approval of the Plan by the Bankruptcy Court.
YOU SHOULD REVIEW THE DISCLOSURE STATEMENT AND THE PLAN BEFORE YOU
VOTE. YOU MAY WISH TO SEEK LEGAL ADVICE CONCERNING THE PLAN AND YOUR
CLASSIFICATION AND TREATMENT UNDER THE PLAN. YOUR CLAIM HAS BEEN PLACED IN CLASS
6 UNDER THE PLAN. IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS, YOU WILL RECEIVE A
BALLOT FOR EACH CLASS IN WHICH YOU ARE ENTITLED TO VOTE. IF YOUR BALLOT IS NOT
RECEIVED BY THE BALLOTING AGENT ON OR BEFORE 5:00 P.M. EST ON FEBRUARY 12, 1999,
AND SUCH DEADLINE IS NOT EXTENDED, YOUR VOTE WILL NOT COUNT AS EITHER AN
ACCEPTANCE OR REJECTION OF THE PLAN. IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY
COURT IT WILL BE BINDING ON YOU WHETHER OR NOT YOU VOTE.
ITEM 1. AMOUNT OF CLASS 6 CLAIM
The undersigned holds an indemnification claim in the amount of
$_____________ against Mercury.
ITEM 2. CLASS 6 VOTE
The beneficial owner of the Claim set forth in Item 1, votes (please
check one):
/ / To Accept the Plan / / To Reject the Plan
ITEM 3. CERTIFICATIONS.
By signing this Ballot, the undersigned certifies:
(a) that no other Ballots cast with respect to the amount of
the Class 6 claims identified in Item 1 have been cast with respect to
such Class 6 Claims, or in such case earlier Ballots were cast, such
earlier Ballots are hereby revoked;
(b) that a copy of the Disclosure Statement relating to the
Plan and a copy of the Plan has been provided to and reviewed by the
undersigned; and
(c) that as the holder of the amount of Class 6 Claims set
forth in Item 1, the undersigned has full power and authority to vote
to accept or reject the Plan. The undersigned also acknowledges that
this solicitation is subject to all the terms and conditions set forth
in the Disclosure Statement relating to the Plan.
ITEM 4. YOU ARE URGED TO VOTE TO ACCEPT THE PLAN.
Dated______________ Name of Voter:_________________________________________
(Print or Type)
Social Security or Tax I.D. No.:_______________________
Signature:_____________________________________________
By:____________________________________________________
(If Appropriate)
Title:_________________________________________________
(If Appropriate)
Street Address:________________________________________
City, State and Zip Code:______________________________
Telephone No.:_________________________________________
VOTING INSTRUCTIONS
PLEASE COMPLETE, SIGN AND DATE
THE BALLOT AND RETURN IT PROMPTLY
YOUR BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
BY 5:00 P.M. EASTERN STANDARD TIME ON OR
BEFORE FEBRUARY 12, 1999, OR YOUR VOTE WILL NOT BE COUNTED
1. All capitalized terms used in the Ballot or Voting Instructions but not
otherwise defined therein shall have the meanings ascribed to them in the Second
Amended Plan of Reorganization dated December 29, 1998 of Mercury Finance
Company (the "Plan").
2. The Plan can be confirmed by the Bankruptcy Court and thereby made binding
upon you if it is accepted by the holders of at least two-thirds in amount and
more than one-half in number of the Claims in each impaired Class of Claims that
vote on the Plan and by the holders of at least two-thirds in amount of the
Equity Interests in each impaired Class of Equity Interests that vote on the
Plan, and if the Plan otherwise satisfies the requirements of section 1129(a) of
the Bankruptcy Code. If the requisite acceptances are not obtained, the
Bankruptcy Court may nonetheless confirm the Plan if it finds that the Plan
provides fair and equitable treatment to, and does not discriminate unfairly
against, the Class or Classes of Claims or Equity Interests rejecting it, and
otherwise satisfies the requirements of section 1129(b) of the Bankruptcy Code.
As described in Article VIII.E of the Disclosure Statement, Mercury will seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code (known as
the cram-down section) because of the deemed non-acceptance of the holders of
Interests in Class 8. Mercury also reserves the right to proceed under section
1129(b), if any other impaired Class of Claims or Equity Interests do not accept
the Plan. To have your vote count you must complete and return this Ballot.
Please review the Disclosure Statement for more information.
3. To ensure that your vote is counted, you must (i) complete the Ballot, (ii)
indicate your decision either to accept or reject the Plan in the boxes provided
in Item 2 of the Ballot, (iii) sign and return the Ballot to the address set
forth on the enclosed prepaid envelope. Your Ballot must be received by Logan &
Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
(the "Balloting Agent") by 5:00 p.m. Eastern Standard Time on or before February
12, 1999 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted.
4. If multiple Ballots are received from an individual holder of Class 6 Claims
with respect to the same Class 6 Claims prior to the Voting Deadline, the last
Ballot timely received will supersede and revoke any earlier received Ballot.
5. The Ballot is not a letter of transmittal and may not be used for any purpose
other than to vote to accept or reject the Plan. Accordingly, at this time,
holders should not surrender instruments representing or evidencing their Class
6 Claims, and neither Mercury nor the Balloting Agent will accept delivery of
any documents surrendered together with a Ballot. The remittance of evidence of
your claims for exchange pursuant to the Plan may only be made by you, and you
will be notified following confirmation of the Plan as to what must be
submitted, if anything.
6. This Ballot does not constitute, and shall not be deemed to be, a proof of
claim or interest or an assertion or admission of a claim or equity interest.
7. Please be sure to sign and date your Ballot. If you are completing the Ballot
on behalf of an entity, indicate your relationship with such entity and the
capacity in which you are signing. In addition, please provide your name and
mailing address if different from that set forth on the attached mailing label
or if no such mailing label is attached to the Ballot.
8. If you hold Claims in more than one class under the Plan or if you hold
Equity Interests, you may receive more than one Ballot coded for each different
class of Claims or Equity Interests. Each Ballot votes only your claims or
equity interest indicated on that Ballot. Please complete and return each Ballot
you received.
9. The Ballot must be returned in sufficient time to allow it to be RECEIVED by
the Balloting Agent by no later than 5:00 p.m. Eastern Standard Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Information Agent immediately.
PLEASE MAIL YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING
PROCEDURES, PLEASE CALL THE
INFORMATION AGENT AT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT
IS CONTAINED IN THE MATERIALS MAILED WITH THIS BALLOT.
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
MASTER BENEFICIAL HOLDER BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 7A - EQUITY INTERESTS IN MERCURY FINANCE COMPANY ("MERCURY")
AND
CLASS 7B - SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS AGAINST MERCURY
CUSIP NO. 589 395 102
This Master Ballot may not be used FOR any purpose other than FOR casting votes
to accept or reject Mercury's Second Amended Plan of Reorganization dated
December 29, 1998 (the "Plan") under chapter 11, title 11 of the United States
Code (the "Bankruptcy Code"). All capitalized terms used in the Master Ballot or
Voting Instructions but not otherwise defined therein shall have the meanings
ascribed to them in the Plan.
This Master Ballot is being sent to brokers, proxy intermediaries, and other
nominees of Beneficial Holders (as defined herein) of Mercury's Common Stock as
of the record dates of January 28, 1997, February 17, 1997, and December 28,
1998 and is to be used by brokers, proxy intermediaries or other nominees FOR
casting votes to accept or reject the Plan on behalf of and in accordance with
the ballots/instructions cast by the Beneficial Holders of the record dates set
forth above. HOLDERS OF MERCURY'S COMMON STOCK AS OF JANUARY 28, 1997 MAY HOLD
SECURITIES FRAUD CLAIMS AND HOLDERS OF MERCURY'S COMMON STOCK AS OF FEBRUARY 17,
1997 HOLD DIVIDEND CLAIMS (COLLECTIVELY, "CLASS 7B CLAIMS"). HOLDERS OF
SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS ARE TREATED IN CLASS 7B UNDER THE
PLAN. HOLDERS OF MERCURY'S COMMONS STOCK AS OF DECEMBER 28, 1998 ARE ENTITLED TO
VOTE FOR THE PLAN AS HOLDERS OF EQUITY INTERESTS IN CLASS 7A UNDER THE PLAN.
MASTER BALLOTS MUST BE RETURNED AND RECEIVED TO THE BALLOTING AGENT
ON OR BEFORE 5:00 P.M. (EST) ON FEBRUARY 12, 1999
FOR YOUR VOTE TO ACCEPT OR REJECT THE PLAN TO COUNT.
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE MASTER BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
ITEM 1. AMOUNT OF CLASS 7A EQUITY INTEREST. (FILL IN THE BLANK)
The undersigned was the record holder of _______________________ shares
of Common Stock of Mercury on December 28, 1998 ( the "Equity Interests"), FOR
which voting instructions have been received from the Beneficial Holders as
listed in Item 3 below.
ITEM 2. CLASS 7A VOTE
As instructed by the Beneficial Holders of the aggregate number of
Class 7A Equity Interests as set forth in Item 1 above, the undersigned
transmits the following votes of such Beneficial Holders in respect of their
Class 7A Equity Interests.
To Accept (Vote FOR) the Plan.
Aggregate number of shares voted as Aggregate number of holders as
of the record date 12/ 28/98 of 12/28/98
To Reject (Vote AGAINST) the Plan.
Aggregate number of shares voted as Aggregate number of holders as
of the record date 12/28/98 of 12/28/98
ITEM 3. CLASS 7A VOTE - NUMBER OF HOLDERS OF CLASS 7A EQUITY INTERESTS
The undersigned certifies that the following vote of the Beneficial
Holders of Class 7A Equity Interests, as identified by their respective customer
account numbers or the respective sequence numbers set forth below, have
delivered to the undersigned Ballots casting the following votes (use additional
sheets of paper if necessary):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
INSERT NUMBER OF SHARES VOTED
- -----------------------------------------------------------------------------------------------------
Customer Account No. and/or Accept the Plan Reject the Plan
Customer Name for each Beneficial Holder (VOTE FOR) (VOTE AGAINST)
Record Date 12/28/98 Record Dated 12/28/98
- --------------------------------------------- ---------------------------- --------------------------
<S> <C> <C>
1.
- --------------------------------------------- ---------------------------- --------------------------
2.
- --------------------------------------------- ---------------------------- --------------------------
3.
- --------------------------------------------- ---------------------------- --------------------------
4.
- --------------------------------------------- ---------------------------- --------------------------
5.
- --------------------------------------------- ---------------------------- --------------------------
6.
- --------------------------------------------- ---------------------------- --------------------------
7.
- --------------------------------------------- ---------------------------- --------------------------
8.
- --------------------------------------------- ---------------------------- --------------------------
9.
- --------------------------------------------- ---------------------------- --------------------------
10.
- --------------------------------------------- ---------------------------- --------------------------
</TABLE>
ITEM 4. AMOUNT OF CLASS 7B CLAIMS. (FILL IN THE BLANKS)
The undersigned was the record holder of ______________________ shares
of Common Stock of Mercury on January 28, 1997 and the record holder of
_______________________ shares of Common Stock of Mercury on February 17, 1997
for which voting instructions have been received from Beneficial Holders listed
in Item 6 below.
ITEM 5. CLASS 7B CLAIMS VOTE
As instructed by the Beneficial Holders of the aggregate number of
Class 7B Claims set forth in Item 1 above, the undersigned transmits the
following votes of such Beneficial Holders in respect of their Claims. FOR
PURPOSES OF CALCULATING THE CLASS 7B CLAIMS VOTE, YOU MUST MULTIPLY .075 BY THE
AGGREGATE NUMBER OF FEBRUARY 17, 1997 RECORD DATE SHARES VOTED AND THEN ADD THIS
AMOUNT TO THE AGGREGATE NUMBER OF JANUARY 28, 1997 RECORD DATE SHARES VOTED.
To Accept (Vote FOR) the Plan.
Number of shares voted Aggregate number of holders
(.075 x 2/17/97 shares plus 1/28/97 shares)
To Reject (Vote AGAINST) the Plan.
Number of shares voted Aggregate number of holders
(.075 x 2/17/97 shares plus 1/28/97 shares)
ITEM 6. CLASS 7B VOTE - NUMBER OF HOLDERS OF CLASS 7B CLAIMS.
The undersigned certifies that the following vote of the Beneficial
Holders of Class 7B Claims, as identified by their respective customer account
numbers or the respective sequence numbers set forth below, have delivered to
the undersigned Ballots casting the following votes (use additional sheets of
paper if necessary):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
INSERT NUMBER OF SHARES VOTED
- --------------------------------------------- ------------------------------------- ---------------------------------
Customer Account No. and/or Accept the Plan Reject the Plan
Customer Name for each Beneficial Holder (VOTE FOR) (VOTE AGAINST)
1/28/97 2/17/97 1/28/97 2/17/97
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
1.
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
2.
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
3.
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
4.
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
5.
- --------------------------------------------- ------------------- ----------------- --------------- -----------------
</TABLE>
ITEM 7. CERTIFICATION
By signing this Master Ballot, the undersigned certifies:
(c) that each Beneficial Holder of Class 7A Equity Interest
and/or Class 7B Claims whose votes are being transmitted by this Master
Ballot has been provided with a copy of the Disclosure Statement
relating to the Plan, together with a copy of the Plan, and
(d) that the undersigned is the registered or record owner of
the aggregate number of Class 7A Equity Interests and Class 7B Claims
set forth in Items I and 4, respectively, and has full power and
authority to vote to accept or reject the Plan. The undersigned also
acknowledges that the solicitation of votes herein is subject to all
the terms and conditions set forth in the Disclosure Statement.
Dated: Name of Voter:
(Print or Type)
Social Security or Tax I.D. No.
Signature:
By:
(If Appropriate)
Title:
(If Appropriate)
Street Address:
City, State and Zip Code:
Telephone No.:
Participant No.:
THIS MASTER BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
TELEPHONE: (201) 798-1031
FACSIMILE: (201) 798-4157
BY 5:00 P.M. EASTERN STANDARD TIME ON OR BEFORE FEBRUARY 12, 1999,
OR YOUR VOTE WILL NOT BE COUNTED
THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT,
LOGAN & C0MPANY, INC. BY 5:00 P.M., EASTERN STANDARD TIME, ON OR BEFORE
FEBRUARY 12, 1999 (UNLESS EXTENDED) OR THE VOTES TRANSMITTED
HEREBY WILL NOT BE COUNTED.
INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT
Mercury is soliciting the votes of holders of Class 7A Equity Interests
and Class 7B Claims with respect to the Second Amended Plan of Reorganization
dated December 29, 1998 of Mercury Finance Company (the "Plan") referred to in
the Disclosure Statement (a copy of which is enclosed herewith).
The Plan can be confirmed by the Bankruptcy Court and thereby made
binding upon the Beneficial Holders if it is accepted by the holders of at least
two-thirds in amount and more than one-half in number of the claims in each
impaired Class of Claims that vote on the Plan and by the holders of at least
two-thirds in amount of the Equity Interests in the impaired Class of Equity
Interests that vote on the Plan, and if the Plan otherwise satisfies the
requirements of section 1129(a) of the Bankruptcy Code. If the requisite
acceptances are not obtained, the Bankruptcy Court may nonetheless confirm the
Plan if it finds that the Plan provides fair and equitable treatment to, and
does not discriminate unfairly against, the Class or Classes of Claims or Equity
Interests rejecting it, and otherwise satisfies the requirements of section
1129(b) of the Bankruptcy Code. As described in Article VIII.E of the Disclosure
Statement, Mercury will seek confirmation of the Plan under section 1129(b) of
the Bankruptcy Code (known as the cram-down section) because of the deemed
non-acceptance of the holders of Stock Options in Class 8. Mercury also reserves
the right to proceed under section 1129(b), if any other impaired Class of
Claims or Equity Interests does not accept the Plan. To have the votes of your
Beneficial Holders count, you must complete and return this Master Ballot.
You should deliver the Beneficial Holder Ballot and other documents
relating to the Plan, including the Disclosure Statement (collectively,
"Solicitation Materials"), to each Beneficial Holder of Mercury Common Stock as
of the record dates of January 28, 1997, February 17, 1997 and December 28, 1998
and take any action required to enable each such Beneficial Holder to vote the
Class 7A Equity Interests and/or Class 7B Claims held by such Beneficial Holder.
With regard to any Beneficial Holder Ballots returned to you, to have the vote
of your Beneficial Holder count, you must, not later than February 12, 1999,
subject to extension in the sole discretion of Mercury (the "Voting Deadline"),
either (i) forward such Beneficial Holder Ballots to the Balloting Agent (as
defined herein) indicating the appropriate authority to vote from such
Beneficial Holder Ballot submitted or (ii) (a) retain such Beneficial Holder
Ballots in your files and transfer the requested information from each such
Beneficial Holder Ballot onto the attached Master Ballot or your computer
generated version of the Master Ballot that contains the same information (b)
execute the Master Ballot, and (c) arrange FOR delivery of such Master Ballot to
Logan & Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey
07030, Facsimile (201) 798-4157 (the "Balloting Agent"). Please keep any records
of the voting instructions received from Beneficial Holders, including all
Beneficial Holder Ballots, until February 28, 2000 (or such other date as is set
by subsequent Bankruptcy Court order).
The Master Ballot is not a letter of transmittal and may not be used
for any purpose other than to vote to accept or reject the Plan. Accordingly,
holders of Class 7A Equity Interests and Class 7B Claims should not surrender
instruments or certificates representing or evidencing their Class 7A Equity
Interests or Class 7B Claims, and neither Mercury nor the Balloting Agent will
accept delivery of such instruments or certificates surrendered together with a
Ballot. The remittance of instruments or other evidence of Beneficial Holders'
claims or equity interests FOR exchange pursuant to the Plan may only be made,
and will only be accepted if instruments or certificates representing their
Class 7A Equity Interests and Class 7B Claims (in proper form FOR transfer) are
delivered as provided under the Plan following confirmation of the Plan by the
Bankruptcy Court.
To properly complete the Master Ballot take the following steps:
(a) provide appropriate information FOR each of the items on
the Master Ballot. Please note that Item 3 and 6 requests information for each
individual beneficial holder FOR whom you hold Class 7A Equity Interests and/or
Class 7B Claim in your name (the "Beneficial Holders"). To identify such
Beneficial Holders without disclosing their names, please use the customer
account number assigned by you to identify each such Beneficial Holder or, if no
such customer account number exists, please use the sequential numbers provided
(making sure to retain a separate list of each Beneficial Holder and his or her
assigned sequential number);
(b) vote to accept or reject the Plan in Item 2 for the Class
7A Equity Interests and Item 5 for the Class 7B Claims held by you as the
registered holder on behalf of the Beneficial Holders.
(c) sign and date your Master Ballot;
(d) if you are completing this Master Ballot on behalf of
another entity, state your title of such entity, and
(e) provide your name and mailing address if different from
the preprinted address on the Master Ballot or if no preprinted address appears
on the Master Ballot.
THE DEBTOR REQUESTS THAT YOU RETAIN IN YOUR FILES THE BALLOTS RECEIVED FROM THE
BENEFICIAL HOLDERS
- You should deliver the GREEN colored Ballot to each
Beneficial Holder of Mercury's Common Stock as of the record
dates January 28, 1997, February 17, 1997 or December 28,
1998, take any action required to enable each such Beneficial
Holder to vote his respective Class 7A Equity Interests and/or
Class 7B Claims to accept or reject the Plan. With regard to
any Ballots returned to you, you must either (1) forward such
Ballots to the Balloting Agent or (2)(a) retain such Ballots
in your files and transfer the requested information from each
such Ballot onto the attached Master Ballot, (b) execute the
Master Ballot and (c) arrange FOR delivery of such Master
Ballot to the Balloting Agent.
- If you are both the registered holder and beneficial holder
of any of the Class 7A Equity Interests and/or Class 7B Claims
and you wish to vote such Class 7A Equity Interests and/or
Class 7B Claims, you may return either a Ballot or a Master
Ballot by the Voting Deadline.
- THE MASTER BALLOT MUST BE DELIVERED TO THE BALLOTING AGENT BY
U.S. MAIL, HAND DELIVERY, OVERNIGHT DELIVERY OR FACSIMILE
PRIOR TO THE VOTING DEADLINE, OTHERWISE SUCH MASTER BALLOT
WILL NOT BE COUNTED. IF YOU FAX YOUR BALLOT TO THE BALLOTING
AGENT, YOU MUST FORWARD THE ORIGINAL TO THE BALLOTING AGENT
WITHIN ONE BUSINESS DAY.
VOTING DEADLINE AND EXTENSIONS. If a Master Ballot must be completed by
you, please complete, sign and return this Master Ballot so that it is
received by the Balloting Agent no later than 5:00 p.m., Eastern
Standard Time, on February 12, 1999. The Debtor reserves the right to
extend the Voting Deadline in the manner described in the Disclosure
Statement.
IF YOU HAVE ANY QUESTIONS REGARDING THIS
MASTER BALLOT OR THE VOTING PROCEDURES,
PLEASE CALL THE INFORMATION AGENT AT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF MERCURY, THE BALLOTING AGENT, OR THE
INFORMATION AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT
TO THE PLAN, EXCEPT FOR THE STATEMENTS CONTAINED IN THE DOCUMENTS
ENCLOSED HEREWITH.
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation, ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
BENEFICIAL HOLDER BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 7A -EQUITY INTERESTS IN MERCURY FINANCE COMPANY ("MERCURY")
AND
CLASS 7B -SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS AGAINST MERCURY
CUSIP NO. 589 395 102
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE BALLOT.
PLEASE CHECK THE APPROPRIATE BOXES BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
- --------------------------------------------------------------------------------
THIS BALLOT IS ACCOMPANIED BY A RETURN ENVELOPE THAT IS ADDRESSED TO LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT"), THIS BALLOT MUST BE RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN STANDARD TIME, FEBRUARY 12, 1999 ("THE
VOTING DEADLINE"), OR YOUR VOTE TO ACCEPT OR REJECT THE PLAN WILL NOT BE
COUNTED.
- --------------------------------------------------------------------------------
The Bankruptcy Court has approved the second amended disclosure
statement (the "Disclosure Statement") with respect to Mercury's Second Amended
Plan of Reorganization dated December 29, 1998 (the "Plan"). The Disclosure
Statement provides information to assist you in deciding how to vote your
Ballot. If you do not have a Disclosure Statement you may obtain a copy from the
Information Agent. Court approval of the Disclosure Statement does not indicate
approval of the Plan by the Bankruptcy Court.
YOU SHOULD REVIEW THE DISCLOSURE STATEMENT AND THE PLAN BEFORE YOU
VOTE. YOU MAY WISH TO SEEK LEGAL ADVICE CONCERNING THE PLAN AND YOUR
CLASSIFICATION AND TREATMENT UNDER THE PLAN. IF YOU WERE A SHAREHOLDER OF
MERCURY ON JANUARY 28, 1997, FEBRUARY 17, 1997 AND/OR DECEMBER 28, 1998, YOU ARE
ENTITLED TO VOTE TO ACCEPT OR REJECT MERCURY'S PLAN. HOLDERS OF MERCURY'S COMMON
STOCK AS OF DECEMBER 28, 1998 HOLD EQUITY INTERESTS IN MERCURY AND ARE TREATED
IN CLASS 7A UNDER THE PLAN. HOLDERS OF MERCURY'S COMMON STOCK ON JANUARY 28,
1997 MAY HOLD SECURITIES FRAUD CLAIMS AGAINST MERCURY AND HOLDERS OF MERCURY'S
STOCK ON FEBRUARY 17, 1997 HOLD DIVIDEND CLAIMS AGAINST MERCURY. SECURITIES
FRAUD CLAIMS AND DIVIDEND CLAIMS (COLLECTIVELY, "CLASS 7B CLAIMS") ARE TREATED
IN CLASS 7B UNDER THE PLAN. PLEASE REFER TO THE DISCLOSURE STATEMENT AND PLAN
FOR A DISCUSSION OF TREATMENT OF CLASS 7A EQUITY INTERESTS AND CLASS 7B CLAIMS
UNDER THE PLAN.
IF YOUR BALLOT IS NOT RECEIVED BY THE BALLOTING AGENT ON OR BEFORE
FEBRUARY 12, 1999, AND SUCH DEADLINE IS NOT EXTENDED, YOUR VOTE WILL NOT COUNT
AS EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN. THEREFORE, IT IS IMPORTANT
THAT YOU RETURN YOU BALLOT EARLY ENOUGH SO IT IS RECEIVED BY THE BALLOTING AGENT
BEFORE THE DEADLINE FEBRUARY 12, 1999. IF THE PLAN IS CONFIRMED BY THE
BANKRUPTCY COURT IT WILL BE BINDING ON YOU WHETHER OR NOT YOU VOTE.
ITEM 1. AMOUNT OF CLAIM AND/OR EQUITY INTERESTS (ONLY FILL IN THE APPROPRIATE
BLANKS)
The undersigned was the beneficial owner of ________________ shares of
Mercury's Common Stock on January 28, 1997
The undersigned was the beneficial owner of ________________ shares of
Mercury's Common Stock on February 17, 1997
The undersigned was the beneficial owner of ________________ shares of
Mercury's Common Stock on December 28, 1998
ITEM 2. CLASS 7A AND 7B VOTE
The beneficial owner of the shares as of January 28, 1997 and February
17, 1997 votes (please check one):
/ / To Accept the Plan / / To Reject the Plan
The beneficial owner of the shares as of December 28, 1998, votes
(please check one):
/ / To Accept the Plan / / To Reject the Plan
ITEM 3. CERTIFICATIONS.
By signing this Ballot, the undersigned certifies:
(a) that no other Ballots cast with respect to the amount of
the Class 7A Equity Interests and/or Class 7B Claims identified in Item
1 have been cast with respect to such Class 7A Equity Interests and/or
Class 7B Claims or in such case earlier Ballots were filed, such
earlier Ballots are hereby revoked;
(b) that a copy of the Disclosure Statement relating to the
Plan along with a copy of the Plan has been provided to and reviewed by
the undersigned; and
(c) that as the holder of the amount of Class 7A Equity
Interests and/or Class 7B Claims set forth in Item 1, the undersigned
has full power and authority to vote to accept or reject the Plan. The
undersigned also acknowledges that this solicitation is subject to all
the terms and conditions set forth in the Disclosure Statement relating
to the Plan.
ITEM 4. YOU ARE URGED TO VOTE TO ACCEPT THE PLAN.
Dated_______________ Name of Voter:_____________________________________
(Print or Type)
Social Security or Tax I.D. No.:___________________
Signature:_________________________________________
By:________________________________________________
(If Appropriate)
Title:_____________________________________________
(If Appropriate)
Street Address:____________________________________
City, State and Zip Code:__________________________
Telephone No.:_____________________________________
Broker where shares are held:______________________
VOTING INSTRUCTIONS
PLEASE COMPLETE, SIGN AND DATE
THE BALLOT AND RETURN IT PROMPTLY
YOUR BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
BY 5:00 P.M. EASTERN STANDARD TIME ON OR
BEFORE FEBRUARY 12, 1999, OR YOUR VOTE WILL NOT BE COUNTED
1. All capitalized terms used in the Ballot or Voting Instructions but not
otherwise defined therein shall have the meanings ascribed to them in the Second
Amended Plan of Reorganization dated December 29, 1998 of Mercury Finance
Company (the "Plan").
2. The Plan can be confirmed by the Bankruptcy Court and thereby made binding
upon you if it is accepted by the holders of at least two-thirds in amount and
more than one-half in number of the Claims in each impaired Class of Claims that
vote on the Plan and by the holders of at least two-thirds in amount of the
Equity Interests in each impaired Class of Equity Interests that vote on the
Plan, and if the Plan otherwise satisfies the requirements of section 1129(a) of
the Bankruptcy Code. If the requisite acceptances are not obtained, the
Bankruptcy Court may nonetheless confirm the Plan if it finds that the Plan
provides fair and equitable treatment to, and does not discriminate unfairly
against, the Class or Classes of Claims or Interests rejecting it, and otherwise
satisfies the requirements of section 1129(b) of the Bankruptcy Code. As
described in Article VIII.E of the Disclosure Statement, Mercury will seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code (known as
the cram-down section) because of the deemed non-acceptance of the holders of
Interests in Class 8. Mercury also reserves the right to proceed under section
1129(b), if any other impaired Class of Claims or Equity Interests does not
accept the Plan. To have your vote count you must complete and return this
Ballot. Please review the Disclosure Statement for more information.
3. To ensure that your vote is counted, you must (i) complete the Ballot, (ii)
indicate your decision either to accept or reject the Plan in the boxes provided
in Item 2 of the Ballot, (iii) sign and return the Ballot to the address set
forth on the enclosed prepaid envelope. Your Ballot must be received by Logan &
Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
(the "Balloting Agent") by 5:00 p.m. Eastern Standard Time on or before February
12, 1999 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted.
4. If multiple Ballots are received from an individual holder of Class 7A Equity
Interests and/or Class 7B Claims with respect to the same Class 7A Equity
Interest and/or Class 7B Claim prior to the Voting Deadline, the last Ballot
timely received will supersede and revoke any earlier received Ballot.
5. The Ballot is not a letter of transmittal and may not be used for any purpose
other than to vote to accept or reject the Plan. Accordingly, at this time, you
should not surrender certificates or instruments representing or evidencing your
Class 7A Equity Interests and/or Class 7B Claims and neither the Debtor nor the
Balloting Agent will accept delivery of such certificates or instruments
surrendered together with a Ballot. The remittance of your certificates or other
evidence of your equity interests and/or claims for exchange pursuant to the
Plan may only be made by you, and will only be accepted if certificates or
instruments representing your Class 7A Equity Interests and/or Class 7B Claims
in proper form for transfer) are delivered in accordance with the instructions
you will receive following confirmation of the Plan by the Bankruptcy Court.
6. This Ballot does not constitute, and shall not be deemed to be, a proof of
claim or interest or an assertion or admission of a claim or interest.
7. Please be sure to sign and date your Ballot. If you are completing the Ballot
on behalf of an entity, indicate your relationship with such entity and the
capacity in which you are signing. In addition, please provide your name and
mailing address if different from that set forth on the attached mailing label
or if no such mailing label is attached to the Ballot.
8. If you hold Claims or Equity Interests in more than one class under the Plan,
you may receive more than one Ballot coded for each different class. Each Ballot
votes only your Claims or Equity Interests indicated on that Ballot. Please
complete and return each Ballot you received.
9. The Ballot must be returned in sufficient time to allow it to be RECEIVED by
the Balloting Agent by no later than 5:00 p.m. Eastern Standard Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Information Agent Immediately.
PLEASE MAIL YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING
PROCEDURES, PLEASE CALL THE
INFORMATION AGENT AT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
)
MERCURY FINANCE COMPANY, ) Case No. 98 B 20763
a Delaware corporation. ) Honorable Erwin I. Katz
) Chapter 11
Debtor. )
)
RECORD HOLDER BALLOT FOR ACCEPTING OR REJECTING THE
SECOND AMENDED PLAN OF REORGANIZATION DATED DECEMBER 29, 1998
OF MERCURY FINANCE COMPANY
CLASS 7B - SECURITIES FRAUD CLAIMS AND DIVIDEND CLAIMS AGAINST
MERCURY FINANCE COMPANY ("MERCURY")
PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THE BALLOT.
PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
YOUR ACCEPTANCE OR REJECTION OF THE PLAN.
- --------------------------------------------------------------------------------
THIS BALLOT IS ACCOMPANIED BY A RETURN ENVELOPE THAT IS ADDRESSED TO LOGAN &
COMPANY, INC. (THE "BALLOTING AGENT"), THIS BALLOT MUST BE RECEIVED BY THE
BALLOTING AGENT BY 5:00 P.M., EASTERN TIME, FEBRUARY 12, 1999 ("THE VOTING
DEADLINE") OR YOUR VOTE TO ACCEPT OR REJECT THE PLAN WILL NOT BE COUNTED.
- --------------------------------------------------------------------------------
The Bankruptcy Court has approved the second amended disclosure
statement (the "Disclosure Statement") with respect to Mercury's Second Amended
Plan of Reorganization dated December 29, 1998 (the "Plan"). The Disclosure
Statement provides information to assist you in deciding how to vote your
Ballot. If you do not have a Disclosure Statement you may obtain a copy from the
INFORMATION AGENT. Court approval of the Disclosure Statement does not indicate
approval of the Plan by the Bankruptcy Court.
YOU SHOULD REVIEW THE DISCLOSURE STATEMENT AND THE PLAN BEFORE YOU
VOTE. YOU MAY WISH TO SEEK LEGAL ADVICE CONCERNING THE PLAN AND YOUR
CLASSIFICATION AND TREATMENT UNDER THE PLAN. . ACCORDING TO MERCURY'S RECORDS,
YOU WERE A SHAREHOLDER OF MERCURY ON JANUARY 28, 1997 AND/OR FEBRUARY 17, 1997
AND, THEREFORE, ARE ENTITLED TO VOTE ON THE PLAN. HOLDERS OF MERCURY'S COMMON
STOCK AS OF JANUARY 28, 1997 MAY HOLD SECURITIES FRAUD CLAIMS AND HOLDERS OF
MERCURY'S COMMON STOCK AS OF FEBRUARY 17, 1997 HOLD DIVIDEND CLAIMS
(COLLECTIVELY, "CLASS 7B CLAIMS"). YOUR CLAIMS HAVE BEEN PLACED IN CLASS 7B
UNDER THE PLAN. IF YOU ARE ALSO A SHAREHOLDER OF RECORD AS OF DECEMBER 28, 1998,
YOU ARE ALSO ENTITLED TO VOTE ON THE PLAN AS A HOLDER OF A CLASS 7A EQUITY
INTEREST, AND CONSEQUENTLY WOULD RECEIVE A SEPARATE BALLOT FOR VOTING SUCH
EQUITY INTEREST. IF YOU RECEIVE TWO BALLOTS, YOU SHOULD COMPLETE AND RETURN BOTH
BALLOTS TO THE BALLOTING AGENT BY THE VOTING DEADLINE.
IF YOUR BALLOT IS NOT RECEIVED BY THE BALLOTING AGENT ON OR BEFORE
FEBRUARY 12, 1999, AND SUCH DEADLINE IS NOT EXTENDED, YOUR VOTE WILL NOT COUNT
AS EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN. IF THE PLAN IS CONFIRMED BY
THE BANKRUPTCY COURT IT WILL BE BINDING ON YOU WHETHER OR NOT YOU VOTE.
ITEM 1. AMOUNT AND TYPE OF CLAIMS (FILL IN THE APPLICABLE BLANKS)
The undersigned was the owner of ______ shares of Common Stock of
Mercury on January 28, 1997 and/or the owner of __________ shares of Common
Stock of Mercury on February 17, 1997.
ITEM 2. CLASS 7B VOTE
The owner of the Class 7B Claims set forth in Item 1, votes (please
check one):
/ / To Accept the Plan / / To Reject the Plan
ITEM 3. CERTIFICATIONS.
By signing this Ballot, the undersigned certifies:
(a) that no other Ballots cast with respect to the amount of
the Class 7B Claims identified in Item 1 have been cast with respect to
such Class 7B Claims, or in such case earlier Ballots were filed, such
earlier Ballots are hereby revoked;
(b) that a copy of the Disclosure Statement relating to the
Plan and the Plan has been provided to and reviewed by the undersigned;
and
(c) that as the holder of the amount of Class 7B Claims set
forth in Item 1, the undersigned has full power and authority to vote
to accept or reject the Plan. The undersigned also acknowledges that
this solicitation is subject to all the terms and conditions set forth
in the Disclosure Statement relating to the Plan.
ITEM 4. YOU ARE URGED TO VOTE TO ACCEPT THE PLAN.
Dated__________________ Name of Voter:__________________________________
(Print or Type)
Social Security or Tax I.D. No.:________________
Signature:______________________________________
By:_____________________________________________
(If Appropriate)
Title:__________________________________________
(If Appropriate)
Street Address:_________________________________
City, State and Zip Code:_______________________
Telephone No.:__________________________________
VOTING INSTRUCTIONS
PLEASE COMPLETE, SIGN AND DATE
THE BALLOT AND RETURN IT PROMPTLY
YOUR BALLOT MUST BE RECEIVED BY:
BALLOT TABULATION CENTER - MERCURY FINANCE COMPANY
C/O LOGAN & COMPANY, INC.
615 WASHINGTON STREET
HOBOKEN, NJ 07030
BY 5:00 P.M. EASTERN STANDARD TIME ON OR
BEFORE FEBRUARY 12, 1999, OR YOUR VOTE WILL NOT BE COUNTED
1. All capitalized terms used in the Ballot or Voting Instructions but not
otherwise defined therein shall have the meanings ascribed to them in the Second
Amended Plan of Reorganization dated December 29, 1998 of Mercury Finance
Company (the "Plan").
2. The Plan can be confirmed by the Bankruptcy Court and thereby made binding
upon you if it is accepted by the holders of at least two-thirds in amount and
more than one-half in number of the Claims in each impaired Class of Claims that
vote on the Plan and by the holders of at least two-thirds in amount of the
Equity Interests in the impaired Class of Equity Interests that vote on the
Plan, and if the Plan otherwise satisfies the requirements of section 1129(a) of
the Bankruptcy Code. If the requisite acceptances are not obtained, the
Bankruptcy Court may nonetheless confirm the Plan if it finds that the Plan
provides fair and equitable treatment to, and does not discriminate unfairly
against, the Class or Classes of Claims or Equity Interests rejecting it, and
otherwise satisfies the requirements of section 1129(b) of the Bankruptcy Code.
As described in Article VIII.E of the Disclosure Statement, Mercury will seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code (known as
the cram-down section) because of the deemed non-acceptance of the holders of
Stock Options in Class 8. Mercury also reserves the right to proceed under
section 1129(b), if any other impaired Class of Claims or Equity Interests does
not accept the Plan. To have your vote count you must complete and return this
Ballot. Please review the Disclosure Statement for more information.
3. To ensure that your vote is counted, you must (i) complete the Ballot, (ii)
indicate your decision either to accept or reject the Plan in the boxes provided
in Item 2 of the Ballot, (iii) sign and return the Ballot to the address set
forth on the enclosed prepaid envelope. Your Ballot must be received by Logan &
Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030
(the "BALLOTING AGENT") by 5:00 p.m. EST on or before February 12, 1999 (the
"Voting Deadline"). If a Ballot is received after the Voting Deadline, it will
not be counted.
4. If multiple Ballots are received from an individual holder of Class 7B Claims
with respect to the same Class 7B Claims prior to the Voting Deadline, the last
Ballot timely received will supersede and revoke any earlier received Ballot.
5. The Ballot is not a letter of transmittal and may not be used for any purpose
other than to vote to accept or reject the Plan. Accordingly, at this time,
holders should not surrender certificates or instruments presenting or
evidencing their Class 7B Claims, and neither the Debtor nor the BALLOTING AGENT
will accept delivery of such certificates or instruments surrendered together
with a Ballot. You will be notified following confirmation of the Plan as to the
information which will be necessary to receive distributions, if any, under the
Plan.
6. This Ballot does not constitute, and shall not be deemed to be, a proof of
claim or equity interest or an assertion or admission of a claim or equity
interest.
7. Please be sure to sign and date your Ballot. If you are completing the Ballot
on behalf of an entity, indicate your relationship with such entity and the
capacity in which you are signing. In addition, please provide your name and
mailing address if different from that set forth on the attached mailing label
or if no such mailing label is attached to the Ballot.
8. If you hold Claims or Equity Interests in more than one class under the Plan,
you may receive more than one Ballot coded for each different class. Each Ballot
votes only your claims or Equity Interests indicated on that Ballot. Please
complete and return each Ballot you received.
9. The Ballot must be returned in sufficient time to allow it to be RECEIVED by
the BALLOTING AGENT by no later than 5:00 p.m. (EST), on or before the Voting
Deadline. If you believe you have received the wrong Ballot, please contact the
INFORMATION AGENT.
PLEASE MAIL YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING
PROCEDURES, PLEASE CALL THE
INFORMATION AGENT AT:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
1-888-296-3797
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: ) Case No. 98 B 20763
) Chapter 11
MERCURY FINANCE COMPANY, )
a Delaware Corporation, ) Honorable Erwin I. Katz
)
Debtor. )
)
MONTHLY OPERATING REPORT
Mercury Finance Company hereby files its Monthly Operating Report for
the period ending September 30, 1998, as required by the Chapter 11 Operating
Instructions and Reporting Requirements issued by the United States Trustee,
with the United States Bankruptcy Court for the Northern District of Illinois,
Eastern Division.
Date: November 20, 1998 MERCURY FINANCE COMPANY
Debtor and Debtor in Possession
By:
One of its Attorneys
Lewis S. Rosenbloom (Reg. No. 02386321)
Debra A. Riley (Reg. No. 06212193)
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
(312) 372-2000
CERTIFICATE OF SERVICE
I, Debra A. Riley, an attorney, hereby certify that on November 20,
1998, I caused a copy of the attached Monthly Operating Report to be served
upon:
Kathryn M. Gleason
U.S. Trustee's Office
227 West Monroe Street - Suite 3350
Chicago, Illinois 60606
Via hand delivery.
Debra A. Riley
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CASE NAME: MERCURY FINANCE COMPANY CASE NO. 98-B-20763
SUMMAR OF CASH RECEIPTS AND DISBURSEMENTS
For the Month Ending September 30, 1998
----------
BEGINNING BALANCE 73,774,790
----------
RECEIPTS:
1. Receipts from Operations: 5,464,486
----------
2. Other Receipts:
a. Cash from Subsidiaries 55,408,366
----------
DISBURSEMENTS:
3. Net Payroll:
a. Officers 163,231
----------
b. Others 1,860,439
----------
4. Taxes:
a. Federal income 306,394
----------
b. FICA withholdings 193,577
----------
c. Employee's withholdings
----------
d. Employer's FICA 193,577
----------
e. Federal Unemployment Taxes 2,500
----------
f. State Income Tax 62,036
----------
g. State Employee withholdings 4,552
----------
h. All other state & local taxes 2,501
----------
5. Necessary Expenses:
a. Rents or mortgage payments(s) 0
----------
b. Utilities 0
----------
c. Insurance 0
----------
d. Merchandise bought for manufacture
or sale 0
----------
e. Other necessary expenses
Advances to subsidiaries 33,307,984
----------
Disbursements per attachment 6,014,154
----------
TOTAL DISBURSEMENTS: 42,110,945
----------
NET RECEIPTS (DISBURSEMENTS) FOR THE CURRENT PERIOD 18,761,907
----------
----------
ENDING BALANCE IN ALL ACCOUNTS 92,536,697
----------
MERCURY FINANCE COMPANY
Cash Consolidation Worksheet
<TABLE>
<CAPTION>
BANKONE BANKONE LASALLE BANK PULLMAN NATIONSBANK NATIONSBANK
#1565520303 #100074781 #8600728730 #0001175439 #3751055343 CERT. OF
MONEY MARKET SWEEP MONEY MARKET CREDIT CARD MONEY MARKET DEPOSIT
------------ ----- ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance 11,027,159 0 60,249,058 745,984 1,944 130,000
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Receipts
Transfers 24,280,963 7,904,775 10,000,000
Other 92,496 576 284,144 3,267,720 902
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total Receipts 24,373,459 2,905,351 10,284,144 3,267,720 902 0
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Disbursements
Transfers (22,100,000) (2,905,351) (1,000,000)
Other (2,195,396)
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total (22,100,000) (2,905,351) 0 (3,195,396) 0 0
Disbursements
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Ending Balance 13,300,618 0 70,533,202 818,308 2,846 130,000
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
STAR BANK BANKONE PULLMAN CASH IN BANKONE
#488913617 #1000744781 #7102000 PETTY TRANSIT #212850060
#488913625 CONCENTRATION CC ESCROW CASH FROM SUBS DISBURSEMENT ELIMINATIONS TOTAL
---------- ------------- --------- ---- --------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 10,000 (274,237) 253,652 300 9,084,045 (7,453,115) (0) 73,774,790
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
Receipts
Transfers 29,660,434 (160,026,835) 0
Other 10,000,000 83,180,663 55,408,366 439,555 60,872,852
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
4,463 1,374,630
Total Receipts 10,000,463 84,555,293 0 0 55,408,366 30,099,989 (160,026,835) 60,872,852
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
Disbursements
Transfers (76,846,172) (57,175,312) 160,026,835 0
Other (26) (8,201,825) (253,652)
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
(31,460,046) (42,110,945)
Total (26) (85,047,997) (253,652) 0 (57,175,312) (31,460,046) 160,026,835 (42,110,945)
Disbursements
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
Ending Balance 10,014,437 (766,941) 0 300 7,317,099 (8,813,172) (0) 92,536,697
- ------------------ ------------ ------------ -------- ---- ------------ ------------ ------------ ------------
</TABLE>
MERCURY FINANCE COMPANY
SEPTEMBER OPERATING REPORT - Disbursement Summary
DESCRIPTION CHECKS WIRES TOTAL
Accrued Interest & Receivable Midland 7,476.90 60,839.07 68,315.97
Advertising 29,762.19 29,762.19
Automobile 23,962.30 23,962.30
Bank Service Charges 131.68 8,467.89 8,599.57
Credit Card Advances 1,786,653.17 1,786,653.57
Credit Card Fees 408,742.66 408,742.66
Commissions Auto Club 1,379.91 1,379.91
Company Meeting Expense 16,833.86 16,833.86
Dues and Subscriptions 306.25 306.25
Employee Emergency Loans 1,787.00 1,787.00
Furniture and Fixtures 7,756.96 7,756.96
Insurance Employee 85,758.15 263,951.45 349,709.60
Insurance Expense 1,488.84 1,488.84
Interest Expense 569.88 569.88
Legal Expense 65.00 65.00
Licenses and Fees 682.40 682.40
Miscellaneous Expense 43,806.55 43,806.55
Moving and Relocation Expense 16.25 16.25
Online Expense 101,406.20 101,406.20
Payroll Administration 8,939.52 8,939.52
Pension Expense 81,217.00 276,015.06 357,232.06
Postage 2,073.14 2,073.14
Rent 25,368.85 25,368.85
Restructuring Expense 100,000.00 152,630.96 252,630.96
Salary Other 15,755.41 15,755.41
SIC Insurance Refunds 1,151,446.01 1,151,446.01
Stationery Expense 2,584.02 2,584.02
Stockholder Relations 4,888.80 4,888.80
Suspense 4,875.00 4,875.00
Suspense SIC Clearing 17,008.95 19,273.57
Taxes Property and Misc. 1,219.00 2,264.62 1,219.00
Taxes State Income Tax 66,975.00 66,975.00
Telephone 102,334.19 102,334.19
Travel 10,056.20 10,056.20
UFCC Insurance Premiums 1,134,470.26 1,134,470.26
Utilities 2,187.62 2,187.62
TOTALS 1,920,119.03 4,094,035.14 6,014,154.17
------------ ------------ ------------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CASE NAME: MERCURY FINANCE COMPANY CASE NO. 98-B-20763
FOR MONTH ENDING September 30, 1998
STATEMENT OF INVENTORY
Beginning inventory $0.00
-----
Add: purchases $0.00
-----
Less: goods sold (cost basis) $0.00
-----
Ending inventory $0.00
-----
PAYROLL INFORMATION STATEMENT
Gross payroll for this period $2,788.805.50
-------------
Payroll taxes due but unpaid 0.00
-------------
STATUS OF PAYMENTS TO SECURED CREDITORS AND LESSORS
Name of Date regular Amount of Number of Amount of
Creditor/Lessor payment regular payments payment
is due payment delinquent delinquent (post)
NONE
STATEMENT OF AGED RECEIVABLES
ACCOUNTS RECEIVABLES See Attached Summary
MERCURY FINANCE COMPANY
Accounts Receivable Summary
Type Book Balance Book Balance
@ 8/31/98 @ 9/30/98
- ------------------------------------ ------------------------- -----------------
Employee Cash Advances
Employee Cash Advance 37,234.00 11,520.00
Employee Travel Advance 10,500.00 10,500.00
Employee Emergency Loans 7,014.27 5,557.28
Credit Card Interest Receivable 469,957.13 442,499.86
Credit Card Income Receivable 60,000.00 90,000.00
Credit Card - Suspense 71.39 0.00
Credit Card Loan Balances (Net of R) 49,035,715.13 47,319,427.75
Accrued Income Receivable 374,584.00 374,584.00
Other Receivables-Suspense (136,614.00) (119,379.41)
------------------------- -----------------
TOTAL 49,858,461.92 48,134,709.48
------------------------- -----------------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CASE NAME: MERCURY FINANCE COMPANY CASE NO. 98-B-20763
FOR MONTH ENDING September 30, 1998
TAX QUESTIONNAIRE
Debtors in possession and trustees are required to pay all taxes incurred after
the filing of their Chapter 11 petition on an as due basis. Please indicate
whether the following post petition taxes or withholdings have been paid
currently.
1.) Federal income taxes Yes (X) No ( )
2.) FICA withholdings Yes (X) No ( )
3.) Employee's withholdings Yes (X) No ( )
4.) Employer's FICA Yes (X) No ( )
5.) Federal unemployment taxes Yes (X) No ( )
6.) State income tax Yes (X) No ( )
7.) State employee withholdings Yes (X) No ( )
8.) All other state taxes Yes (X) No ( )
If any of the above have not been paid, state below the tax not paid, the
amounts past due and the date of last payment.
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), made as of the _____ day of March, 1999
by and between MFN Financial Corporation, a Delaware corporation ("Company"),
and Edward G. Harshfield ("Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and the
Executive agrees to serve the Company, in the capacities described herein during
the Period of Employment (as defined in Section 2 of this Agreement), in
accordance with the terms and conditions of this Agreement.
2. PERIOD OF EMPLOYMENT. The term "Period of Employment" shall mean the period
which commences on the effective date of a plan of reorganization for the
Company which is confirmed by the bankruptcy court pursuant to a final order
which is no longer subject to appeal (the "Effective Date") and, unless earlier
terminated pursuant to Section 6, ends on the third anniversary of the Effective
Date.
3. DUTIES DURING THE PERIOD OF EMPLOYMENT.
(a) DUTIES. During the Period of Employment, the Executive shall be
employed as the President and Chief Executive Officer of the Company with
overall charge and responsibility for the business and affairs of the Company,
and shall perform such appropriate duties as the Executive shall reasonably be
directed to perform by the Company's Board of Directors (the "Board"). The
Company shall also elect the Executive as a member and Chairman of the Company's
Board. In addition, in connection with each election of directors, the Executive
may nominate two (2) other individuals to serve as outside members of the Board,
who shall be included in the slate of nominees presented to the shareholders by
the Board.
(b) SCOPE. During the Period of Employment, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote substantially all of his business time and attention to the business and
affairs of the Company. It shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions, or (iii) manage personal investments, so long as such activities
under clauses (i), (ii) and (iii) do not interfere, in any substantial respect,
with the Executive's responsibilities hereunder.
4. COMPENSATION AND OTHER PAYMENTS.
(a) SALARY. During the Period of Employment the Company shall pay the
Executive an annual base salary ("Base Salary") of one million dollars
($1,000,000) per year. The Executive's Base Salary shall be paid in advance, in
equal monthly installments. The Base Salary shall be reviewed annually as of the
end of each fiscal year of the Company (the "Applicable Year") during the Period
of Employment by the Compensation Committee of the Board (the "Committee"). Each
annual review shall be completed by January 1 following the Applicable Year.
Based upon such reviews, the Committee may increase, but shall not decrease, the
Base Salary. Any increase in Base Salary shall not serve to limit or reduce any
other obligation to the Executive under this Agreement.
(b) ANNUAL BONUSES. The Committee or the Board shall at least annually
review the Executive's performance under this Agreement. The Executive shall be
awarded annual bonuses at the discretion of the Board or the Committee;
provided, however, that for each of the second and third years of the Period of
Employment the Executive's minimum annual bonus shall be five hundred thousand
dollars ($500,000), subject to achieving such reasonable minimum performance
levels as shall be agreed upon in writing by the Executive and the Company
(c) SIGNING BONUS. As an incentive to join the Company and as compensation
for terminating his present employment and foregoing other opportunities, the
Executive shall be paid a cash signing bonus in the amount of four million
dollars ($4,000,000) ("Signing Bonus"), which shall be due and payable on the
Effective Date. The payment of the Signing Bonus is contingent on the Executive
signing this Agreement but is not contingent on the performance of services for
the Company and does not represent compensation for services rendered.
(d) INITIAL STOCK OPTIONS. On the Effective Date, the Company shall grant
the Executive the following options to purchase stock of the Company, which
options shall be transferable by the Executive to members of his immediate
family or to trusts or partnerships formed for the benefit of the Executive or
members of his immediate family:
(i) A ten (10)-year option, exercisable from and after the date of
grant, to purchase a number of shares equal to five percent (5%) of the
Company's stock outstanding as of the Effective Date (the "First
Installment"), for an aggregate exercise price equal to five percent (5%)
of the total deemed equity value of the Company as of the Effective Date
(referred to hereinafter as the "Reorganization Equity Value"), which for
purposes of this Agreement shall be eighty-five million dollars
($85,000,000); provided, however, that if the post-reorganization capital
structure of the Company or any other economic feature of the plan of
reorganization referred to in Section 2, above, differs materially from
those described in the Disclosure Statement approved by the bankruptcy
court on October 15, 1998, the Reorganization Equity Value shall be
adjusted appropriately;
(ii) A ten (10)-year option to purchase a number of shares equal to
two and one-half percent (2.5%) of the Company's stock outstanding as of
the Effective Date (the "Second Installment"), for an aggregate exercise
price equal to two and seven-eighths percent (2.875%) of the Reorganization
Equity Value (i.e., a premium of fifteen percent (15%) over the pro rata
Reorganization Equity Value), which option shall vest in twelve (12) equal
monthly portions, beginning with the first anniversary of the date of
grant, with one-twelfth (1/12) vesting on such first anniversary and an
additional one-twelfth (1/12) vesting on the first day of each of the next
eleven (11) calendar months thereafter; and
(iii) A ten (10)-year option to purchase a number of shares equal to
two and one-half percent (2.5%) of the Company's stock outstanding as of
the Effective Date (the "Third Installment"), for an aggregate exercise
price equal to three and one-fourth percent (3.25%) of the Reorganization
Equity Value (i.e., a premium of thirty percent (30%) over the pro rata
Reorganization Equity Value), which option shall vest in twelve (12) equal
monthly portions, beginning with the second anniversary of the date of
grant, with one-twelfth (1/12) vesting on such second anniversary and an
additional one-twelfth (1/12) vesting on the first day of each of the next
eleven (11) calendar months thereafter.
The Company shall take such reasonable efforts as may be necessary to
cause any shares to be issued in connection with such option awards to be
registered under the Federal Securities Act of 1933, as amended, or under
applicable state securities laws, or to secure an appropriate exemption
from such registration. The terms and conditions of the said option awards
are to be included in a Stock Option Agreement in the form attached hereto
as Exhibit A. Options included in the Second and Third Installments shall
become exercisable immediately upon vesting and shall remain exercisable
until they expire or otherwise terminate in accordance with this Agreement
or the terms and conditions set forth in Exhibit A. To the extent the
Company is unable to provide sufficient shares to comply with this Section
4(d), the Company shall provide the Executive with the economic equivalent
of the value of the option award(s) described in this Section 4(d) in the
form of a stock appreciation right based upon substantially the same terms
and conditions as set forth in Exhibit A.
(e) FUTURE AWARDS AND OPTION GRANTS. The Company shall make available a
pool of stock representing five percent (5%) of the Company's stock, on a fully
diluted basis, for option awards to other employees of the Company, and the
Executive shall not be eligible to receive additional option awards from that
pool.
(f) REIMBURSEMENT OF PROFESSIONAL FEES. The Company shall pay on the
Executive's behalf all reasonable fees and expenses shown on statements
submitted to the Executive by the Executive's attorneys, accountants and other
advisors in connection with the negotiation and execution of this Agreement and
in connection with the provision of advice regarding this Agreement after its
execution.
(g) TRAVEL AND HOUSING. The Company shall pay all reasonable local housing,
transportation and commutation expenses for the Executive and his spouse
incurred in connection with the Executive rendering services to the Company.
Reasonable commutation and transportation expenses include, but are not limited
to, air travel between California and Chicago and an appropriate automobile for
local transportation in the Chicago area. The Company shall reimburse the
Executive for all taxes payable by the Executive because of travel and housing
payments by the Company, including tax reimbursement payments.
5. OTHER EXECUTIVE BENEFITS.
(a) REGULAR REIMBURSED BUSINESS EXPENSES. The Company shall promptly
reimburse the Executive for all expenses and disbursements reasonably incurred
by the Executive in the performance of his duties hereunder during the Period of
Employment.
(b) BENEFIT PLANS. The Executive and his eligible family members shall be
entitled to participate, on terms no less favorable to the Executive and his
eligible family members than the terms offered to other senior executives of the
Company, in any group and/or executive life, hospitalization or disability
insurance plan, health program, vacation policy, pension, profit sharing, ESOP,
401(k) and similar benefit plans (qualified, non-qualified and supplemental) or
other fringe benefits of the Company, including an automobile allowance, club
memberships and dues, and similar programs (collectively referred to as the
"Benefits"). In the event that any health programs or insurance policies
applicable to the Benefits provided hereunder contain a preexisting conditions
clause, the Company shall either obtain a waiver from such clause with respect
to the Executive and/or his eligible family members or self-insure the Executive
and/or his eligible family members with respect to such conditions. Anything
contained herein to the contrary notwithstanding, the benefits described herein
shall not duplicate benefits made available to the Executive pursuant to any
other provision of this Agreement. In the event that any benefits coverage
requires an interim waiting period, the Company shall pay all interim premiums
on behalf of the Executive and his family for such coverage. The Company shall
reimburse the Executive for all taxes payable by the Executive due to payments
made by the Company pursuant to this paragraph (b), including tax reimbursement
payments; provided however, that such tax reimbursement shall not apply to
payments which constitute vacation pay or pension, profit-sharing or similar
retirement or deferred compensation benefits normally taxable to recipients.
(c) PERQUISITES. The Company shall provide the Executive such perquisites
of employment as are commonly provided to other senior executives of the
Company.
6. TERMINATION.
(a) DEATH OR DISABILITY. This Agreement and the Period of Employment shall
terminate automatically upon the Executive's death. If the Company determines in
good faith that the Disability of the Executive has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the Executive
written notice of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the thirtieth day after receipt by the Executive of such notice given at any
time after a period of one hundred twenty (120) consecutive days of Disability
or a period of one hundred eighty (180) days of Disability within any twelve
(12) consecutive months, and, in either case, while such Disability is
continuing ("Disability Effective Date"); provided that, within the thirty (30)
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the Executive's inability to substantially perform his duties
hereunder, with reasonable accommodation, as evidenced by a certificate signed
either by a physician mutually acceptable to the Company and the Executive or,
if the Company and the Executive cannot agree upon a physician, by a physician
selected by agreement of a physician designated by the Company and a physician
designated by the Executive. Until the Disability Effective Date, the Executive
shall be entitled to all compensation and benefits provided for under Section 4
and Section 5 hereof. It is understood that nothing in this Section 6(a) shall
serve to limit the Company's obligations under Section 7(b) hereof.
(b) BY THE COMPANY FOR CAUSE. The Company may terminate the Executive's
employment hereunder for "Cause" upon five (5) days' written notice. For
purposes of this Agreement, "Cause" shall mean (i) Executive's commission of an
act materially and demonstrably detrimental to the Company, which act
constitutes gross negligence or willful misconduct by Executive in the
performance of his material duties to the Company or (ii) Executive's commission
of any material act of dishonesty or breach of trust resulting or intended to
result in material personal gain or enrichment of Executive at the expense of
the Company, or (iii) Executive's conviction of a felony involving theft or
moral turpitude, but specifically excluding any conviction based entirely on
vicarious liability. Notwithstanding the foregoing, the Company may not
terminate the Executive's employment for Cause unless (i) a determination that
Cause exists is made and approved by a majority of the Board, (ii) the Executive
is given at least five (5) days written notice of the Board meeting called to
make such determination, and (iii) the Executive is given the opportunity to
address such meeting.
(c) BY EXECUTIVE FOR GOOD REASON. The Executive's employment hereunder may
be terminated by the Executive for Good Reason upon five (5) days' written
notice. For purposes of this Agreement, "Good Reason" shall mean: (d) (i) The
assignment to the Executive of any duties inconsistent in any respect with the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties or responsibilities as contemplated by Section
3 of this Agreement, or any other action by the Company which results in a
significant diminution in such position, authority, duties or responsibilities,
excluding for this Section 6(c) any isolated, immaterial and inadvertent action
not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(i) Any failure by the Company to comply with any of the provisions of
this Agreement, other than an isolated, immaterial and inadvertent failure
not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) The filing of any involuntary bankruptcy petition against the
Company which is not dismissed within sixty (60) days of the filing of the
petition;
(iii) The revocation of any significant business license of the
Company by any state, except such a revocation which does not have a
material adverse effect on the business or prospects of the Company taken
as a whole; or
(iv) Any criminal indictment of the Company, except for any such
indictment (A) which (1) is based upon the investigation by the federal
Securities and Exchange Commission into actions of the Company which
preceded the July 15, 1998 filing date of the bankruptcy petition of the
Company and (2) does not have a material adverse effect on the business or
prospects of the Company taken as a whole or (B) which is based primarily
upon the Executive's own actions, but excluding any indictment based upon
an allegation of vicarious liability on the part of the Executive, with
vicarious liability meaning liability which is based on actions of the
Company for which the Executive is alleged to be responsible solely as a
result of his offices with the Company and in which he was not directly
involved and of which he did not have prior knowledge.
(d) BY EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may, without
liability to the Company, terminate his employment hereunder at any time other
than for Good Reason, upon thirty (30) days' written notice to the Company.
(e) BY THE COMPANY WITHOUT CAUSE. The Company may, subject to Section 7(d)
hereof, terminate the Executive's employment hereunder at any time upon thirty
(30) days' written notice to the Executive.
(f) NOTICE OF TERMINATION. Any termination of employment under this
Agreement by the Company or by the Executive shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail, if applicable, the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the provision so
indicated, and (iii) specifies the Date of Termination (as defined below). The
failure by the Executive or Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of the basis for
termination shall not waive any right of such party hereunder or preclude such
party from asserting such fact or circumstance in enforcing his or its rights
hereunder.
(g) DATE OF TERMINATION. "Date of Termination" means the date specified in
the Notice of Termination; provided, however, that if the Executive's employment
is terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION OR A CHANGE IN CONTROL.
(a) DEATH. If the Executive's employment is terminated by reason of the
Executive's death, this Agreement shall terminate without further obligations to
the Executive's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Executive as of
the Date of Termination, including, but not limited to, (i) the Executive's Base
Salary through the Date of Termination at the rate in effect on the Date of
Termination disregarding any reduction in Base Salary in violation of this
Agreement, (ii) any other rights and benefits (including, without limitation,
payments due pursuant to Section 5(a) or Section 5(b) of this Agreement)
available to the Executive under employee compensation and benefit arrangements
of the Company (without duplication) in which the Executive was a participant on
the Date of Termination, determined in accordance with the applicable terms and
provisions of such arrangements (such amounts specified in clauses (i) and (ii)
being hereinafter referred to as "Accrued Obligations"); and (iii) any amounts
that remain unpaid pursuant to Section 4(c).
(b) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned and
vested (if applicable) by the Executive as of the Date of Termination,
including, but not limited to, all Accrued Obligations and any amounts that
remain unpaid pursuant to Section 4(c).
(c) CAUSE; OTHER THAN GOOD REASON. If the Executive's employment shall be
terminated by the Company for Cause or by the Executive other than for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than those obligations accrued or earned and vested (if
applicable) by the Executive through the Date of Termination, including, but not
limited to, all Accrued Obligations. In addition, Executive will forfeit any
unpaid amounts that he is entitled to pursuant to Section 7(d)(i) if he
terminates his employment other than for Good Reason prior to January 1, 2000.
(d) GOOD REASON; CHANGE IN CONTROL; OTHER THAN FOR CAUSE OR DISABILITY. If
the Company shall terminate the Executive's employment other than for Cause or
Disability, or if the Executive shall terminate his employment for Good Reason,
or if a Change in Control shall occur while Executive is employed by the
Company:
(i) Subject to the limitation set forth in Section 7(c), the Company
shall cause the Executive to receive the aggregate of the following
amounts:
(A) Continuation of Base Salary through the third anniversary of
the Effective Date;
(B) Any options or stock awards previously granted and not yet
vested as of the Date of Termination or date of Change in Control
shall be fully vested immediately, and all options shall remain
exercisable through the end of their original term;
(C) All unpaid and vested compensation and Benefits accrued or
earned by the Executive as of the Date of Termination or date of
Change in Control, including, but not limited to, all Accrued
Obligations;
(D) Any amounts that remain unpaid pursuant to Section 4(c); and
(E) Any additional compensation to which the Executive may become
entitled pursuant to this Agreement because of continued employment
after a Change in Control.
(ii) Through the third anniversary of the Effective Date, or such
longer period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them in
accordance with Section 5(b) of this Agreement if the Executive's
employment had not been terminated, including health insurance and life
insurance. Thereafter, the Executive shall be treated as a retired senior
executive of the Company for purposes of Benefits provided by the Company
to such retirees.
(iii) For purposes of this Agreement, a "Change in Control" shall
mean:
(A) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") (excluding
any of the Holders (as defined in paragraph (iv), below) and their
affiliates) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of either (i) the
then outstanding shares of capital stock of the Company (the
"Outstanding Company Capital Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Company Voting
Securities"); provided, however, that if the Holders cease to be, in
the aggregate, beneficial owners of at least 20% of both the
Outstanding Company Capital Stock and the Company Voting Securities, a
Change in Control shall mean the acquisition by any individual, entity
or group (other than any of the Holders and their affiliates) of
beneficial ownership of 30% or more of either the Outstanding Company
Capital Stock or the Company Voting Securities; provided further that
(X) any acquisition by or from the Company or any of its subsidiaries
which is recommended or approved by the Executive, (Y) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (Z) any
acquisition by any entity with respect to which, following such
acquisition, more than 80% of, respectively, the then outstanding
shares of capital stock of such entity and the combined voting power
of the then outstanding voting securities of such entity entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Capital Stock and Company Voting Securities
immediately prior to such acquisition, in substantially the same
proportion as their ownership, immediately prior to such acquisition,
of the Outstanding Company Capital Stock and Company Voting
Securities, as the case may be, shall not constitute a Change in
Control; or
(B) A change in the composition of the Board such that
individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute a simple
majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by the
Executive and by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the directors of the Company; or
(C) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination")
with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding
Company Capital Stock and Company Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 80%
of, respectively, the then outstanding shares of capital stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from the Business Combination, in
substantially the same proportion as their ownership immediately prior
to such Business Combination of the Outstanding Company Capital Stock
and Company Voting Securities, as the case may be; or
(D) (1) A complete liquidation or dissolution of the Company or
(2) a sale or other disposition of all or substantially all of the
assets of the Company other than to an entity with respect to which,
following such sale or disposition, more than 80% of, respectively,
the then outstanding sharers of capital stock and the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Capital Stock and Company Voting Securities
immediately prior to such sale or disposition, in substantially the
same proportion as their ownership of the Outstanding Company Capital
Stock and Company Voting Securities, as the case may be, immediately
prior to such sale or disposition.
(iv) For purposes of this Agreement, "Holder" means each shareholder
of the Company who, as of the Effective Date, owns ten percent (10%) or
more of the Company's stock outstanding as of the Effective Date.
It is understood that the Executive's rights under this Section 7 are in lieu of
all other rights which the Executive may otherwise have had upon termination of
this Agreement; provided, however, that no provision of this Agreement is
intended to adversely affect the Executive's rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985.
8. MITIGATION. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment.
9. INDEMNIFICATION. The Company shall maintain, for the benefit of the Executive
and all of the Executive's nominees to the Board, director and officer liability
insurance in form at least as comprehensive as, and in an amount that is at
least equal to, that maintained by the Company on October 1, 1998. The
Executive's rights to such insurance shall continue so long as the Company
maintains director and office liability insurance for any then current director
or officer; provided that such insurance shall in any event be maintained
through December 31, 2003. In addition, the Executive shall be indemnified by
the Company against liability as an officer and director of the Company or any
subsidiary or affiliate of the Company to the maximum extent permitted by
applicable law.
10. CONFIDENTIAL INFORMATION AND NONCOMPETITION.
(a) The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company, or any of its subsidiaries, affiliates and businesses, which shall
have been obtained by the Executive pursuant to his employment by the Company or
any of its subsidiaries and affiliates and which shall not have become public
knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the Executive's employment
with the Company, the Executive shall not, without the prior written consent of
the Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. However, in no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(b) During the Period of Employment and during the one (1)-year period
immediately following (i) the Company's termination of the Executive's
employment for Cause or (ii) the Executive's termination of his employment other
than for Good Reason, the Executive shall not, directly or indirectly, engage
in, be employed by, act as a consultant to, or be a director, officer, owner or
partner of, any business activity or entity which competes significantly and
directly with the Company or any of its subsidiaries in lines of business
conducted by the Company or its subsidiaries during the Period of Employment or,
for purposes of applying this noncompetition restriction after the Period of
Employment, in lines of business conducted by the Company or its subsidiaries as
of the Date of Termination and, in either event, in any geographic area in which
the Company or its subsidiaries engage in such business; provided, however, that
it shall not be a violation of this paragraph (b) for the Executive to continue
to serve in those current directorships which are disclosed to the Company by
the Executive in writing at the time of his execution of this Agreement; and
provided further that it shall not be a violation of this Agreement for the
Executive to own an interest of less than five percent (5%) in any entity whose
ownership interests are publicly traded.
11. REMEDY FOR VIOLATION OF SECTION 10. The Executive acknowledges that the
Company has no adequate remedy at law and will be irreparably harmed if the
Executive breaches or threatens to breach the provisions of Section 10 of this
Agreement and, therefore, agrees that the Company shall be entitled to
injunctive relief to prevent any breach or threatened breach of such section and
that the Company shall be entitled to specific performance of the terms of such
section in addition to any other legal or equitable remedy it may have. Nothing
in this Agreement shall be construed as prohibiting the Company from pursuing
any other remedies at law or in equity that it may have or any other rights that
it may have under any other agreement.
12. WITHHOLDING. Anything in this Agreement to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive shall be
subject to withholding of such amounts, at the time payments are actually made
to the Executive and received by him, relating to taxes as the Company may
reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provision for payment of taxes
as required by law, provided that it is satisfied that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
13. ARBITRATION. Any dispute or controversy between the Company and the
Executive, whether arising out of or relating to this Agreement, the breach of
this Agreement, or otherwise, shall be settled by arbitration administered in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") then in effect, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction. Any arbitration
shall be held before a single arbitrator who shall be selected by the mutual
agreement of the Company and the Executive, unless the parties are unable to
agree to an arbitrator, in which case, the arbitrator will be selected by the
then President of the Chicago Bar Association. The arbitrator shall have the
authority to award any remedy or relief that a court of competent jurisdiction
could order or grant, including, without limitation, the issuance of an
injunction. However, either party may, without inconsistency with this
arbitration provision, apply to any court having jurisdiction over such dispute
or controversy and seek interim provisional, injunctive or other equitable
relief until the arbitration award is rendered or the controversy is otherwise
resolved. Except as necessary in court proceedings to enforce this arbitration
provision or an award rendered hereunder, or to obtain interim relief, or as
required by law, neither a party nor an arbitrator may disclose the existence,
content or results of any arbitration hereunder without the prior written
consent of the Company and the Executive. The Company and the Executive
acknowledge that this Agreement evidences a transaction involving interstate
commerce. Notwithstanding any choice of law provision included in this Agreement
the United States Federal Arbitration Act shall govern the interpretation and
enforcement of this arbitration provision. The arbitration proceeding shall be
conducted in Chicago, Illinois or such other location to which the parties may
agree. The Company shall pay the costs of any arbitrator appointed hereunder.
14. REIMBURSEMENT OF LEGAL EXPENSES. In the event that the Executive is the
prevailing party, or is successful to a material degree, in pursuing or
defending, whether in arbitration or litigation, any claim or dispute involving
the Executive's employment with the Company, including any claim or dispute
relating to (a) this Agreement, (b) termination of the Executive's employment
with the Company or (c) the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall promptly reimburse the
Executive for all reasonable costs and expenses (including, without limitation,
attorneys' fees) relating solely, or allocable, to such claim. In any other
case, the Executive and the Company shall each bear all their own costs and
attorneys' fees.
15. TAXES. In the event that the aggregate of all payments or benefits made or
provided to, or that may be made or provided to, the Executive under this
Agreement and under all other plans, programs and arrangements of the Company
(the "Aggregate Payment") is determined to constitute an "excess parachute
payment," as such term is defined in Section 280G(b) of the Internal Revenue
Code, the Company shall pay to the Executive prior to the time any excise tax
imposed by Section 4999 of the Internal Revenue Code ("Excise Tax") is payable
with respect to such Aggregate Payment, an additional amount which, after the
imposition of all income and excise taxes thereon, is equal to the Excise Tax on
the Aggregate Payment. The determination of whether the Aggregate Payment
constitutes an excess parachute payment and, if so, the amount to be provided to
the Executive and the time of payment pursuant to this Section 15 shall be made
by an independent auditor (the "Auditor") jointly selected by the Company and
the Executive and paid by the Company. The Auditor shall be a nationally
recognized United States public accounting firm which has not, during the two
(2) years preceding the date of its selection, acted in any way on behalf of the
Company or any affiliate thereof. If the Executive and the Company cannot agree
on the firm to serve as the Auditor, then the Executive and the Company shall
each select one accounting firm and those two firms shall jointly select the
accounting firm to serve as the Auditor. Notwithstanding the foregoing, in the
event that the amount of the Executive's Excise Tax liability is subsequently
determined to be greater than the Excise Tax liability with respect to which any
initial payment to the Executive under this Section 15 has been made, the
Company shall pay to the Executive an additional amount (grossed up for all
taxes), with respect to such additional Excise Tax (and any interest and
penalties thereon) at the time and in the amount reasonably determined by the
Auditor. Similarly, if the amount of the Executive's Excise Tax liability is
subsequently determined to be less than the Excise Tax liability with respect to
which any prior payment to the Executive has been made under this Section 15,
the Executive shall refund to the Company the excess amount received, after
reduction for any nonrefundable tax, penalties and/or interest incurred by the
Executive in connection with the receipt of such excess, and such refund shall
be paid promptly after the Executive has received any corresponding refund of
excess Excise Tax paid to the Internal Revenue Service. The Executive and the
Company shall cooperate with each other in connection with any proceeding or
claim relating to the existence or amount of liability for Excise Tax, and all
expenses incurred by the Executive in connection therewith shall be paid by the
Company promptly upon notice of demand from the Executive.
16. SUCCESSORS.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, the Executive's rights hereunder shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's heirs and legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) As used in this Agreement the term "Company" shall include any
successor to the Company's business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise. The Company
shall require any successor (whether direct or indirect, by purchase, merger,
reorganization, consolidation, acquisition of property or stock, liquidation, or
otherwise) to all or a substantial portion of its assets, by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform this Agreement if no such succession
had taken place.
17. REPRESENTATIONS.
(a) The Company represents and warrants that (i) the execution of this
Agreement has been duly authorized by the Company, including action of the
Board, (ii) the execution, delivery and performance of this Agreement by the
Company does not and will not violate any law, regulation, order, judgment or
decree or any agreement, plan or corporate governance document of the Company
and (iii) upon the execution and delivery of this Agreement by the Executive,
this Agreement shall be the valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to entry of a confirmation
order regarding the plan of reorganization referred to in Section 2, above),
except to the extent enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
(b) The Executive represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by the Executive does not
and will not violate any law, regulation, order, judgment or decree or any
agreement to which the Executive is a party or by which he is bound; (ii) the
Executive is not a party to or bound by any employment agreement, noncompetition
agreement or confidentiality agreement with any other person or entity that
would interfere with this Agreement or his performance of services hereunder;
and (iii) upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of the Executive,
enforceable in accordance with its terms, except to the extent enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
18. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without reference to principles of choice of
law. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party, by overnight courier, or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Mr. Edward G. Harshfield
132 East Delaware Place
Apartment 5506
Chicago, IL 60611
with a copy to:
Robert J. Stucker, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
If to the Company:
MFN Financial Corporation
100 Field Drive, Suite 340
Lake Forest, Illinois 60045
Attn: General Counsel
with a copy to:
Lewis S. Rosenbloom, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
or to such other addresses as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee, as evidenced by a delivery receipt.
(c) None of the provisions of this Agreement shall be deemed to be a
penalty.
(d) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or unenforceability of any other provision of this
Agreement.
(e) Either party's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision hereof.
(f) This Agreement supersedes any prior agreements or understandings,
written or oral, between the Company and the Executive and contains the entire
understanding of the Company and the Executive with respect to the subject
matter hereof.
(g) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS HEREOF, the parties have executed this Agreement all as of the day
and year first above written.
MFN FINANCIAL CORPORATION
Mark E. Dapier, General Counsel
EDWARD G. HARSHFIELD
_________________________________________
Exhibit A
STOCK OPTION AGREEMENT
Edward G. Harshfield
President & Chief Executive Officer __________, 1999
In accordance with the terms of your ___________, 1999 Employment
Agreement with MFN Financial Corporation (the "Company"), and in consideration
of the mutual covenants contained in that Employment Agreement and other good
and valuable consideration, you are hereby awarded a stock option with the
following terms and conditions:
1. SHARES: This option is for a total of ____________________ (_____)
shares of common stock of the Company, consisting of a First Installment of
______________ (_____) shares, a Second Installment of ______________ (_____)
shares and a Third Installment of ______________ (_____) shares.
2. PRICE: The exercise prices under this option are $______________ per
share for the First Installment, $_____________ per share for the Second
Installment and $______________ per share for the Third Installment.
3. WHEN EXERCISABLE: Your rights to purchase shares covered by this
option shall vest and be exercisable as set forth below and shall remain fully
exercisable by you (or by an authorized representative in the event of your
death or disability) throughout the term of this option, as described in Section
4, below, except as otherwise provided in Section 4:
(a) The First Installment is fully vested and is exercisable
from and after the grant date of this option (the "Grant Date");
(b) The Second Installment shall vest and become exercisable
in twelve (12) equal monthly portions, beginning with the first anniversary of
the Grant Date, with one-twelfth (1/12) vesting on such first anniversary and an
additional one-twelfth (1/12) vesting on the first day of each of the next
eleven (11) calendar months thereafter; and
(c) The Third Installment shall vest and become exercisable in
twelve (12) equal monthly portions, beginning with the second anniversary of the
Grant Date, with one-twelfth (1/12) vesting on such second anniversary and an
additional one-twelfth (1/12) vesting on the first day of each of the next
eleven (11) calendar months thereafter.
4. TERM. This option shall remain in full force and effect for a term
of ten (10) years ending on ____________, 2009, without regard to the
termination of your employment with the Company; provided, however, that if your
employment with the Company is terminated by you other than for Good Reason (as
that term is defined in your Employment Agreement) or if your employment with
the Company is terminated by the Company for Cause (as that term is defined in
your Employment Agreement), the term of this option shall end immediately upon
such termination.
5. MANNER OF EXERCISE. You, or an authorized representative acting on
your behalf in the event of your death or disability, may exercise this option
in whole or in part, from time to time, by written notice delivered to the
Treasurer of the Company, which includes the following:
(a) Your name, mailing address and Social Security number;
(b) The date of the notice;
(c) The number of shares with respect to which this option is
being exercised;
(d) The exercise price for the shares with respect to which
this option is being exercised;
(e) Payment, in accordance with Section 6, below, for the
shares being purchased; and
(f) Your signature or the signature of an authorized
representative acting on your behalf in the event of your death or disability.
6. PAYMENT. Payment under this option may be made in cash or by
transferring shares of the Company's common stock valued at fair market value at
the effective date of exercising this option, or a combination of both. Shares
shall be issued promptly after full payment has been made.
7. TAX WITHHOLDING. Tax withholding is required upon exercising this
option in whole or in part. Payment for tax withholding may be made in cash or,
pursuant to your election, by transferring shares of the Company's common stock
or the withholding of shares to be issued, or any combination of cash, shares
and withholding of shares. Any election to use or withhold shares must be made
in accordance with applicable tax and securities laws and established
administrative procedures and shall be subject to disapproval by the Company for
failure to comply with such laws and procedures.
8. TRANSFERABILITY. Your rights to purchase shares pursuant to this
option are transferable by you from time to time, in whole or in part, to
members of your immediate family or to trusts or partnerships formed for your
benefit or the benefit of members of your immediate family. Such transfer may be
effected by delivering to the Treasurer of the Company a written notice
identifying the transferee(s) and the portion of the option which is being
transferred to each transferee.
9. ADJUSTMENT. In the event of any change in the common stock of the
Company through stock dividends, stock splits, recapitalization,
reclassification or otherwise, or in the event that any other stock shall be
substituted for the present common stock of the Company as the result of any
merger, consolidation or reorganization, then the Board of Directors of the
Company (or a committee thereof) shall make appropriate adjustment or
substitution in the number, kind and/or price of the shares subject to this
option, so as to preserve the overall value of this option. In connection with
any merger, consolidation or reorganization in which the present common stock of
the Company is converted into the right to receive only cash, the Board of
Directors may require you to tender your options to the Company for cash in an
amount equal to the positive difference, if any, between the cash price per
share in such merger, consolidation or reorganization and the exercise price per
share of such options.
10. REGISTRATION OF SHARES. The Company shall take such reasonable
efforts as may be necessary to cause any shares to be issued in connection with
this option to be registered under the Federal Securities Act of 1933, as
amended, or under applicable state securities laws, or to secure an appropriate
exemption from such registration.
11. NONSTATUTORY STOCK OPTION. This option shall be a nonstatutory
stock option and is not to be treated as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
MFN FINANCIAL CORPORATION
---------------------------------------------
Mark E. Dapier, General Counsel
Accepted and agreed to this
____ day of _________, 1999.
- ----------------------------
Edward G. Harshfield
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into on this __________ day of
November, 1998 by and between Mercury Finance Company, a Delaware corporation,
(hereinafter referred to as "Company") and Edward G. Harshfield (hereinafter
referred to as "Consultant").
WHEREAS, Company intends to pursue a plan of reorganization in the
United States Bankruptcy Court; and
WHEREAS, Company wishes to obtain the benefit of Consultant's
participation in the preparations for that reorganization and in the overall
supervision and direction of the business of Company prior to any confirmation
by the Bankruptcy Court of a plan of reorganization; and
WHEREAS, Consultant wishes to provide his services for those purposes;
NOW, THEREFORE, Company and Consultant, each intending to be legally
bound, hereby mutually covenant and agree as follows:
1. Engagement and Term.
(a) Engagement. Company engages Consultant to assist in the
preparations for the reorganization of Company. Neither the Company nor
Consultant shall, without prior review and approval by the other party, issue
any press release or other public statement about Consultant's engagement by the
Company, but such approval shall not be withheld unreasonably.
(b) Term. The term of Consultant's engagement under this
Agreement shall commence on November _____, 1998 and shall continue
indefinitely, subject to termination by either party by giving at least ten (10)
days written notice of termination, and subject to Paragraph 14, below.
2. Duties. Consultant shall participate in planning and preparing for
the reorganization of Company. Such participation shall consist of such specific
activities as the Board of Directors of Company (the "Board") shall reasonably
request from time to time. Consultant shall devote such time as is necessary to
fulfill his responsibilities hereunder.
3. Compensation. As compensation for Consultant's services under this
Agreement, Company shall pay Consultant fees at the rate of eighty-three
thousand three hundred and thirty-three dollars ($83,333) per month, payable in
advance on the first day of each calendar month. If the term of this Agreement
ends prior to the end of a calendar month, the Executive shall refund to the
Company a pro rata portion of the fee for that final month. The fees payable to
Consultant under this Agreement shall be administrative expenses of Company
having priority, in the Chapter 11 proceeding of the Company, over all
pre-petition unsecured claims of creditors.
4. Expense Reimbursement. Company shall reimburse Consultant for
reasonable travel and all other direct, out-of-pocket expenses actually incurred
in the performance of services under this Agreement, including (but not by way
of limitation) the cost of commuting between California and Illinois and the
cost of suitable temporary housing in Illinois, during Consultant's engagement
under this Agreement. Such reimbursement shall be paid within a reasonable time
following Consultant's submission of proper substantiation, in accordance with
the expense reimbursement policies then generally applicable to directors and
officers of Company.
5. Covenants of Consultant. In order to induce Company to enter into
this Agreement, Consultant hereby agrees as follows:
(a) Confidentiality. Except for and on behalf of Company with
the consent of or as directed by the Board, Consultant shall keep confidential
and shall not divulge to any other person or entity, during the term of
engagement hereunder or thereafter, any business secrets or other confidential
information regarding Company and its affiliates which has not otherwise become
public knowledge; provided, however, that nothing in this Agreement shall
preclude Consultant from disclosing information (i) to an appropriate extent to
parties retained to perform services for Company or its affiliates or (ii) under
any other circumstances to the extent such disclosure is, in the reasonable
judgment of Consultant, appropriate or necessary to further the best interests
of Company and its affiliates or (iii) as may be required by law.
(b) Noncompetition. During the term of Consultant's engagement
under this Agreement and during the one (1)-year period immediately following
(i) the Company's termination of such engagement for "Cause" (as defined below)
or (ii) Consultant's termination of such engagement other than for "Good Reason"
(as defined below), Consultant shall not, directly or indirectly, engage in, be
employed by, act as a consultant to, or be a director, officer, owner or partner
of, any business activity or entity which competes significantly and directly
with the Company or any of its subsidiaries in lines of business conducted by
the Company or its subsidiaries during the term of Consultant's engagement under
this Agreement or, for purposes of applying this noncompetition restriction
after the end of that term, in lines of business conducted by the Company or its
subsidiaries as of the end of that term and, in either event, in any geographic
area in which the Company or its subsidiaries engage in such business; provided,
however, that it shall not be a violation of this paragraph (b) for Consultant
to continue to serve in those current directorships which are disclosed to the
Company by Consultant in writing at the time of his execution of this Agreement;
and provided further that it shall not be a violation of this Agreement for
Consultant to own an interest of less than five percent (5%) in any entity whose
ownership interests are publicly traded. For purposes of this paragraph (b), the
terms "Cause" and "Good Reason" shall have the meanings set forth in Sections
6(b) and 6(c) (excluding paragraph (i) of Section 6(c)), respectively, of the
Employment Agreement of even date herewith between Consultant and the Company.
(c) Enforcement. Consultant recognizes that the provisions of
this Paragraph 5 are vitally important to the continuing welfare of Company and
its affiliates and that money damages would constitute an inadequate remedy for
any violation thereof. Accordingly, in the event of any such violation by
Consultant, Company and its affiliates, in addition to any other remedies they
may have, shall have the right to compel specific performance thereof or to seek
an injunction restraining any action by Consultant in violation of this
Paragraph 5.
6. Non-Employee Status. Consultant and Company acknowledge that
Consultant will, in performing his duties under this Agreement, be acting as an
independent contractor and will not be an employee of Company. Consultant will
not be eligible to participate in any benefits plan or program now existing or
hereafter created for employees of Company or any affiliate of Company. Except
as otherwise required by law, Company will not withhold any taxes from the
compensation paid to Consultant under this Agreement. Consultant will be solely
responsible for the payment of all taxes (including, but not by way of
limitation, federal and state income taxes and Social Security taxes) imposed
upon such compensation and for fulfilling all other legal obligations associated
with rendering services as a self-employed independent contractor.
7. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Consultant, Company, the heirs and representatives of Consultant,
and the successors and permitted assigns of Company.
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by reputable commercial delivery service or if mailed
within the continental United States by first class certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to Company, to:
Mercury Finance Company
100 Field Drive, Suite 340
Lake Forest, Illinois 60045
Attention: Chairman of the Board,
with a copy to:
Lewis S. Rosenbloom, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
(b) If to Consultant, to:
Mr. Edward G. Harshfield
510 Rosemont Avenue
Pasadena, California 91103,
with a copy to:
Robert J. Stucker, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Either party may change its address by written notice sent to the other party at
the last recorded address of that party.
9. No Assignment. This Agreement is not assignable by Consultant or
Company, and no payment to be made to Consultant hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
10. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
11. Applicable Law. This Agreement shall be construed and interpreted
in accordance with and governed by the laws of the State of Illinois, other than
the conflict of laws provisions of such laws.
12. Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and
Consultant consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
13. Waiver. No waiver by any party at any time of any breach by the
other party of, or failure to comply with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of any
other provisions or conditions at the same time or at any prior or subsequent
time.
14. Entire Agreement. This Agreement embodies the entire understanding
of the parties hereto, and supersedes all other prior oral or written agreements
or understandings between them, regarding the subject matter hereof. However,
nothing in this Agreement is intended to impair or modify, or shall be
interpreted as impairing or modifying, any part of the Employment Agreement of
even date herewith between Consultant and Company. Upon that Employment
Agreement becoming effective, it shall fully replace and supersede this
Agreement with respect to subsequent services of Consultant for Company, and the
term of this Agreement shall end. No other change, alteration or modification
hereof may be made except in a writing, signed by each of the parties hereto.
The headings in this Agreement are for convenience of reference only and shall
not be construed as part of this Agreement or to limit or otherwise affect the
meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on this __________ day of November, 1998.
Attest: MERCURY FINANCE COMPANY
_____________________________ By:
Title:_______________________ Title:
------------------------------------
Edward G. Harshfield
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MINNESOTA STATE BOARD )
OF INVESTMENT, Lead Plaintiff, On Behalf of ) Civil Action No. 97 C 3035
Itself and All Other Similarly Situated, )
) Hon. Charles R. Norgle, Sr.
-and- )
)
JAY LEVIN, et al., )
)
Plaintiffs, )
)
vs. )
)
MERCURY FINANCE COMPANY, et at., )
)
Defendants. )
JAMES FERREE, on Behalf of Himself and All ) Civil Action No. 97 C 5245
Other Similarly Situated, )
) Hon. Charles R. Norgle, Sr.
Plaintiffs, )
)
vs. )
)
MERCURY FINANCE COMPANY, et at., )
)
Defendants. )
In re: )
) Case No. 98 C 8246
MERCURY FINANCE COMPANY, ) Hon. Charles R. Norgle, Sr.
a Delaware Corporation, )
)
Debtor. )
)
Official Committee of Securities )
Claimants Appointed in the Chapter 11 )
Case Of Mercury Finance Company, )
)
Plaintiff, ) Adv. Pro. No. 98 A 1580
) [In the Chapter 11
vs. ) bankruptcy case, Case No.
) 98 B 20763, pending before
Cerberus Partners, L.P., et al., ) Hon. Erwin I. Katz]
)
Defendants. )
NOTICE OF PENDENCY OF CLASS
ACTION, PROPOSED PARTIAL SETTLEMENT
OF CLASS ACTION, AND SETTLEMENT HEARING
[This page intentionally left blank]
TO: ALL PERSONS AND ENTITIES (THE "CLASS") THAT PURCHASED SHARES OF MERCURY
FINANCE COMPANY COMMON STOCK OR DEBT SECURITIES: (1) ON THE OPEN MARKET
DURING THE PERIOD FROM AND INCLUDING JANUARY 3, 1994, THROUGH AND
INCLUDING JANUARY 29, 1997; (2) ON THE OPEN MARKET PRIOR TO FEBRUARY 23,
1994, AND HELD SUCH SECURITIES THROUGH AND INCLUDING JANUARY 29, 1997;
OR (3) PURSUANT TO THE MERCURY FINANCE COMPANY RETIREMENT SAVINGS PLAN
(COLLECTIVELY, THE "CLASS PERIOD").
The purpose of this Notice is to inform you of the proposed partial
settlement of this class action and the hearing to be held by the United States
District Court for the Northern District of Illinois (the "District Court") to
consider the fairness, reasonableness and adequacy of the proposed partial
settlement (the "Partial Settlement") with defendant Mercury Finance Company
("Mercury" or the "Company") set forth in the Class Settlement Agreement dated
as of December 23, 1998 (the "Settlement Stipulation").
A. Statement of Plaintiff Recovery: The Partial Settlement will result
in the creation of a cash settlement fund with an aggregate value of
Twenty-Eight Million Two Hundred Fifty Thousand Dollars ($28,250,000), which,
subject to deduction for attorneys' fees and out-of-pocket expenses, as approved
by the Court, will be available for distribution to the members of the Class.
The recovery by Class members on a per share basis will depend upon the outcome
of the allocation procedure described below, and is therefore virtually
impossible to estimate prior to completion of the allocation procedure.
See Section III.
B. Statement of Potential Outcome: Plaintiffs' Counsel have conducted an
analysis of damages suffered by members of the class and have concluded that, if
Plaintiffs prevailed on all of their claims against Mercury and the non-settling
defendants, the maximum amount of damages recoverable by each member of the
Class would be an average of $11.79 per share, without regard to liability or
other potential discounts. The actual maximum recovery achievable by members of
the Class will vary depending upon the outcome of the allocation procedure
described below. See Section III.
C. Statement of Attorneys' Fees and Costs Sought: Plaintiffs' counsel
intend to apply for an award of attorneys' fees in an amount not to exceed
one-third of that portion of the Settlement Fund allocated to the particular
group represented by counsel for that group as detailed herein, or $0.02 per
share, as well as reimbursement of its out-of-pocket expenses incurred in the
prosecution of this litigation through the date of counsel's fee application, in
an amount presently estimated to be approximately $800,000, or less than $0.01
per share. Plaintiffs' counsel will not apply for any fees or expense
reimbursement until the Settlement Fund has been allocated among the various
groups constituting the Class. See Section VII.
D. Reasons for Settlement: The parties to this Partial Settlement
believe that it is fair, reasonable, and adequate to the members of the Class.
The parties have reached this conclusion after investigating and considering,
among other things, the strengths and weaknesses of plaintiffs' claims against
Mercury, the present financial condition of the Company, the uncertainties
inherent in this complex litigation, and the substantial benefit provided by the
Partial Settlement to the members of the Class. See Section II.
E. Identification of Attorneys' Representatives: Any questions regarding
the Partial Settlement should be directed to the following Plaintiffs' Counsel:
Stacey Mills, Esq., Heins Mills & Olson, P.L.C., 700 Northstar East, 608 Second
Avenue South, Minneapolis, Minnesota 55402, Tel. (612) 338-4605. Additional
counsel are set forth below. See Section VI.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL
BE AFFECTED BY PROCEEDINGS IN THIS LITIGATION. PLEASE NOTE THAT, IF YOU ARE A
CLASS MEMBER, YOU MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE PARTIAL
SETTLEMENT DESCRIBED IN THIS NOTICE.
I. BACKGROUND OF THE ACTION
This litigation (hereafter referred to as the "Actions") consists of 44
putative class actions that were commenced on or after January 29, 1997 against
defendants Mercury, John N. Brincat, Sr., the Estate of James A. Doyle, Andrew
McNally IV, Clifford R. Johnson, Fred G. Steingraber, Philip J. Wicklander,
James D. Terra, as the executor of the Estate Of Daniel J. Terra, John N.
Brincat, Jr., Bruce L. McPhee, Dennis H. Chookaszian, William C. Croft and KPMG
Peat Marwick LLP ("KPMG"). Defendants Brincat, the Estate of James A. Doyle and
KPMG are sometimes referred to herein as the "Non-Settling Defendants".
Defendants Chookaszian, Croft, McPhee, McNally, Johnson, Wicklander, Steingraber
and Bradley S. Vallem are sometimes referred to herein as the "Settling
Defendants." The following parties to this Partial Settlement are collectively
referred to herein as the "Released Parties": Richard P. Bosson, Jeffrey R.
Brincat, John N. Brincat, Jr., George R. Carey, Michael H. Caul, Edward W.
Gordon, Steven G. Gould, Charles H. Lam, Gerald M. Mizel, Charley A. Pond, John
J. Pratt, Edward G. Stauzenbach, Michael W. Stremlau, Sheila M. Tilson, James D.
Terra, as executor of the Estate of Daniel J. Terra, and Bank One.
The Actions were brought in the District Court, the Circuit Court of
Cook County, Illinois (the "Circuit Court"), and the Court of Chancery for New
Castle County, Delaware, on behalf of the Class, which is comprised of
individuals and entities falling within each of the following groups:
(1) The Federal Class Claimants: All persons and entities that
purchased shares of Mercury Finance Company ("Mercury") Common Stock or
debt securities during the period from and including April 10, 1995,
through and including January 29, 1997, inclusive, for claims arising
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act"), Rule l0b-5 promulgated thereunder by the
Securities and Exchange Commission ("SEC"), and various provisions of
Illinois statutory and common law;
(2) The State Class Claimants: All persons and entities that purchased
shares of Mercury Common Stock or debt securities during the period
from and including January 3, 1994, through and including January 29,
1997, inclusive, for violation of various provisions of Illinois
statutory and common law;
(3) The Holder Claimants: All persons and entities that purchased
shares of Mercury Common Stock prior to February 23, 1994, and held
said shares through and including January 29, 1997, inclusive (the
"Holder Class Period"), for violation of various provisions of Illinois
common law and Delaware common and corporate law; and
(4) The ERISA Claimants: All current and former employees of Mercury or
any of its subsidiaries who purchased Mercury common stock via the
Mercury Finance Company Retirement Savings Plan, whether directly or
indirectly, and on behalf of the Plan itself, for violations of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and various
provisions of Illinois common law.
Individual entities have also brought actions against the Settling
Defendants and Released Parties. Two of these entities, T. Rowe Price, 100 East
Pratt Street, Baltimore, Maryland 21202, and Shriners Hospital for Children,
2900 North Rocky Point Drive, Tampa, Florida 33607, have been participants in
the 7B Class of securities claimants in the bankruptcy proceeding and thus are
members of the Class for settlement purposes only. They will participate in the
Proposed Partial Settlement on an individual basis through counsel of their own
choosing. Any amounts allocated to these entities from the Settlement Fund in
connection with the allocation process described below will not be included
within any allocation to any of the groups described above, and will not be
subject to any attorneys fees relating to the representation of any of these
groups.
Excluded from the Class are Defendants, officers, directors, or
partners of any of the Defendants, members of the families of any of the
Individual Defendants, any entity in which any Defendant has a controlling
interest, and the legal representatives, heirs, successors, and assigns of any
such excluded party.
The plaintiffs in the Actions seek to recover damages purportedly
sustained by members of the Class based upon their allegation that defendants
caused Mercury Finance to misstate its publicly disseminated financial results
from its fiscal year ended December 31, 1993 ("Fiscal 1993"), through its fiscal
year ended December 31, 1996 ("Fiscal 1996"). Plaintiffs further allege that
defendants issued or participated in the issuance of other false and misleading
statements pertaining to the period from the close of Fiscal 1993 through
January, 1997, and omitted to state material facts necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading. Plaintiffs also allege that, as a result of these false and
misleading statements and omissions, the market price of Mercury common stock
was artificially inflated, and that the members of the Class were damaged as a
result of the alleged misstatements and omissions.
On July 15, 1998, Mercury filed a voluntary petition for protection
under Chapter 11 of the Bankruptcy Code. Pursuant to an Order of the Bankruptcy
Court dated August 28, 1998, the United States Trustee appointed the Official
Securities Claimants Committee on September 4, 1998 for the purpose of
representing the interests of the members of the Class in connection with the
Mercury bankruptcy proceedings, and appointed the following individuals and
entines to serve as members of the Official Securities Claimants Committee: (i)
the Minnesota State Board of Investment ("MSBI"), which, by Order dated November
7, 1997, was appointed by the District Court to serve as Lead Plaintiff on
behalf of the Federal Class Claimants pursuant to Section 21D of the Exchange
Act; (ii) Michael Dloogatch, who commenced a class action on behalf of the
Holder Claimants in the Circuit Court; (iii) James Ferree, who commenced a class
action in the District Court on behalf of the ERISA Claimnants; (iv) Real Tech
Software Employees Retirement Program, who commenced a class action in the
Circuit Court on behalf of the State Class Claimants; (v) Shriners Hospital for
Children, which has asserted an individual claim against defendants arising
under the Exchange Act and state law; (vi) T. Rowe Price, whose funds have
asserted individual claims against defendants arising under the Exchange Act and
state law; and (vii) David Isaak, a member of the Federal Class Claimants group.
By order entered on Or about December 31, 1998, the District Court certified the
Class for settlement purposes as a mandatory, non-opt-out class pursuant to Rule
23 of the Federal Rules of Civil Procedure, and Rule 7023 of the Federal
Bankruptcy Rules, and approved the members of the Official Securities Claimants
Committee to serve as Class Representatives. ONLY THOSE CLAIMS ASSERTED AGAINST
THE SETTLING DEFENDANTS AND RELEASED PARTIES ARE BEING SETTLED AT THIS TIME. THE
CLAIMS ASSERTED AGAINST DEFENDANTS BRINCAT, THE ESTATE OF DOYLE, AND KPMG ARE
NOT IMPACTED BY THE PROPOSED PARTIAL SETTLEMENT.
II. REASONS FOR PARTIAL SETTLEMENT
Class Representatives, through their counsel, have made and are
continuing to make a thorough investigation into the facts and circumstances
relevant to the allegations set forth in the complaints filed in the Actions. In
connection with that investigation, they are conducting substantial discovery,
including (1) inspecting thousands of pages of documents produced to Plaintiffs
by Mercury and the Special Committee of the Mercury Board of Directors, which
investigated accounting irregularities at Mercury during the Class Period; (2)
interviewing and conducting depositions of various officers, directors, and
employees of Mercury; (3) reviewing documents produced to Plaintiffs by various
non-parties and Non-Settling Defendants with potential knowledge of the facts
surrounding these Actions; and (4) conducting interviews and consultations with
accounting, valuation, and damage experts.
Counsel for the Class Representatives also have considered the
substantial benefit provided by the proposed Partial Settlement to the Class,
which not only includes a substantial monetary recovery, but also ensures that
Mercury and the other Settling Defendants participating in the Partial
Settlement will continue to respond to discovery requests as if they remained
parties to the Actions. Class Representatives also have considered various
actions taken by Mercury subsequent to the Company's disclosure of accounting
irregularities, including the termination of Mercury's former chief executive
officer, defendant Brincat, and, prior to his death, Mercury's former chief
financial officer, defendant Doyle. Further, Class Representatives have
considered the limited resources that Mercury possesses to defend this Action
and to satisfy any judgment ultimately obtained on behalf of the Class,
especially in view of its bankruptcy filing. Specifically, in connection with
the Settlement, Mercury has filed a Plan of Reorganization under Chapter 11 of
the Bankruptcy Code (the "Plan") and the Settlement is largely contingent upon
confirmation of the Plan by the Bankruptcy Court, as detailed below. Finally,
Class Representatives have considered the fact that, even if the Class were
awarded a verdict or judgment against Mercury on their claims, such verdict or
judgment, to the extent collectible, would be subject to appeals, which could
take years to resolve. Based upon these considerations, Class Representatives
and their Counsel have concluded that it is in the best interests of the Class
to conclude the Partial Settlement of the Action on the terms set forth in the
Settlement Stipulation and as discussed herein.
The Settling Defendants express no opinion as to the validity of the
claims asserted against Brincat, Estate of Doyle, or KPMG in the Action, nor do
they express an opinion as to the liability of any other person or entity
arising from any of the claims asserted by Plaintiffs in the Actions. As to
themselves, however, the Settling Defendants deny all wrongdoing as alleged by
the Class or any wrongdoing whatsoever. Nevertheless, relying on the provisions
of the Settlement Stipulation that the proposed Partial Settlement shall in no
event be construed or deemed to be evidence, an admission, or a concession on
the part of the Settling Defendants of any fault or liability whatsoever, and
without conceding any infirmity in the defenses they have asserted or intended
to assert in the Action, the Settling Defendants consider it desirable and in
their best interests that this Action be dismissed on the terms set forth in the
Settlement Stipulation and as discussed herein in order to avoid further
expense, inconvenience, distraction, and to avoid protracted litigation.
This Notice does not indicate any expression of opinion by the District
Court concerning the merits of the respective claims or defenses asserted in the
Actions. This Notice is sent merely to advise you of the proposed Partial
Settlement and of your rights in connection therewith.
III. TERMS OF THE PROPOSED PARTIAL SETTLEMENT
A. Statement of Plaintiff Recovery And Allocation Procedure
In full settlement of any and all direct claims, individual and
representative, that are, could have been or might in the future be asserted
against the Settling Defendants by the Class Representatives or any member of
the Class in the Actions, the Settling Defendants have agreed to pay or caused
to be paid into a fund (the "Settlement Fund"), pursuant to the terms of the
Settlement Stipulation, cash consideration totaling TWENTY-EIGHT MILLION TWO
HUNDRED FIFTY THOUSAND DOLLARS ($28,250,000), in the manner set forth below, and
subject to confirmation of the Plan:
(i) the Settling Parties shall cause Mercury, upon confirmation of
the Plan, to contribute the sum of THIRTEEN MILLION DOLLARS ($13,000,000), in
cash, into the Settlement Fund;
(ii) the Settling Parties shall cause Mercury's insurer to
contribute TEN MILLION DOLLARS ($10,000,000), in cash, into the Settlement Fund,
representing the proceeds of Mercury's directors and officers liability
insurance policy (the "D&O Policy"), provided that, in the event that the
proceeds of the D&O Policy are less than ten million dollars ($10,000,000), then
the Class Representatives shall have the exclusive option to proceed with or
terminate the Settlement; and
(iii) the Settling Parties shall cause the additional contribution
of FIVE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($5,250,000), in cash, into
the Settlement Fund, pursuant to the terms of the plan.
Upon the effective date of the Settlement, the Settlement Fund shall be
paid into a liquidating trust (the "Trust"), to be distributed to Class Members.
The Class Representatives will serve jointly as trustees of the Trust. Further,
upon the effective date of the Settlement, the Settling Defendants shall assign
to the Trust all claims that they possess against KPMG arising out of the facts
and circumstances giving rise to the commencement of the Actions.
If the Settlement is not approved or, for any reason, does not become
effective, then the Settling Defendants and Plaintiffs shall be returned to
their respective positions prior to their entry into the Settlement Stipulation,
with the exception that the Settling Defendants shall cause the sum of NINE
MILLION DOLLARS ($9,000,000), in cash, from the Settlement Fund, to be deposited
into the Trust, for allocation and distribution to the members of the Class.
Pursuant to the terms set forth in the Settlement Stipulation, the
Class Representatives will select an Arbitrator and/or Mediator, subject to the
approval of the District Court and the Bankruptcy Court, for the purpose of
allocating the proceeds of the Settlement Fund. The Class Representatives, or if
they fail to agree, the Arbitrator, will establish procedures for the selected
Arbitrator and/or Mediator to follow with respect to the allocation of the
proceeds of the Settlement Fund, subject to approval of the District Court and
the Bankruptcy Court. Following completion of the allocation procedure, counsel
for the Class Representative designated to represent each group of claimants
within the Class, as set forth in Section IV below, shall be responsible,
subject to the approval, to the extent necessary, of the court in which the
group's claim was initiated, for distributing the allocated portion of the
Settlement Fund to the members of the group. (For example, if $20 million of the
Settlement Fund is allocated to the Federal Securities Claimants, then counsel
for MSBI, lead plaintiff for these claimants, will be responsible for
distributing these funds to the members of this group, under the direction of
the District Court).
The recovery achieved by Class Members on a per share basis will depend
primarily upon the allocation of the Settlement Fund, and is therefore
impossible to predict or determine prior to completion of the allocation
process. Nevertheless, the following estimates, which are for illustrative
purposes only, set forth the hypothetical average recovery that will be achieved
by the members of each group within the Class, on a per share basis, assuming
that the Settlement is approved and becomes effective, and that $10 million of
the Settlement Fund is allocated to the particular group:
(i) If $10 million of the Settlement Fund is allocated to the
Federal Class Claimants, then the members of this Group will receive an average
recovery of $0.10 per share, subject to various deductions for expenses and
attorneys' fees, as detailed below;
(ii) If $10 million of the Settlement Fund is allocated to the
State Class Claimants, then the members of this Group will receive an average
recovery of $0.09 per share, subject to various deductions for expenses and
attorney's fees, as detailed below;
(iii) If $10 million of the Settlement Fund is allocated to
the Holder Claimants, then the members of this Group will receive an average
recovery of $0.15 per share, subject to various deductions for expenses and
attorney's fees, as detailed below; and
(iv) If $10 million of the Settlement Fund is allocated to the
ERISA Claimants, then the members of this Group will receive an average recovery
of $20.12 per share, subject to various deductions for expenses and attorney's
fees, as detailed below.
The actual recovery obtained by any member of the Class also may vary
from the average recovery per share depending upon numerous other factors,
including the actual number and amount of claims submitted by members of the
Class, as well as the timing of the Class Member's transactions in Mercury
common stock during the Class Period. In addition, as detailed below, the
portion of the Settlement Fund available for distribution to the Class Members
may be reduced for payment of various costs and expenses, including attorneys'
and experts' fees, costs associated with the prosecution of the Action, and
payment of taxes.
B. Statement of Potential Outcome of the Action: Counsel for the Class
Representatives have conducted a detailed analysis of the damages suffered by
the members of the Class during the Class Period, both in the aggregate and on a
per share basis, without regard to liability of the Defendants, or the relative
strengths and weaknesses of the various claims asserted by each group within the
Class. By using widely recognized methodologies, and by analyzing the trading
prices and volume of Mercury common stock prior to, during, and subsequent to
the Class Period, counsel have concluded that the members of the Class have
suffered average damages of approximately $11.79 per share, computed from a
weighted average of the following:
(i) the Federal Class Claimants have suffered aggregate damages of
$1,053,731,220, or an average of $10.51 per share;
(ii) the State Class Claimants have suffered aggregate damages of
$1,153,731,220, or an average of $10.56 per share;
(iii) the Holder Claimants have suffered aggregate damages of
$926,532,891, or an average of $13.63 per share; and
(iv) the ERISA Claimants have suffered aggregate damages of
$15,000,000, or an average of $30.18 per share. While the Settling Defendants
deny all liability as to themselves, they agree that, if plaintiffs prevailed on
each of their claims, the maximum amount of damages recoverable by each member
of the Class would be an average of $11.79 per share.
IV. PARTICIPATION IN THE SETTLEMENT
TO CLAIM ANY PAYMENTS FROM THE SETTLEMENT FUND, YOU NEED NOT TAKE ANY
ACTION AT THIS TIME. In connection with the allocation procedure described
above, counsel for the designated Class Representative of each group within the
Class seeking an allocation from the Settlement Fund will, subject to judicial
approval, issue a supplement to this notice (the "Supplemental Notice") to
members of the group, which will provide the following information: (i) a
detailed statement of the allocation procedure to be conducted and (ii) an
estimate of the average per share recovery that will be achieved by members of
the group as a result of the Partial Settlement.
To ensure your eligibility to participate in the Settlement, in the
event that you change your address prior to receiving the Supplemental Notice,
you should promptly send notice in writing to:
Logan & Company, Inc.
615 Washington Street, Second Floor
Hoboken, NJ 07030
V. MANDATORY NATURE OF THE CLASS
The terms of the proposed Partial Settlement provide for the Class to
be certified as a mandatory, non-opt-out class, pursuant to Rule 23(b)(1)(B) of
the Federal Rules of Civil Procedure, and Bankruptcy Rule 7023(b)(1)(B). Upon
approval by the Court of the proposed Partial Settlement as provided for in the
Settlement Stipulation (including any modification or amendment thereto approved
by counsel for all parties), a judgment will be entered dismissing the Action
against the Settling Defendants and forever barring and enjoining the Class
Representatives and each Class Member from commencing, instituting or
prosecuting any action or other adversary proceeding in any court of law or
equity, arbitration tribunal, or administrative forum, directly or
representatively, against any of the Settling Parties within the scope of the
Class Release, as defined in the Settlement Stipulation.
All proceedings with respect to the Partial Settlement described by
this Notice and the determination of all controversies relating thereto,
including disputed questions of law and fact with respect to the validity of
claims, shall be subject to the jurisdiction of the Court.
VI. THE SETTLEMENT HEARING
A hearing (the "Hearing") shall be held before the Honorable Charles R.
Norgle, Sr., United States District Judge at 10:00 a.m. on February 22, 1999 (or
at such adjourned time or times as the District Court may without further notice
direct) at the United States District Court, Northern District of Illinois,
Courtroom 2341, Dirksen Building, 219 South Dearborn Street, Chicago, Illinois:
(a) to determine whether the proposed Partial Settlement of the Action
is fair, reasonable, and adequate to the Class Members, and should be approved
by the Court, and whether an Order and Final Judgment should be entered
dismissing the Action against the Sealing Defendants with prejudice and without
costs; and
(b) to reserve jurisdiction to effect and enforce the Partial
Settlement.
Any member of the Class may appear at the Hearing in person or through
counsel and be heard as to: (1) why the proposed Partial Settlement of the
Actions should or should not be approved as fair, reasonable and adequate; or
(2) why a judgment should or should not be entered thereon; provided, however,
that no member of the Class shall be heard or entitled to contest the approval
of the terms and conditions of the proposed Partial Settlement, the Order and
Final Judgment to be entered approving the same, unless on or before February
12, 1999, that person has served, by hand or first-class mail, written
objections and copies of any supporting papers and briefs (which must contain
proof of all purchases and sales of shares of Mercury common stock or debt
securities during the Class Period) upon the following counsel:
Stacey Mills, Esq. Charles R. Watkins, Esq.
HEINS, MILLS & OLSON, P.L.C. SUSMAN & WATKINS
700 Northstar East Two First National Plaza
608 2nd Avenue South Suite 600
Minneapolis, Minnesota 55402 Chicago, Illinois 60603
(612) 338-4605 (312) 346-3466
Counsel for the Federal Class Claimants Counsel for the ERISA Claimants
Stewart M. Weltman, Esq. Clinton A. Krislov, Esq.
STEWART M. WELTMAN KRISLOV & ASSOCIATES, LTD.
& ASSOCIATES 222 North LaSalle Street
39 South LaSalle Street, Suite 308 Suite 2120
Chicago, Illinois 60603 Chicago, Illinois 60601
(312) 357-0370 (312) 606-0500
Counsel for the Holder Claimants Counsel for the State Class Claimants
and upon counsel for Mercury:
Lewis S. Rosenbloom, Esq.
McDERMOTT, WILL & EMERY
227 West Monroe Street
Chicago, Illinois 60606
and has filed said objections, papers, and briefs, showing due proof of service
upon said counsel for the Class Representatives and counsel for Mercury with the
Clerk of the United States District Court for the Northern District of Illinois,
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604, and the
Clerk of the United States Bankruptcy Court for the Northern District of
Illinois, Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604.
Any member of the Class who does not object in the manner provided shall be
deemed to have waived such objection and shall forever be foreclosed from making
any objection to the fairness, adequacy or reasonableness of the proposed
Partial Settlement.
Any member of the Class may, but need not, enter an appearance in this
Action, at his own cost, through counsel of his own choice. If a member of the
Class does not enter an appearance or file an individual Request for Allocation,
as described in Section VIII below, his interests will be represented in the
allocation proceedings by counsel designated to represent each group within the
Class, as set forth above. If the proposed Partial Settlement is finally
approved by the Court, it will be binding on all Class Members.
The Court has expressly retained its power to adjourn the Hearing or any
adjournment thereof without any further notice other than an announcement at the
Hearing or any adjournment thereof and to approve the Settlement Stipulation
with modification and without further notice to members of the Class.
VII. APPLICATION FOR ATTORNEYS' FEES, COSTS AND DISBURSEMENTS
Counsel for the Class Representatives will not apply for any award of
attorneys' fees or reimbursement of out-of-pocket expenses at this time. If the
Settlement is approved by the Court then, following allocation of the proceeds
of the Settlement Fund, as described above, counsel for each group that has
commenced a class action included within the Class, and has received an
allocation of a portion of the Settlement Fund for the group on whose behalf a
class action was commenced, shall apply to the court in which the group's claim
was initiated for an award of attorneys' fees in an amount not to exceed
one-third of the allocation to the group, net of any allocation awarded to any
member of the group filing an individual Request for Allocation, as described in
Section VIII below, plus accrued interest. In addition such counsel will request
an award for reimbursement of their costs and disbursements incurred in this
Action, including expert fees incurred, which counsel presently estimates to be
approximately $800,000. The attorneys' fees, costs and disbursements awarded
will be paid entirely from the portion of the Settlement Fund allocated to the
particular groups represented by counsel, as described above, and will reduce
that portion of the Settlement Fund available for distribution to members of the
Class an average of less than $0.03 per share. Any application for fees and
reimbursement of costs and disbursements will be set forth in the Supplemental
Notice, to be distributed to Class Members in connection with the allocation
procedure described above. Counsel for members of the Class who file individual
Requests for Allocation, as described in Section VIII below, shall not be
required to seek judicial approval of fees or expense reimbursement payable by
their individual clients.
Any fees requested by counsel for plaintiffs will be at a level
customary in actions brought on a contingency fee basis, and are justified by
the substantial time and effort already invested in the prosecution of the
Actions, as well as the time and effort that will be required of counsel for
Plaintiffs prior to final approval of this Partial Settlement. Any expense
reimbursement sought by counsel for Plaintiffs will consist exclusively of those
out-of-pocket expenses actually incurred in the prosecution of the Action as of
the date that counsel applies for reimbursement of said expenses, including fees
payable to consulting experts.
VIII. REQUEST TO PARTICIPATE IN ALLOCATION PROCEEDINGS
Unless otherwise requested, the interests of the members of the Class
will be represented in the allocation proceedings by designated counsel for each
group included within the Class, as set forth in Section VI, above. Therefore,
Class members need not take any affirmative steps or submit any information at
this time to participate in the Partial Settlement. Each member of the Class
will be represented in the allocation proceedings by the designated counsel for
the group in which the Class member's claim falls, unless such member shall mail
by first-class mail a written Request for Allocation, to be received no later
than April 9, 1999, addressed to Logan & Company, Inc., 615 Washington Street,
Second Floor, Hoboken, NJ 07030. Such Request for Allocation must state the name
and address of the person making the request, and shall be accompanied by true
and correct copies of confirmations, brokerage account statements, or other
sufficient evidence of the following with respect to said person's transactions
in Mercury common stock or debt securities: (i) dates of purchase and sale; (ii)
purchase and sale prices; and (iii) number of shares of Mercury common stock or
debt securities purchased or sold on such dates and at such prices. A Request
for Allocation shall not be effective unless it is made in the manner and within
the time set forth in this paragraph.
IX. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES
If you acted as a nominee for any purchaser of shares of Mercury common
stock prior to February 23, 1994, and still held said shares through January 29,
1997, or purchased said stock from January 3, 1994 through January 29, 1997,
inclusive, for the beneficial interest of a person or entity other than
yourself, you are hereby requested by the Court to either provide a copy of this
Notice to the beneficial holders described above or to the extent that this
Notice has not been sent already or will not be sent to the beneficial holders
described above, provide the name and last known address of each person or
organization for whom or which you effected such purchase or sales in writing
to:
Logan & Company, Inc.
615 Washington Street, Second Floor
Hoboken, NJ 07030
Upon receipt of such information, copies of this Notice will be sent to each
beneficial owner so designated. Alternatively, you may request, in writing,
additional copies of this Notice and you may mail the Notice directly to the
beneficial owners of the securities referred to herein. Brokers and other
nominees may request reimbursement of their reasonable costs in complying with
this request.
X. EXAMINATION OF PAPERS AND INQUIRES
The foregoing is only a summary of the Actions and the proposed Partial
Settlement, and does not purport to be comprehensive. For a more detailed
statement of the matters involved in the Actions and the proposed Partial
Settlement, you may refer to the pleadings, the Settlement Stipulation and the
other papers filed in the above Action, which may be inspected at the Office of
the Clerk of the United States District Court, Dirksen Building, 219 South
Dearborn Street, Chicago, Illinois 60604, during regular business hours of each
business day.
Members of the Class, aside from T. Rowe Price and Shirners Hospital
for Children and any other class member who has already retained counsel of its
own choosing, are currently represented by counsel for the Class
Representatives. If you have any questions with respect to the Notice, you may
consult an attorney of your own choosing or write to Corporate Investors
Communications, Inc., 111 Commerce Road, Carlstadt, NJ 07072, 1-888-296-3797.
PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE.
Dated: December 31, 1998
Clerk of the Court
United States District Court
Northern District of Illinois
REMINDER: ANY QUESTIONS RELATING TO THE NOTICE SHOULD BE DIRECTED TO CORPORATE
INVESTORS COMMUNICATIONS, INC. AT 1-888-296-3797. ADDITIONAL COPIES OF THIS
NOTICE MAY BE OBTAINED AT THE FOLLOWING INTERNET ADDRESS:
http://www.gilardi.com/mercurylitigation
EXHIBIT A
CLASS SETTLEMENT AGREEMENT
This Class Settlement Agreement (this "SETTLEMENT AGREEMENT") is made
and entered into as of December 23, 1998, by and among (a) the Class, as that
term is defined below; (b) Dennis H. Chookaszian, William C. Croft, Bruce L.
McPhee, Andre W. McNally IV, Clifford R. Johnson, Fred G. Steingraber and Philip
J. Wicklander (singly, a "SETTLING DIRECTOR", and collectively, the "SETTLING
DIRECTORS"); (c) Richard P. Bosson, Jeffrey R. Brincat, John N. Brincat, Jr.,
George R. Carey, Michael H. Caul. Edward W. Gordon, Steven G. Gould, Charles H.
Lam, Gerald M. Mizel, Charley A. Pond, John J. Pratt, Edward G. Stauzenbach,
Michael W. Stremlau, James D. Terra, as executor of the Estate of Daniel J.
Terra, the Estate of Daniel J. Terra, and Sheila M. Tilson and Bradley S. Vallem
(singly, a "SETTLING NON-DIRECTOR", collectively, "SETTLING NON-DIRECTORS") (the
Settling Directors and the Settling Non-Directors shall be referred to
collectively herein AS the "SETTLING INDIVIDUALS").
RECITALS
FIRST: All capitalized terms used in this Settlement Agreement, and
not otherwise expressly defined herein, shall have the
meanings ascribed to them in the Debtor's Second Amended Plan
of Reorganization dated December 29, 1998, and filed with the
Court (the "PLAN"), or the Bankruptcy Code.
SECOND: Mercury Finance Company (the "DEBTOR") is currently a debtor
in possession in a chapter 11 case pending in the United
States Bankruptcy Court for the Northern District of Illinois,
Eastern Division (the "COURT") as Case No. 98-B 20763 (the
"REORGANIZATION CASE").
THIRD: On January 29, 1997, a date prior to the Petition Date, the
Debtor announced that it would restate its earnings for
certain periods as a result of accounting irregularities.
Subsequent to that announcement and prior to the Petition
Date, various parties commenced litigation against the Debtor,
the Settling Individuals, KPMG Peat Marwick ("KPMG"), and
other Persons.
FOURTH: Under the Plan, Class 7B consists of all holders of all
Securities Fraud Claims. Securities Fraud Claims against the
Debtor will be treated and discharged pursuant to the
provisions of the Plan. Class 7B claimants also hold or may
hold Securities Fraud Claims against the Settling Individuals.
The Class 7B claimants are the same Persons which comprise the
class of all holders of Securities Fraud Claims against the
Settling Individuals which the parties hereto shall seek to
have certified by the Bankruptcy Court and the United States
District Court (the "DISTRICT COURT") as a mandatory
non-opt-out class pursuant to Bankruptcy Rule 7023(b)(1)(B),
Bankruptcy Rule 9019, Section 105 of the Bankruptcy Code, and
Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure (the
"CLASS").
FIFTH: Under the Plan, Class 6 consists of the Indemnification Claims
which the Settling Individuals hold against the Debtor. The
Indemnification Claims will be treated and discharged in part
pursuant to the provisions of the Plan.
SIXTH: While denying any wrongdoing or liability whatsoever, the
Settling Individuals and the Class desire to resolve and
settle, in accordance with and subject to the terms and
conditions set forth below, all Securities Fraud Claims
asserted, which could have been asserted, or which could be
asserted by the Class against the Settling Individuals.
SEVENTH: This Settlement Agreement interfaces with the Plan in that in
consideration of the Settling Individuals' distribution to the
Class, upon final approval of this Settlement Agreement beyond
all appeal, of the distribution which the Plan otherwise
provides to the Settling Individuals, the Settling Individuals
are to receive the Class Release.
NOW, THEREFORE, in consideration of the covenants and undertakings
and subject to the terms and conditions set forth herein, the parties hereto
agree as follows:
1. EXECUTION OF SETTLEMENT AGREEMENT. The full execution of this
Settlement Agreement is a condition to acceptance of the Plan by the
Securities Claimants' Committee. Promptly upon acceptance of this Settlement
Agreement by the Settling Directors, the following shall Occur.
1.A. PRELIMINARY CERTIFICATION OF SETTLEMENT CLASS. The
Securities Claimants' Committee, the Settling Directors, and the Debtor shall
jointly submit this Settlement Agreement to the Bankruptcy Court and the
District Court and shall request the Bankruptcy Court and the District Court
to enter orders: (i) preliminarily certifying the Class for settlement
purposes and appointing the members of the Securities Claimants' Committee as
the representatives of the Class (the "CLASS REPRESENTATIVES"); (ii)
preliminarily approving this Settlement Agreement; and (iii) approving the
form of Class Notice, establishing procedures for issuing the Class Notice to
the Class, setting a time by which the Class Notice must be issued to the
Class, and establishing a date for the hearing to determine whether to grant
final approval of this Settlement Agreement (the "PRELIMINARY APPROVAL
ORDERS").
1.A.1. For purposes hereof, "CLASS NOTICE" means the
form of notice attached hereto as Exhibit A and by this reference made
a part hereof which will be modified as necessary, and acceptable to
the parties to this Settlement Agreement, in order to be approved by
the Bankruptcy Court and the District Court, and which will comply with
the Bankruptcy Code, the Bankruptcy Rules, the Federal Rules of Civil
Procedure and Private Securities Litigation Reform Act, to be issued to
the Class, notifying the members of the Class of, among other things,
(i) the certification of the Class, (ii) the entry of the Preliminary
Approval Orders, (iii) the date of the hearing to determine whether the
Final Approval Orders should be entered, (iv) the date by which any
objections to the Final approval of this Settlement Agreement are to be
filed, and (v) the date by which Requests for Allowance/Allocation must
be filed to entitle a member of the Class to participate in the
allowance/allocation process under the Class 7B Liquidating Trust
Agreement.
1.A.2 For purposes hereof, "FINAL APPROVAL ORDER"
means an order of each of the Bankruptcy Court and the District Court,
entered after the Class Notice is issued and after a final joint
hearing on approval of this Settlement Agreement is conducted by the
Bankruptcy Court and the District Court, granting final approval of
this Settlement Agreement, and specifically providing that: (i) this
Settlement Agreement was entered into in good faith, (ii) this
Settlement Agreement is fair, reasonable, and adequate, and (iii) the
parties to this Settlement Agreement have complied with Rule 11 of the
Federal Rules of Civil Procedure and will consent to an order making
that finding.
1.A.3. For purposes hereof, "FINAL ORDER" means a
Final Approval Order which has become a Final Order as that term is
defined in the Plan.
1.B. STAY OF PENDING LITIGATION. All currently pending
litigation commenced by any member of the Class or by the Class Representatives
against any one or more of the Settling Individuals including without limitation
the litigation identified on Schedule I attached hereto and by this reference
made a part of this Settlement Agreement (collectively, the "PENDING
LITIGATION") as well as the Adversary Proceeding, Adversary Proceeding No.
98A01580 commenced by the Securities Claimants' Committee in the Reorganization
case (the "ADVERSARY PROCEEDING") shall be stayed, but stayed only as to the
Settling Individuals, until the earlier of (i) the Deemed Dismissal of the
Pending Litigation and the Adversary Proceeding set forth in Section 14 below,
and (ii) the first Business Day following (a) the ninth month after the
Confirmation Date of the Plan, in the event a Final Approval Order has not been
entered or (b) the final disposition of all appeals from a Final Approval Order
in the event a Final Order is not entered.
2. SETTLEMENT CONTRIBUTION BY SETTLING INDIVIDUALS. In consideration of
the Class Release, as that term is defined in Section 7 or Section 9 below, the
Settling Individuals shall use their best efforts to cause, and Reliance
Insurance Company shall cause to be delivered by wire transfer, in the manner
and at the applicable time and place set forth in this Section 2, the (i) the
sum of Twenty-Three Million Dollars ($23,000,000.00). The references in this
Settlement Agreement to "policies" issued by Reliance Insurance Company or to
"proceeds" of policies from Reliance Insurance Company include without
limitation the Reliance Policies, as that term is defined in the Plan, and
proceeds therefrom. Notwithstanding the references in this Section 2 to the
policies issued by Reliance Insurance Company, the Settling Individuals
acknowledge that the Class has not agreed to reduce the amount payable hereunder
to less than Twenty-Three Million Dollars ($23,000,000.00) unless the Class
Representatives' option set forth in Section 12 below is exercised.
2.A. SETTLEMENT APPROVAL AFTER CONFIRMATION. If the Effective
Date of the Plan occurs prior to entry of the Final Approval Orders, then on the
Effective Date of the Plan (i) the Reorganized Debtor shall wire transfer
Thirteen Million Dollars ($13,000,000.00) in cash to the Indemnification
Settlement Fund, and (ii) Reliance Insurance Company shall wire transfer up to
Ten Million Dollars ($10,000,000.00) representing that portion of the proceeds
of policies which Reliance Insurance Company agrees to pay over the
Indemnification Settlement Fund. The Indemnification Settlement Fund immediately
upon receipt of such funds shall wire transfer such funds to an interest bearing
escrow account (the "ESCROW ACCOUNT") maintained at and administered by Windsor
Bank (the "ESCROW AGENT") until such time as the Class Representatives and the
Settling Directors jointly provide to the Escrow Agent (a) written notification
that the Final Approval Orders have been entered and have become Final Orders
and (b) written instruction to wire transfer immediately from the Escrow Account
up to the sum of Twenty-Three Million Dollars ($23,000,000.00), together with
all interest accrued thereon, to the Class 7B Liquidating Trust, to be held in
trust for the Class and distributed in accordance with the provisions of the
Class 7B Liquidating Trust Agreement. At all times Four Million Dollars
($4,000,000.00) of the $13,000,000 wired into the Escrow Account by the
Reorganized Debtor shall be earmarked as funds belonging to the Class 7B
Liquidating Trust, and such $4,000,000 of funds shall be wire transferred to the
Class 7B Liquidating Trust at the direction of the Settling Directors, whether
or not this Settlement Agreement is approved, on the first Business Day
following (a) the ninth month after the Confirmation Date of the Plan in the
event a Final Approval Order has not been entered, or (b) the final disposition
of all appeals from a Final Approval Order in the event a Final Order is not
entered. The irrevocable escrow instructions shall so provide as set forth in
this Section 2A. Costs of the escrow shall be deducted from the funds, first
from accrued interest, in the Escrow Account.
2.B. SETTLEMENT APPROVAL PRIOR TO CONFIRMATION. If the Final
Approval Orders are entered and become Final Orders prior to the Effective Date
of the Plan, then on the Effective Date of the Plan (i) the Debtor shall wire
transfer Thirteen Million Dollars ($13,000,000.00) in cash, and (ii) Reliance
Insurance Company shall wire transfer up to Ten Million Dollars ($10,000,000.00)
representing that portion of the proceeds of policies which Reliance Insurance
Company agrees to pay to the Class 7B Liquidating Trust, to be held in trust for
the Class and distributed in accordance with the provisions of the Class 7B
Liquidating Trust Agreement.
2.C. NO SETTLEMENT APPROVAL. If the Final Approval Orders (a)
are not entered within nine (9) months from the Confirmation Date of the Plan or
(b) do not become Finals Orders, then the Class Representatives and the Settling
Directors shall jointly provide written instruction to the Escrow Agent to wire
transfer from the Escrow Account (i) the sum of Four Million Dollars
($4,000,000.00), together with all interest accrued thereon, to the Class 7B
Liquidating Trust, to beheld in trust for the Class and distributed in
accordance with the provisions of the Class 7B Liquidating Trust Agreement, and
(ii) the balance of the Escrow Account, including any proceeds of policies from
Reliance Insurance Company to the Indemnification Settlement Fund.
2.D. APPEAL FROM SETTLEMENT APPROVAL. Notwithstanding the
foregoing provisions in this Section 2, in the event that the Final Approval
Order are entered approving this Settlement Agreement but an appeal or appeals
are taken timely from the Final Approval Orders before such orders become Final
Orders, then the Settling Directors and the Class Representatives shall provide
joint written instructions to the Escrow Agent to wire transfer only from the
interest accrued on $13,000,000 of the principal amount maintained in the Escrow
Account, to an account designated by counsel for the Settling Directors, an
amount up to but not in excess of One Hundred Fifty Thousand Dollars
($150,000.00) for the necessary legal costs and attorneys' fees actually
incurred by the Settling Directors in connection with such appeal(s).
3. ASSIGNMENT OF SETTLING INDIVIDUALS' KPMG CLAIMS. (i) On the
Settlement Date, defined in Section 10 below, each and every one of the Settling
Individuals, shall transfer and assign without recourse to the Class 7B
Liquidating Trust, to be held in trust for the Class, all of his or her rights,
title, and interests in and to any and all of his or her respective claims
against KPMG, including without limitation those relating to, arising from, or
on account of: (a) the announcement on January 29, 1997, that the Debtor would
restate its earnings for certain periods as a result of accounting
irregularities, (b) such accounting irregularities, and (c) the actions or
non-action of KPMG with respect to the foregoing or with respect to its role as
auditor of and provider of other services, including accounting, to the Debtor
prior to and at the time of the announcement of the accounting irregularities,
together with complete and exclusive control of the prosecution and/or
settlement of all such claims against KPMG and the sole right to prosecute the
same on behalf of and in the name of such Settling Individuals and the Class 7B
Liquidating Trust (collectively, the "SETTLING INDIVIDUALS' KPMG CLAIMS"). The
Settling Individuals make no warranty or representation of any kind or nature
with respect to any claim against KPMG, including without limitation, as to the
existence or validity of such claims. The Settling Individuals' KPMG Claims
shall be deemed to be assets of the Trust without any further action by any
Person at the time specified in Section 2.A. or Section 2.B. above, as the case
may be. However, in the case of events described in Section 2.C. above the
Settling Individuals' KPMG Claims shad not be transferred and assigned to the
Class 7B Liquidating Trust.
4. NO ADMISSION OF LIABILITY; NO AGREEMENT REGARDING INDEMNIFICATION.
The execution, delivery, and acceptance of this Settlement Agreement does not
constitute, and shall not be construed as constituting, an admission of any
wrongdoing or liability whatsoever on the part of any party hereto. By entering
into and performing under this Settlement Agreement, neither the Securities
Claimants' Committee, nor any member thereof, nor the Class, nor any member of
the Class acknowledges or agrees that any of the Settling Individuals is
entitled to any indemnification by the Debtor or otherwise.
5. RELEASE OF SETTLING NON-DIRECTORS BY SECURITIES CLAIMANTS' COMMITTEE.
On the Effective Date of the Plan, each of the Settling Non-Directors, except
Bradley S. Vallem, shall receive, and she be deemed to receive, without any
further act by any Person, a release equivalent in scope to the Class Release
from the Class Representatives regardless of whether Final Approval Orders or
Final Orders are subsequently entered. The release provided in this Section 5
does not, and is in no way intended to, release in any manner John Brincat, Sr.,
James Doyle, the Estate of James Doyle, or KPMG.
6. CLASS RELEASE OF SETTLING INDIVIDUALS. Upon the Settlement Date
defined in Section 10 below, each of the Settling Individuals shall receive, and
shall be deemed to receive without any further act by any Person, the Class
Release.
7. CLASS RELEASE. For purposes hereof and subject to Section 9 below,
the "CLASS RELEASE" means a release, relinquishment, and discharge of and from
any and all claims, causes of action, suits, damages (whether general, special
or punitive), liabilities, demands, obligations, costs, expenses, losses,
whether known or unknown, liquidated or unliquidated, fixed, contingent, direct
or indirect, suspected or unsuspected, asserted or not asserted and whether
based on contract, tort, statute, or legal or equitable theory of recovery,
which any member of the Class may have, own or hold, or at any time heretofore
had, owned or held against any of the Settling Individuals, arising from. out
of, on account of, in connection with, relating to, or in consequence of the
Securities Fraud Claims and (i) those claims which have been raised or could
have been raised or could be raised in the Pending Litigation or Adversary
Proceeding against any one or more of the Settling Individuals, (ii) the
purchase, sale or ownership of the common stock or other securities of the
Debtor, (iii) accounting irregularities or alleged accounting errors relating to
the Debtor, (iv) any restatements of the Debtor's Financial statements or
results of its operations, and (v) the conduct of the Debtor's restructuring
process and bankruptcy proceeding, including without limitation all decisions,
actions, inactions, and alleged negligence or misconduct relating thereto.
8. NO RELEASE OF ANY THIRD PARTY. It is not the intent of this
Settlement Agreement or of the Class or of any member of the Class to compromise
or release in any way any claim whatsoever as to any Person other than the
Settling Individuals. Each and every claim of the Class and each and every claim
of any member of the Class against KPMG, John Brincat, Sr., James Doyle, and the
estate of James Doyle are hereby expressly reserved. Further the Company KPMG
Claims against KPMG and the Settling Individuals' KPMG Claims against KPMG are
hereby expressly reserved.
9. COVENANT NOT TO SUE. In keeping with the intent expressed in Section
8 above, in the event that at any time it is determined by a court of competent
jurisdiction that a release of any one or more of the Settling Individuals would
result in a release of any third party or parties, such as John Brincat Sr., or
KPMG, then Section 7 above shall be deemed to be deleted and never to have been
a part of this Settlement Agreement and for purposes hereof, the "CLASS RELEASE"
shall mean a covenant not to sue by each member of the Class in favor of each of
the Settling Individuals with respect to any and all claims, causes of action,
suits, damages (whether general, special or punitive), liabilities, demands,
obligations, costs, expenses, losses, whether known or unknown, liquidated or
unliquidated, fixed, contingent, direct or indirect, suspected or unsuspected,
asserted or not asserted and whether based on contract, tort, statute, or legal
or equitable theory of recovery, which any member of the Class may have, own or
hold, or at any time heretofore had, owned or held against any of the Settling
Individuals, arising from, out of, on account of, in connection with, relating
to, or in consequence of the Securities Fraud Claims and (i) those claims which
have been raised or could have been raised or could be raised in the Pending
Litigation or Adversary Proceeding against any one or more of the Settling
Individuals, (ii) the purchase, sale or ownership of the common stock of the
Debtor, (iii) accounting irregularities or alleged accounting errors relating to
the Debtor, (iv) any restatements of the Debtor's financial statements or
results of its operations, and (v) the conduct of the Debtor's restructuring
process and bankruptcy proceeding, including without limitation all decisions,
actions, inactions, and alleged negligence or misconduct relating thereto.
10. CONDITIONS TO SETTLEMENT; "SETTLEMENT DATE". This Settlement
Agreement is subject to each of the following conditions set forth in Sections
10.A. through 10.M., and shall not bind any of the parties hereto unless
otherwise stated, unless and until each such condition is fully satisfied or
unless one or more conditions is waived in writing by the party for whose
benefit the condition was inserted or, if the condition is not clearly for the
benefit of only one party, then it must be waived in writing by all parties.
Upon the full and timely satisfaction of each and every such condition. the
"SETTLEMENT DATE" shall occur. If each condition is not fully and timely
satisfied. then this Settlement Agreement shall be nullified in its entirety and
of no further force or effect except that the Releases delivered pursuant to
Section 5 shall remain effective and pursuant to the provisions of Section 2.C.
above the Settling Individuals and the Class Representatives shall jointly
instruct the Escrow Agent to wire transfer the sum of Four Million Dollars
($4,000,000.00), together with all interest accrued thereon, to the Class 7B
Liquidating Trust, and the balance of the Escrow Account, including any proceeds
of policies from Reliance Insurance Company, together with all interest accrued
thereon. to the Indemnification Settlement Fund.
10.A. Within nine (9) months of the Confirmation Date of the
Plan, the Class must be certified by both the Bankruptcy Court and the District
Court as a mandatory non-opt-out class pursuant to Rule 23(b)(1)(B) of the
Federal Rules of Civil Procedure and Bankruptcy Rule 7023(b)(1)(B);
10.B. (i) Within ten (10) Business Days of the entry of the
Preliminary Approval Orders, the Class Notice must be sent to all known members
of the Class, and (ii) within ten (10) Business Days of the entry of the
Preliminary Approval Orders, a summary notice substantially in the form attached
to this Settlement Agreement as Exhibit B (the "SUMMARY NOTICE") shall be
published once each on successive days in The Wall Street Journal, The New York
Times, and The Chicago Tribune, all at the expense of the Debtor or the
Reorganized Debtor as the case may be;
10.C. On or before January 15, 1999, (i) tolling agreements,
in form and substance acceptable to the Class Representatives, with respect to
the Company KPMG Claims must be obtained from KPMG, or (ii) a lawsuit must have
been commenced by the Debtor on all such claim;
10.D. The Settling Individuals shall use their best efforts to
obtain tolling agreements, in form and substance acceptable to the Class
Representatives, with respect to the Settling Individuals' KPMG Claims;
10.E. Within nine (9) months of the Confirmation Date of the
Plan. the Final Approval Orders must be entered;
10.F. The Final Approval Orders must become Final Orders.
10.G. Subject only to the election provided to the Class in
Section 12 below, the Class 7B Liquidating Trust must receive a total sum of
Twenty-Eight -Million Dollars ($28,000,000.0o) in cash comprised of (i) the sum
of Twenty-Three Million Dollars ($23,000,000.00) in cash, together with all
interest accrued thereon, if any, from the Effective Date of the Plan, pursuant
to this Settlement Agreement, Plus (i) the sum of Five Million Dollars
($5,000,000.00) in cash, plus (iii) the sum of Two Hundred Fifty Thousand
Dollars ($250,000.00) pursuant to the Plan, which such total sum is to be held
in trust for the Class and distributed in accordance with the provisions of the
Class 7B Liquidating Trust Agreement;
10.H. All sums paid by Reliance Insurance Company as proceeds
of policies issued by Reliance Insurance Company must be in cash with no
reservations allocation, of reversion of such sums to any insured thereunder;
10.I. The Final Approval Orders must: (i) incorporate the
Class Release and dismiss the Class's claims against the Settling Individuals
with prejudice, (ii) bar each non-settling defendant in the Pending Litigation
and Adversary Proceeding from asserting any present or future claims, including
but not limited to claims for contribution or indemnity (whether express or
implied) against any of the Settling Individuals who shall be deemed "covered
persons" within the meaning of Section 21D(g) of the Securities Exchange Act of
1934, (iii) provide that any judgment which may be obtained hereafter by the
Class or any member of the Class against any one or more of the non-settling
defendants shall be reduced in accordance with Section 21D(g) of the Securities
Exchange Act of 1934 or any applicable state law; and (iv) in addition to the
reduction, if any, set forth in the immediately preceding Section 10.I.(iii) and
subject to the Limitations set forth in Section 11 below, provide that any
judgment or verdict which may be obtained hereafter by the Class or any member
of the Class against one or more of John Brincat, Sr., James Doyle, the Estate
of James Doyle, or KPMG shall be reduced by any amount which may be obtained by
KPMG against the Settling Individuals arising out of cross claims other than for
contribution or indemnity.
10.J. The Plan must provide that (i) Five Million Dollars
($5,000,000.00) shall be distributed and (ii) the Company KPMG Claim shall be
assigned to the Class 7B Liquidating Trust on the Effective Date;
10.K. The Confirmation Order (i) must be entered by the
Bankruptcy Court confirming the Plan and (ii) must become a Final Order;
10.L. The Effective Date of the Plan must occur; and
10.M. All holders of Senior Debt Claims and holders of
Subordinated Notes listed on Schedule 2 must assign all of their respective
Securities Fraud Claims (collectively, the "NOTEHOLDERS' SECURITIES CLAIMS") (i)
against the Debtor to the Class 7B Liquidating Trust, and (ii) against the
Settling Individuals to the Class Representatives. If the Final Approval Orders
(a) are not entered within nine (9) months from the Confirmation Date of the
Plan or (b) do not become Finals Orders, the Class Representatives on behalf of
the Class and all members thereof covenant not to sue the Settling Individuals
on the Noteholders' Securities Claims.
11. JUDGMENT REDUCTIONS. Provided that the Settlement Date as defined
in Section 10 above occurs, then subject to the limitations set forth in
Sections 11.A., 11.B., 11.C., and 11.D. and in the following stated order of
application, there will be judgment reduction(s) first of the Company KPMG
Claims, second of the Settling Individuals' Claims, and third of claims held by
separate members or class actions of the Class to the extent that assertion of
such claims results in judgment(s) over against one or more of the Settling
Individuals by KPMG. At the election of the Settling Individuals, the Class 7B
Liquidating Trust must defend the Settling Individuals against the claims over
by KPMG.
11.A. AGGREGATE MAXIMUM JUDGMENT REDUCTION. There shall be a
maximum aggregate judgment reduction in an amount equal to the amount of the
Principal Funds (collectively, the "AGGREGATE MAXIMUM JUDGMENT REDUCTION"). For
purposes of this Settlement Agreement "PRINCIPAL FUNDS" means the total amount
of the principal of funds, excluding any interest accrued thereon, which in
accordance with this Settlement Agreement are transferred from the Escrow
Account into the Class 7B Liquidating Trust.
11.B. JUDGMENT REDUCTION REGARDING COMPANY KPMG CLAIMS. If the
Class 7B Liquidating Trust obtains a judgment against KPMG on the Company KPMG
Claims, then the Class 7B Liquidating Trust will reduce the amount of said
judgment to the aggregate extent in such action KPMG is successful in obtaining
a judgment or judgments over against any one or more of the Settling Individuals
arising out of or relating to facts upon which the judgment in favor of the
Class 7B Liquidating trust is based. The amount of the Aggregate Maximum
Judgment Reduction remaining, if any, after a portion thereof is utilized for
such reduction shall be referred to as the "INITIAL NET JUDGMENT REDUCTION" and
shall be utilized next in accordance with Section 11.C. below.
11.C. JUDGMENT REDUCTION REGARDING SETTLING INDIVIDUALS' KPMG
CLAIMS. If, subsequent to any utilization of the Aggregate Maximum Judgment
Reduction pursuant to Section 11.B. above, (i) there remains any portion thereof
as the Initial Net Judgment Reduction and (ii) the Class 7B Liquidating Trust
obtains a judgment against KPMG on the Settling Individuals' KPMG Claims, then
the Class 7B Liquidating Trust will reduce the amount of said judgment to the
aggregate extent in such action KPMG is successful in obtaining a judgment or
judgments over against any one or more of the Settling Individuals arising out
of or relating to facts upon which the judgment in favor of the Class 7B
Liquidating Trust is based. If there is no Initial Net Judgment Reduction
remaining following application of the Aggregate Maximum Judgment Reduction in
accordance with Section 11.B., above, then there shall be no judgment reductions
as described in this Section 11.C. The amount of the Initial Net Judgment
Reduction, if any, remaining after any portion thereof is utilized for the
judgment reduction described in Section 11.B., shall be referred to as the
"REMAINDER NET JUDGMENT REDUCTION".
11.D. JUDGMENT REDUCTION REGARDING CLASS MEMBERS' SEPARATE
KPMG CLAIMS. If subsequent to any utilization of the Initial Net Judgment
Reduction pursuant to Section 11.C. above, (i) there remains any portion thereof
as the Remainder Net Judgment Reduction and (ii) any member of the Class obtains
a judgment against KPMG on such Class member's separate claim(s), then such
Class member will reduce the amount of its respective judgment against KPMG, to
the extent in such action KPMG Is successful in obtaining a judgment over
against one or more of the Settling Individuals arising out of or relating to
facts upon which the judgment in favor of the Class 7B Liquidating Trust is
based, in an amount equal to the amount of KPMG's judgment against said Settling
Individual minus the product of said Class member's Trust Percentage Allocation
multiplied by the particular Settling Individual's Dollar Reduction Allocation.
For purposes hereof, "TRUST PERCENTAGE ALLOCATION" means the ratio of the dollar
amount distributed to a Class member on account of its Allowed Class 7B Claim
from the Class 7B Liquidating Trust to the total dollar amount distributed on
account of all Allowed Class 7B Claims from the Class 78 Liquidating Trust. For
purposes hereof, "DOLLAR REDUCTION ALLOCATION" means the dollar amount allocated
to a particular Settling Individual by the consensus of all Settling Individuals
provided the total amount of the Dollar Reduction Allocations shall never exceed
the amount of the Remainder Net Judgment Reduction. Unless and until counsel for
the Settling Individuals provide to the Class Representatives written
notification of the Dollar Reduction Allocation figures for the respective
Settling Individuals, there shall be no judgment reduction pursuant to this
Section 11.D. However, the Settling Individuals may provide such written notice
after one or more such judgments over is obtained by KPMG so long as such
written notice is provided within thirty (30) days of KPMG's obtaining of such
judgment(s) over. Further, for purposes of this Section 11.D., any reference to
a "Class member" shall also include any and all pending class actions identified
on Schedule 1 attached hereto and by this reference made a part hereof. For
example, (a) if a Class member obtains a judgment against KPMG in the amount of
$10,000,000, (b) that Class member's Trust Percentage Allocation is 25%, (c)
KPMG obtains a judgment over against a Settling Individual in the amount of
$8,000,000, and (d) that Settling Individual's Dollar Reduction Allocation s
$2,000,000; then the Class member must reduce its $10,000,000 judgment against
KPMG by $500,000.
12. LESS THAN $10 MILLION FROM RELIANCE. In the event that the total
amount deposited into the Escrow Account from the policies issued by Reliance
Insurance Company is less than Ten Million Dollars ($10,000,000.00) (the "LESS
THAN $10 MILLION AMOUNT") them notwithstanding Section 6 above, (i) them shall
be no Class Release of the Settling Directors, (ii) the Class Representatives
and the Settling Directors shall jointly provide written instructions to the
Escrow Agent to wire transfer Four Million Dollars ($4,000,000.00), together
with all interest accrued thereon, to the Class 7B Liquidating Trust, and to
wire the balance of the funds from the Escrow Account, including any proceeds of
policies from Reliance Insurance Company, to the Indemnification Settlement
Fund, (iii) the stay of Pending Litigation and the Adversary Proceeding against
the Settling Directors described in Section 1.B., above shall cease, and (iv)
neither the Settling Individuals nor the Class nor any member of the Class shall
be bound by this Settlement Agreement except for the release of the Settling
Non-Directors by the Class Representatives and its members set forth in Section
5 above, unless, however, that in such event the Class Representatives, and only
the Class Representatives, may, at their option, elect instead, within ten (10)
Business Days of the Reliance Insurance Company's deposit of the Less Than $10
Million Amount, by written notification to counsel for the Settling Directors,
to proceed under this Settlement Agreement in which case all Settling
Individuals shall be bound to perform under this Settlement Agreement the same
as if the entire $10,000,000 had been deposited by Reliance Insurance Company
pursuant to the policies issued by Reliance Insurance Company.
13. NO THIRD PARTY BENEFICIARIES; NO INTEREST IN FUNDS. There shall be
no third parry beneficiaries of this Settlement Agreement. To the extent the
Class 7B Liquidating Trust or any member of the Class is required to disgorge
any funds received in accordance with this Settlement Agreement, all such
disgorged funds (a) shall revert to the Reorganized Debtor, (b) shall be
segregated and held by the Reorganized Debtor in trust for the Class 7B
Liquidating Trust or such member of the Class, as the case may be, and then (c)
shall be delivered by the Reorganized Debtor to the Class 7B Liquidating Trust
or such member of the Class, as the case may be, immediately upon receipt by the
Reorganized Debtor.
14. DEEMED DISMISSAL. Upon the Settlement Date, all then Pending
Litigation and the Adversary Proceeding shall be deemed to be dismissed with
prejudice, but so dismissed only as to the Settling Individuals, without the
need for any Person to take any further action or file any pleading.
15. COOPERATION. The parties hereto shall cooperate with one another in
order to effectuate this Settlement Agreement, shall execute and deliver such
additional documents or instruments and shall take such actions as may be
reasonably required to effect the previsions of this Settlement Agreement. The
Settling Individuals shall (i) cooperate fully, at no cost (except as to
attorneys' fees reasonably incurred by the Settling Individuals therefor) in the
prosecution of the Settling Individuals' KPMG Claims by or on behalf of the
Class 7B Liquidating Trust, and (ii) provide and transfer to the Class 7B
Liquidating Trust all such non-privileged documents, claims files, and other
information relating to the Settling Individuals' KPMG Claims as may be in their
respective possession. custody, or control. The Settling Individuals shall take
such actions and deliver such documentation as the Class Representatives may
reasonably require to effectuate, perfect, confirm. and evidence the transfer
and assignment to the Class 7B Liquidating Trust of the Settling Individuals'
KPMG Claims and the validity of such transfer and assignment. In addition, the
Settling Individuals shall continue to respond to discovery requests from the
plaintiffs in the Pending Litigation. including without limitation document
requests and deposition notices, the same as if the Settling Individuals
remained parties to the Pending Litigation.
16. MISCELLANEOUS. The certification of the Class is not intended to,
shall not, and shall not be construed to, affect in any way any claims which
members of the Class hold or may hold, separate and apart from the Class,
against KPMG, John Brincat, Sr., the estate of James Doyle, or any other Person,
whether or not such claims have been asserted. The certification of the Class is
For purposes of this Settlement Agreement only and shall not bind any member of
the Class for any other purpose. The participants in Class 7B which have
separately commenced a related non-class action in a non-bankruptcy court (e.g.,
the U.S. District Court in the Northern District of Illinois) shall be
responsible for the expenses, costs, and attorney fees only in their own
actions; and they shall have no responsibility for the expenses, costs, or
attorneys' fees in any related action including this action and any class or
other action not commenced by them. The Settling Individuals shall not take any
position with respect to any application for attorneys' fees or counsel's fees,
in connection with this Settlement Agreement, filed or made in any court having
jurisdiction over any of the Pending Litigation, and further the Settling
Individuals shall not assert that they have legal standing to take any such
position. However, the Settling Individuals shall not be liable for any
attorneys' fees to the attorneys for the Class.
17. GOVERNING LAW. This Settlement Agreement shall be governed and
interpreted by the laws of the United States of America and the internal laws of
the State of Illinois.
18. BANKRUPTCY COURT JURISDICTION. Any question, dispute, claim or
controversy arising from or relating to this Settlement Agreement, including any
issues concerning the interpretation, operation, effect, or enforcement of this
Settlement Agreement shall be brought before and adjudicated by the Bankruptcy
Court or the District Court.
19. BINDING EFFECT. This Settlement Agreement and each and every one of
the rights and duties contained herein shall be binding upon and inure to the
benefit of all of the parties hereto and to their respective successors and
assigns.
20. COUNTERPARTS AND AUTHORIZATION. This Settlement Agreement may be
executed in any number of counterparts, all of which shall constitute one and
the same instrument. Each signatory hereto represents and warrants that he or
she is fully authorized to enter into this Settlement Agreement on behalf of the
Person for which he or she is signing this Agreement and that such Person itself
so authorizing the signatory has taken and obtained all necessary actions and
approvals, corporate or otherwise, for entering into and performing under this
Settlement Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Settlement
Agreement effective as of the date first above written.
"CLASS REPRESENTATIVES"
BY: SECURITIES CLAIMANTS' COMMITTEE:
Dated: _________ SHRINERS HOSPITALS FOR CHILDREN
By:
Its:
Dated: _________ MINNESOTA STATE BOARD OF INVESTMENT
By:
Its:
Dated: _________ JOSEPH DANIELLE
By:
Its:
Dated: _________ T. ROWE PRICE
By:
Its:
MICHAEL DLOOGATCH
By:
Its:
Dated: _________ JAMES FERREE
By:
Its:
Dated: _________ DAVID J. ISAAK
By:
Its:
"SETTLING DIRECTORS"
Dated: _________ DENNIS H. CHOOKASZIAN
By:
Its:
Dated: _________ WILLIAM C. CROFT
By:
Its:
Dated: _________ BRUCE L. MCPHEE
By:
Its:
Dated: _________ ANDRE W. MCNALLY, IV
By:
Its:
Dated: _________ CLIFFORD R. JOHNSON
By:
Its:
Dated: _________ FRED G. STEINGRABER
By:
Its:
Dated: _________ PHILIP J. WICKLANDER
By:
Its:
"SETTLING NON-DIRECTORS"
Dated: _________ RICHARD P. BOSSON
By:
Its:
Dated: _________ JEFFREY R. BRINCAT
By:
Its:
Dated: _________ JOHN N. BRINCAT, JR.
By:
Its:
Dated: _________ GEORGE R. CAREY
By:
Its:
Dated: _________ MICHAEL H. CAUL
By:
Its:
Dated: _________ EDWARD W. GORDON
By:
Its:
Dated: _________ STEVEN G. GOULD
By:
Its:
Dated: _________ CHARLES H. LAM
By:
Its:
Dated: _________ GERALD M. MIZEL
By:
Its:
Dated: _________ CHARLEY A. POND
By:
Its:
Dated: _________ JOHN H. PRATT
By:
Its:
Dated: _________ EDWARD G. STAUZENBACH
By:
Its:
Dated: _________ MICHAEL W. STREMLAU
By:
Its:
Dated: _________ ESTATE OF DANIEL J. TERRA
By:
JAMES D. TERRA, AS EXECUTOR
Dated: _________ SHEILA M. TILSON
By:
Its:
Dated: _________ BRADLEY S. VALLEM
By:
Its:
SCHEDULE 1
1. Each of the civil actions pending in the United States District Court
for the Northern District of Illinois in the Consolidated Pretrial
Proceeding captioned In the Matter of Mercury Finance Company of
Illinois, Case No. 97 C 3035 (N.D.Ill. filed March 20, 1997);
2. The case captioned Ferree v. Mercury Finance Company, et al., No. 97 C
5245 (N.D.Ill. filed July 24, 1997);
3. The case captioned Realtech Software, Inc. et al. v. Mercury Finance
Co. et al., No. 97 CH 1277 (Cir.Ct. Cook Co. Ill. filed January 31,
1997);
4. The case captioned Crandon Capital Partners v. John N. Brincat et al.,
No. 97 CH 1491 (Cir.Ct. Cook Co. Ill. filed February 5, 1997);
5. The case captioned Malone v. John N. Brincat et al., No. 15510-NC (Del.
Ch. Filed February 4, 1997);
6. The case captioned Thorp et al. v. Mercury Finance Co. et al., No. 97
CH 1440 (Cir.Ct. Cook Co. Ill. filed February 4, 1997); State Board of
Administration of Florida et al. v. Brincat et al., No. 97 CH 1440
(Cir.Ct. Cook Co. Ill., Application for intervention filed November 22,
1997);
7. The case captioned Kittle et al. v. Mercury Finance Co. et al., No. 97
CH 3639 (Cir.Ct. Cook Co. Ill. filed March 25, 1997);
8. The case captioned Pontikes et al. v. John N. Brincat et al., No. 97 CH
3039 (Cir.Ct. Cook Co. Ill. filed March 12, 1997);
9. The case captioned Dloogatch et al. v. John N. Brincat et al., No. 97
CH 8790 (Cir.Ct. Cook Co. Ill. filed July 16, 1997);
10. The case captioned Wexler v. John N. Brincat et al., No. 15512-NC (Del.
Ch. filed February 5, 1997);
11. The case captioned Krasnow v. John N. Brincat et al., No. 15525-NC
(Del. Ch. filed February 5, 1997);
12. The case captioned Trauscht v. John N. Brincat et al., No. 15524-NC
(Del. Ch. filed February 6, 1997);
13. The case captioned Demaskus v. John N. Brincat et al., No. 15546-NC
(Del. Ch. filed February 14, 1997);
14. The case captioned Schwartz v. John N. Brincat et al., No. 15567-NC
(Del. Ch. filed February 24, 1997);
15. The case captioned Grinell v. John N. Brincat et al., No. 15568-NC
(Del. Ch. filed February 24, 1997);
16. The case captioned Cumming v. John N. Brincat et al., No. 15569-NC
(Del. Ch. filed February 24, 1997);
17. The case captioned Sutherland v. John N. Brincat et al., No. 15582
(Del. Ch. filed February 27, 1997);
18. The case captioned Gulf Trust v. John N. Brincat et al., No. 15581-NC
(Del. Ch. filed February 27, 1997);
19. The case captioned Jackson v. John N. Brincat et al., No. 97 C 1941
(N.D. Ill. filed March 20, 1997); and
20. T. Rowe Price Financial Services Fund, Inc., et al. v. Mercury Finance
Co. et al., Case No. 97 C 4782 N.D. Ill. filed July 3, 1997. (Motion
for finding of relatedness denied.)
21. Robert F. Wells, et al. v. John N. Brincat et al., No. 98 L 013108
(Cir.Ct. Cook Co. Ill. filed November 13, 1998);
22. Shriners Hospital for Children v. Mercury Finance Co., et al., No. 98 C
1480 (N.D. Ill. filed March 15, 1998).
SCHEDULE 2
MERCURY FINANCE COMPANY
FORBEARANCE AND CONSENT AGREEMENTS
Note and Commercial Paper Holders:
1. American United Life Insurance Company
2. Angelo Gordon & Co. (Silver Oak)
3. Baker Nye
4. Bank of America
5. Bear Stearns
6. Cerberus Partners, L.P.
7. Citibank
8. DK Acquisition Partners
9. Franklin Mutual Series
10. Goldman Sachs
11. Halcyon
12. Intermarket Corp. (Fernwood)
13. Merrill Lynch
14. MHR Capital Partners LP
15. Morgan Stanley & Co.
16. Nomura Holdings
17. Norddeutsche Landesbank ("NORD/LB")
18. Oaktree Capital
19. PPM America
20. Principal Mutual Life
21. Provident Mutual Life Insurance Co.
22. T.A. McKay & Co., Inc. (Simpion)
23. Teachers' Retirement System of Alabama
24. TMG Life Insurance Company
25. Whippoorwill Associates, Inc.
26. York Capital Management, L.P.
Sub-Debt Holder:
27. Credit Suisse First Boston
CLASS 7B LIQUIDATING TRUST AGREEMENT
This Class 7B Liquidating Trust Agreement (this "AGREEMENT") is between
Mercury Finance Company (the "DEBTOR" and the "REORGANIZED DEBTOR"), and the
Trustees, pursuant to the Debtor's Second Amended Plan of Reorganization dated
December 30, 1998 (the "PLAN").
RECITALS
FIRST: The Debtor is a debtor-in-possession in a chapter 11
reorganization case, Case No. 98 B 20763 (the "REORGANIZATION
CASE"), currently pending before the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division
(the "COURT").
SECOND: The Debtor has filed the Plan which provides, among other
things, for the complete settlement, satisfaction, and
discharge of the Class 7B Claims, as that term is defined in
the Plan (collectively, the "CLASS 7B CLAIMS"). The Plan has
been confirmed by the Court.
THIRD: The Plan contemplates the creation of a trust, the principal
purpose of which is to implement the Plan's treatment of the
Class 7B Claims asserted against the Debtor.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.01 All capitalized terms used in this Agreement, and not otherwise
defined herein, shall have the meanings ascribed to them by the Plan or the
Bankruptcy Code, which meanings are incorporated herein by this express
reference.
ARTICLE II
DECLARATION OF TRUST
2.01 CREATION AND NAME. There is hereby created a trust, which shall be
known as the "Class 7B Liquidating Trust" (the "TRUST").
2.02 PURPOSE. The purpose for the Trust is to serve as the mechanism to
implement the Plan's treatment of the Class 7B Claims as fairly and
expeditiously as practicable. Accordingly, an attendant purpose of the Trust is
to qualify as a non-reversionary Designated Settlement Fund pursuant to Section
468 of the Internal Revenue Code.
In order to accomplish the foregoing, the Trustees hereby
agree:
(A) to conserve and protect the Trust estate so as to enable
the Trustees to satisfy as fully as possible all Allowed Class
7B Claims in accordance with the terms of the Plan and this
Agreement; and
(B) to administer the Trust and report on its status as set
forth herein or as otherwise required by the Court.
2.03 TRANSFER OF ASSETS; BENEFICIARIES. On the Effective Date, the
Reorganized Debtor hereby transfers and assigns to the Trust, to be held in
trust, for the holders of Allowed Class 7B Claims all of the Debtor's, the
Reorganized Debtor's, and the Estate's rights, title, and interest in and to all
of the following (collectively, the "INITIAL TRUST ASSETS"):
(A) The sum of Five Million Dollars ($5,000,000) in cash which
sum shall be transferred pursuant to the wire transfer
instructions provided by the Securities Claimants' Committee.
(B) All of the Debtor's, the Reorganized Debtor's, and the
Estate's rights, title, and interests in and to any and all of
their respective claims against KPMG Peat Marwick, including
without limitation those relating to, arising from, or on
account of: (i) the announcement on January 29, 1997, that the
Debtor would restate its earnings for certain periods as a
result of accounting irregularities, (b) such accounting
irregularities, and (c) the actions or non-action of KPMG Peat
Marwick with respect to the foregoing or with respect to its
role as auditor of and provider of other services, including
accounting, to the Debtor prior to and at the time of the
announcement of the accounting irregularities, together with
complete and exclusive control of the prosecution and/or
settlement of all such claims against KPMG Peat Marwick and
the sole right to prosecute the same on behalf of and in the
name of the Debtor, the Reorganized Debtor, the Trust, and the
Estate, subject, in each case, to any defenses, rights of
setoff, or counterclaims that KPMG Peat Marwick may have or be
entitled to assert against the Debtor in respect of such
claims (collectively, the "COMPANY KPMG CLAIMS"). The Company
KPMG Claims and attendant prosecution rights shall be deemed
to be assets of the Trust as of the Effective Date.
(C) The sum of Two Hundred Fifty Thousand Dollars
($250,000.00), in cash which sum shall be transferred pursuant
to the wire transfer instructions provided by the Securities
Claimants' Committee, for fees and costs to be incurred in
connection with the administration of the Trust.
In addition to the Initial Trust Assets, other assets may be transferred to the
Trust. These assets may and shall include any proceeds received by the Trust as
a result of the Company KPMG Claims as well as any proceeds or claims received
by the Trust pursuant to the settlement agreement dated as of December 23, 1998,
a copy of which is attached as Exhibit ___ to the Disclosure Statement (defined
in Section 8.15 of the Plan as the "CLASS SETTLEMENT AGREEMENT") or otherwise
pursuant to the Plan or agreements implementing the Plan. All assets transferred
to the Trust which are not included within the definition of the Initial Trust
Assets are referred to in this Agreement and in the Plan as the "SUBSEQUENT
TRUST ASSETS". The Initial Trust Assets and the Subsequent Trust Assets are
collectively referred to in this Agreement and in the Plan as the "TRUST
ASSETS".
2.04 FURTHER ASSURANCES; COOPERATION. The Debtor and the Reorganized
Debtor shall, and shall use their reasonable best efforts to cause their
respective current or former officers, directors, and employees to, (i)
cooperate fully in the prosecution of the Company KPMG Claims by or on behalf of
the Trust, and (ii) provide and transfer to the Trust all such documents and
information relating to the Company KPMG Claims as may be in their respective
possession, custody, or control, and (iii) provide and transfer to the Trust all
such information, claims files, and other documentation relating to the Class 7B
Claims as may be in their respective possession, custody, or control. The Debtor
and the Reorganized Debtor shall take such actions and deliver such
documentation as the Trustees may reasonably require to effectuate, perfect,
confirm, and evidence the transfer and assignment to the Trust of the Initial
Trust Assets and the validity of such transfer and assignment. All parties to
this Agreement shall take all actions as are reasonably required with respect to
any of the Trust Assets or otherwise in order to effectuate the purpose of this
Trust.
ARTICLE III
TRUSTEES
3.01 NUMBER. There shall be no less than three (3), but no more than
seven (7), Trustees of the Trust. The initial Trustees are the same Persons who
currently serve as members of the Securities Claimants' Committee approved by
the Court and who execute the signature page hereof (collectively, the "INITIAL
TRUSTEES").
3.02 TERMS OF SERVICE.
(A) Trustees shall serve for the duration of the Trust,
subject to his, her, or its earlier (i) death, (ii)
resignation, (iii) mandatory disqualification, or (iv) with
approval of the Court, removal for good cause by the
Co-Trustees.
(B) Any Trustee may resign at any time by written notice to
each of the remaining Trustees and the Court and such other
parties as may be required by applicable law. Such notice
shall specify a date when such resignation shall take effect
which, if possible, shall not be less than thirty (30) days
after the date such notice is given.
(C) For purposes of this Agreement, "MANDATORY
DISQUALIFICATION" of a Trustee will occur in the event that
the Class 7B Claim asserted by such Trustee is either (i)
disallowed in its entirety, or (ii) allocated a distribution
in an amount less than Fifteen Thousand Dollars ($15,000.00),
whether by virtue of a consensual allowance/allocation
approved by the Court or a decision by the Arbitrator.
3.03 APPOINTMENT OF SUCCESSOR TRUSTEE.
(A) If at any time after the Effective Date there are less
than three (3) Trustees, by virtue of the resignation,
removal, mandatory disqualification, or death of a Trustee or
Trustees, or otherwise, within ten (10) days thereof the
remaining Trustees shall elect a successor Trustee or Trustees
subject to the Court's approval.
(B) Upon the acceptance of office by any successor Trustee,
all rights, titles, duties, powers and authority of the
predecessor Trustee under this Agreement shall be vested in
and undertaken by the successor Trustee without any further
act being required. No successor Trustee shall be liable
personally for any act or omission of his, her, or its
predecessor.
3.04 LIABILITY OF TRUSTEES. Except as otherwise provided by applicable
law: (i) no Trustee shall be liable to the Trust or to any Person holding a
Class 7B Claim, except for his, her, or its own willful misconduct; and (ii)
except to the extent any act or failure to act on the part of a Trustee shall
constitute willful misconduct; (a) no Trustee shall be liable for any act or
omission of any Co-Trustee or any officer, agent, or employee of the Trust; (b)
the Trustees shall be entitled to rely upon the advice of counsel or other
advisors to the Trust or the Trustees, reports prepared by the Class 7B Claims
Administrator, and information provided by any other Person employed by the
Trust; and (c) all actions taken and determinations made the by the Trustees,
unless otherwise expressly provided in this Agreement, the Plan, or an order of
the Court, shall be final and binding upon all Persons having any interest in
the Trust.
3.05 REIMBURSEMENT OF TRUSTEES' EXPENSES. Each Trustee shall be
reimbursed from the Trust for his, her, or its reasonable expenses incurred in
the performance of his, her, or its duties as Trustee hereunder, provided that
any request for such reimbursement is approved by the Court after such notice
and hearing as the Court may require, and provided, further, that any legal fees
and costs incurred by such an individual Trustee, or any other Class 7B
claimant, on its own account and not on behalf of the Trust shall not be paid
from Trust Assets but shall be paid from the allocation such Trustee or Class 7B
claimant receives pursuant to the allowance/allocation procedures set forth in
this Agreement.
3.06 INDEMNIFICATION.
(A) Each Trustee or former Trustee shall be indemnified by the
Trust, to the fullest extent that a corporation organized
under ____________ law is entitled to indemnify its directors,
against any and all liabilities, expenses, claims, damages, or
losses incurred by him, her, or it in the performance of his,
her, or its duties hereunder.
(B) Any indemnification under Section 3.06 of this Agreement
shall be made by the Trust upon a determination made in
accordance with the provisions of the applicable ____________
statutes.
(C) Reasonable expenses, costs, and fees, including attorneys'
fees, incurred by or on behalf of a Trustee in connection with
any action, suit, or proceeding, whether civil,
administrative, or arbitrative, commenced against such Trustee
regarding his, her, or its performance hereunder, may be paid
by the Trust in advance of the final disposition thereof upon
receipt of any undertaking by or on behalf of such Trustee to
repay such amount if it shall be determined ultimately that
such Trustee is not entitled to be indemnified by the Trust.
(D) The Trustees shall have the power to cause the Trust to
indemnify the employees and agents of the Trust to the same
extent as provided in this Section 3.06 with respect to the
Trustees.
(E) The Trustees may purchase and maintain reasonable amounts
and types of insurance on behalf of a Person who is or was a
Trustee, employee, or agent of the Trust against liability
asserted against or incurred by such Person arising from his,
her, or its status as such Trustee, employee, or agent.
3.07 TRUSTEES' LIEN. The Trustees shall have a first priority lien upon
the Trust Assets to secure the payment of any amounts payable to them pursuant
to Section 3.05 or Section 3.06 of this Agreement.
3.08 ACTIONS BY TRUSTEES. Except as otherwise expressly set forth in
this Agreement, all decisions and determinations by the Trustees in the
performance of their duties or any other action under this Agreement shall be
made by the vote of a majority of the Trustees then in office (not simply a
majority of the Trustees who do vote) following prior written notice to all
Trustees.
3.09 BOND. The Trustees shall not be required to post any bond or other
form of surety unless otherwise ordered by the Court.
ARTICLE IV
POWERS, TRUST ADMINISTRATION
4.01 POWERS.
(A) Subject to the limitations set forth in this Agreement,
the Trustees shall have the power to take any and all such
actions as in the judgment of the Trustees are necessary to
effectuate the purposes of the Trust, including, without
limitation, each power expressly granted in Section 4.01(c) of
this Agreement, any power reasonably incidental thereto, and
any trust power now or hereafter permitted under the law of
the State of ____________ that is not inconsistent with the
provisions of this Trust.
(B) Except as expressly provided in the Plan or in this
Agreement, the Trustees may but need not obtain the order or
approval of the Court or any other court in the exercise of
any power or discretion conferred hereunder, or account to the
Court or any other court in the absence of a breach of trust.
(C) Without limiting the generality of Section 4.01(a) above,
the Trustees shall have the power to:
(I) Receive and hold the Trust Assets, and invest the
same, from time to time, in accordance with and,
subject to the limitations set forth in Section 5.02
of this Agreement;
(II) Take such actions on behalf of the Trust as may
be required in connection with the Class Settlement
Agreement;
(III) Devise, implement, supervise, modify, and
administer procedures for the allowance of Class 7B
Claims and the allocation of the assets of the Trust
among the holders of Allowed Class 7B Claims, subject
to the limitations imposed by this Agreement or the
Plan;
(IV) Utilize and distribute the Trust Assets to
satisfy Allowed Class 7B Claims in accordance with
procedures set forth in this Agreement and the Plan;
(V) Hire such employees, administrative personnel or
claims administrators, and engage such legal,
financial, accounting, investment, and other
advisors, custodians of assets, including without
limitation the Arbitrator and a Mediator, if any, as
those terms are defined below in this Agreement, and
agents as the business of the Trust requires, and to
delegate to such Persons such powers, authority, and
discretion as the Trustees, in their discretion deem
advisable or necessary to carry out the terms of the
Trust (this Section 4.01(c)(v) is not intended to,
and shall not, include the hiring of any legal,
financial, accounting, or any other type of advisors
or experts, by any Class 7B claimant or group of
Class 7B claimants for purposes of proving a Claim,
defending objections thereto, or asserting objections
thereto);
(VI) Compensate, utilizing the Trust Assets, such
employees, legal, financial, accounting, investment,
and other advisors, and agents, described in Section
4.01(c)(v) above, provided, however, that
accountants, lawyers, and investment advisors engaged
by the Trustees on behalf of the Trust to represent
the interests of the Trust shall be compensated only
with the approval of the Court after such notice and
hearing as the Court may require (this Section
4.01(c)(vi) is not intended to, and shall not,
include the utilization of any Trust Assets to
compensate any legal, financial, accounting, or any
other type of advisors or experts, retained by any
Class 7B claimant, any group of Class 7B claimants,
any individual members of the Securities' Claimants
Committee, or individual Trustees for the purpose(s)
of representing their own respective interests);
(VII) Reimburse, utilizing the Trust Assets, the
Trustees, subject to Section 3.05 above, and such,
employees, legal, financial accounting, investment
and other advisors, and agents, described in Section
4.01(c)(v) above, for all properly documented out of
pocket costs and expenses incurred by such Persons in
connection with the performance of their duties
hereunder;
(VIII) Make such decisions as they may deem
appropriate, and in accordance with the voting
procedures set forth in Section 4.03 below, in
connection with the prosecution, non-prosecution, or
resolution of the Company KPMG Claims or claims
constituting Trust Assets;
(IX) Apply to the Court for instructions to the
Trustees as they may deem proper or necessary in
connection with the administration of the Trust or
the performance of their duties;
(X) In accordance with Section 3.06, indemnify (and
purchase insurance indemnifying) Trustees and
employees, agents, and representatives of the Trust
to the fullest extent that a corporation organized
under ____________ law is entitled to indemnify its
directors, officers, employees, agents, and
representatives;
(XI) Delegate any or all of the discretionary powers
and authority herein conferred at any time with
respect to the investment of the Trust Assets to any
one or more recognized individual or institutional
advisors or investment managers acceptable to the
Trustees, and to compensate and reimburse, in
accordance with Section 4.01(c)(vi) and Section
4.01(c)(vii) above, such advisors and managers for
their services;
(XII) Establish such funds, reserves, and accounts
within the Trust Assets as may be deemed by the
Trustees to be useful in carrying out the purposes of
the Trust;
(XIII) Institute any action or proceeding at law or
in equity for the collection of any sums due the
Trust, or otherwise to advance the interests of the
Trust in a manner not inconsistent with the terms of
the Plan, prosecute any such action or proceeding to
judgment or final decree, enforce any such judgment
or final decree, and collect in any manner provided
by law the monies adjudged or decreed to be payable;
provided, however, that, so long as (A) the Debtor
has timely and fully transferred the Initial Trust
Assets into the Trust, and (B) all assets required to
be transferred to the Trust pursuant to the
Settlement Agreement have been timely and fully into
the Trust, regardless of any deficiency in the Trust
or any other reason, the Trust may not institute any
action or proceeding at law or in equity against the
Debtor, or against any other Person expressly
released pursuant to the terms of the Plan, for
collection of any sums in respect of Class 7B Claims;
(XIV) Draft and amend bylaws governing the operation
of the Trust, provided that any such bylaws are not
inconsistent with any of the provisions contained in
this Agreement;
(XV) Do all other acts and things not inconsistent
with the provisions of this Agreement and the Plan
which the Trustees may deem reasonably necessary or
desirable for the proper administration of the Trust,
in the same manner and to the same extent as a Person
might or could do with respect to his, her, or its
own property, subject to the limitations of
applicable law governing the conduct of fiduciaries.
4.02 ADMINISTRATION.
(A) The Trustees shall conduct the business of the Trust in
accordance with the provisions of this Agreement.
(B) The Trust shall use a calendar year accounting year.
(C) In the event that the duration of the Trust exceeds one
year, the Trustees shall cause to be prepared and filed with
the Court as soon as available and in any event within one
hundred twenty (120) days following the end of each fiscal
year, an annual report containing financial statements of the
Trust, including without limitation, a balance sheet of the
Trust as of the end of such fiscal year and a statement of
operations for such fiscal year audited by a recognized firm
of independent certified public accountants acceptable to and
selected by the Trustees and certified by such firm as to
fairness of presentation and consistency.
(D) Simultaneously with the earlier to occur of: (i) the
Trustees' application to the Court for an order terminating
the Trust, or (ii) the delivery of the financial statements
referred to in Section 4.02(c) above, the Trustees shall cause
to be prepared and filed with the Court a report containing a
summary in reasonable detail of the following information with
respect to the period covered by such application or such
financial statements, as the case may be:
(I) The number of Class 7B Claims liquidated and the
average amount per Allowed Class 7B Claim paid or
payable;
(II) The investment income earned by the Trust; and
(III) The amount of expenses incurred by the Trust.
All materials required to be filed with the Court by this
Section shall be available for inspection by the public in
accordance with procedures established by the Court.
(E) The Trustees shall cause to be filed timely such income
tax and other returns and statements as are required to comply
with applicable provisions of the Internal Revenue Code and of
any state law and the regulations promulgated thereunder. The
Trust shall be responsible for paying taxes and any other
obligations or liabilities of any and all kinds whatsoever
which at any time are lawfully levied, assessed upon, or
become payable in respect of the Trust or the Trust Assets.
The Trustees shall utilize Trust Assets to pay such taxes. The
Trustees shall make any election and provide any information
as may be necessary to comply with the requirement of a
Designated Settlement Fund under Section 468B(d)(2) of the
Internal Revenue Code.
4.03 COMPANY KPMG CLAIMS. The Debtor will use its best efforts to
obtain a tolling of the statute of limitations for the Company KPMG Claims until
sixty (60) days after the allowance and allocation process set forth below has
become final. Thereafter, control and all decisions regarding the Company KPMG
Claims or other claims constituting Subsequent Trust Assets, including without
limitation the filing (or non-filing), prosecution, and settlement thereof,
shall be made by the vote of the representative(s) of the holders of Allowed
Class 7B Claims holding at least a majority in dollar amount of all Allowed
Class 7B Claims (singly a "REPRESENTATIVE" or collectively "REPRESENTATIVES")
which Representative(s) may be, but is/are not required to be, a Trustee or
Trustees of the Trust, provided, however, that any decision (i) to release, or
(ii) to settle the Company KPMG Claims or claims constituting Subsequent Trust
Assets, in whole or in part, or (iii) to dismiss, if suit has been filed, shall
be submitted to the Court for approval after notice and hearing as the Court may
require, and provided, further, that all proceeds recovered, if any, as a result
of the resolution of the Company KPMG Claims or claims constituting Subsequent
Trust Assets shall remain Trust Assets and be distributed in accordance with
Section 6.04 of this Agreement. The Representative(s) shall provide status
reports to the Trustees no less frequently than semi-annually regarding actions
taken and decisions made with respect to the Company KPMG Claims and claims
constituting Subsequent Trust Assets.
ARTICLE V
ACCOUNT PAYMENTS AND INVESTMENTS
5.01 ACCOUNTS. The Trustees may, from time to time, create such
accounts and reserves within the Trust Assets as they may deem necessary,
prudent, or useful in order to provide for the payment of expenses and Class 7B
Claims and may, with respect to any such account or reserve, restrict the use of
monies therein.
5.02 INVESTMENTS. The Trustees shall cause the monies held in the Trust
to be invested and reinvested in (i) United States Treasury Bills, (ii) other
similar United States government obligations secured by the full faith and
credit of the United States including United States Treasury Notes and United
States Treasury Bonds, (iii) federally insured bank certificates of deposit, or
(iv) any combination of the foregoing.
ARTICLE VI
PROCEDURES FOR CLAIMS' ALLOWANCE,
ALLOCATION AND DISTRIBUTION
6.01 REQUESTS FOR ALLOWANCE/ALLOCATION. In connection with confirmation
of the Plan, the Debtor sought and obtained approval of the Court for the form
of notice to be sent to parties who may hold Claims in Class 7B (defined in
Section 8.15 of the Plan and referred to in this Agreement as "NOTICE"), as well
as the form, the timing, and the place for publication of such notice, and
caused such notice to be sent and published as ordered by the Court. Prior to
seeking such approval from the Court, the Debtor had obtained the review and
approval from the Securities Claimants' Committee of the forms of notice and the
place for publication thereof. The forms of notice, among other things, advise
Class 7B claimants that to be eligible to participate in the consensual
allowance process described below or obtain any distribution from the Trust,
they, or their representatives (if they are a member of a class described in a
class action pending against the Debtor on the Petition Date or are individual
holders of Class 7B claims whose claims arise from their purchase of Old Common
Stock before January 29, 1997, and who continue to hold such Old Common Stock as
of the Distribution Record Date (defined in Section 8.15 of the Plan and
referred to in this Agreement as the "OLD AND COLD HOLDERS"), must submit a
Request for Allowance/Allocation (defined in Section 8.15 of the Plan and
referred to in this Agreement as a "REQUEST FOR ALLOWANCE") prior to the date
set forth below and in accordance with procedures set forth below.
(A) DATE BEFORE WHICH REQUEST FOR ALLOWANCE MUST BE FILED. In
addition to the provisions which the Court may require, the
Notice shall notify such parties that in order to be eligible
for any distribution from the Trust, they (or their
representatives if they are either a member of a class
described in a class action pending against the Debtor on the
Petition Date or an Old and Cold Holder) must file a Request
for Allowance in the form approved by the Court with the
Claims Center on or before April 9, 1999. For purposes of the
filing of a Request for Allowance a representative of a class
may include the class representative, or if the class has not
been certified or no such representative has been appointed,
lead counsel for plaintiffs in such class action. For purposes
of the filing of a Request for Allowance, except to the extent
that the Court determines at the time of the confirmation of
the Plan that the interests of the Old and Cold Holders are
represented in pending class actions, a representative of the
Old and Cold Holders shall be approved by the Court at the
time of the confirmation of the Plan and may file a Request
for Allowance on behalf of the class of Old and Cold Holders.
(B) EVIDENCE TO ACCOMPANY REQUEST FOR ALLOWANCE. Any Request
for Allowance filed on behalf of a holder of a Class 7B Claim
shall be accompanied by true and correct copies of
confirmations, brokerage account statements, or other
sufficient evidence of: (i) the date(s) of purchase(s), (ii)
the purchase price(s), (iii) the date(s) of sale(s), (iv) the
sale price(s), and (v) the number of shares of stock purchased
or sold on such date(s) and at such price(s). Any Request for
Allowance filed on behalf of a class of holder of Class 7B
Claims or by the representative of the Old and Cold Holders
shall be accompanied by evidence sufficient to allow the
Arbitrator described below to determine the basis for an award
with respect to allowance and/or allocation of the Class 7B
Claims contained in such class.
(C) NO PRIORITY; NO AUTOMATIC ALLOWANCE. The filing of a
Request for Allowance will not automatically result in the
allowance of the Class 7B Claim described therein. No Allowed
Class 7B Claim shall be afforded any priority over any other
Allowed Class 7B Claim in distribution. All Claims for which a
Request for Allowance is filed shall be subject to objection
and the allowance and allocation process in accordance with
the procedures established by the Trustees.
(D) FORWARDING REQUESTS FOR ALLOWANCE. As soon as practicable
after April 9, 1999, the Reorganized Debtor shall cause the
Claims Center to forward copies of all Requests for Allowance
filed on behalf of claimants asserting a right to be included
in Class 7B to the Trustees, c/o the Class 7B claims
administrator selected by the Securities Claimants' Committee
(the "CLASS 7B CLAIMS ADMINISTRATOR"). Prior to or on the
Confirmation Date, the Securities Claimants' Committee
selected the Class 7B Claims Administrator and provided notice
of the selection to the Debtor, the United States trustee,
counsel for the Unsecured Creditors' Committee, and counsel
for the Equity Committee.
6.02 SELECTION OF ARBITRATOR. Prior to or on the Confirmation Date, the
Securities Claimants' Committee shall have (i) selected an arbitrator (the
"ARBITRATOR") to serve in connection with allowance of Class 7B Claims and the
allocation of the Trust Assets among the various classes of claimants
represented in class actions which were pending against the Debtor on the
Petition Date and other holders of Allowed Claims in Class 7B, and (ii) provided
notice of the selection to the Debtor, the United States trustee, counsel for
the Unsecured Creditors' Committee, and counsel for the Equity Committee. At
confirmation of the Plan, the selection of the Arbitrator was presented to and
approved by the Court. The reasonable expenses of the Arbitrator as well as such
fees as have been agreed upon between the Arbitrator and the Trustees in writing
shall be paid first from the $250,000.00 of funds provided by Section 5.05 of
the Plan for the fees and costs incurred in connection with the administration
of the Trust, and, if such funds have been exhausted, then from the Trust
Assets. The arrangements relating to compensation and reimbursement of the
Arbitrator were presented to and approved by the Court at the hearing on
confirmation of the Plan.
6.03 ALLOWANCE/ALLOCATION/ARBITRATION PROCEDURES. Within fifteen (15)
days of the Confirmation Date, the Trustees shall establish: (i) a procedure for
resolving, on a consensual basis, the allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims, and
(ii) a process for the arbitration of allowance of Class 7B Claims and
allocation of Trust Assets among holders of the Allowed Class 7B Claims in the
event that there is no resolution on a consensual basis. If the Trustees
determine that the services of a mediator (a "MEDIATOR") would be of assistance
in the efforts to attain a consensual allowance and allocation, they may engage
a Mediator for that purpose.
(A) CONSENSUAL ALLOWANCE AND ALLOCATION. If, as a result of
the efforts of the Trustees, a Mediator if any, and any
claimants who indicated on their Requests for Allowance a
desire to provide input regarding a consensual allowance, a
proposal with respect to a consensual allowance of Class 7B
Claims and allocation of Trust Assets on account of such
Claims is accepted by a unanimous vote of the Trustees then in
office, in accordance with procedures adopted by the Trustees,
then the agreement shall be submitted by the Trustees to the
Court for approval, upon such notice as the Court shall order.
(B) NO CONSENSUS; ARBITRATION. If, on or before May 14, 1999,
or such later date as the Trustees shall establish, no motion
is filed with the Court seeking approval of a consensual
allowance of Class 7B Claims and allocation of Trust Assets on
account of such Claims, then an arbitration of any unresolved
issues relating to the allowance of Claims in Class 7B and the
allocation of the assets of the Trust shall be conducted by
the Arbitrator as soon as practicable, in accordance with such
rules as the Trustees shall establish. The arbitration shall
be completed on or before July 31, 1999.
(I) BINDING ARBITRATION. The arbitration shall be
binding in nature, and the only grounds of any
application to vacate or modify any decision or award
of the Arbitrator shall be that the Arbitrator was
other than a neutral party, that the award was
obtained by fraud, or that the award constituted an
abuse of discretion or violated public policy.
(II) POST-AWARD PROCEEDINGS. Any application to
vacate or modify an award of the Arbitrator shall be
only to the Court, and any notice of appeal from an
such award must be filed within fourteen (14) days
after the Arbitrator shall have provided a copy of
his award to the Trustees and any party to the
arbitration, via facsimile to each of the Trustees
and via overnight delivery service in a method
requiring a receipt therefor or via certified mail
return receipt requested to any other party to the
arbitration. In the event such an application is
filed, with respect thereto the Arbitrator may,
utilizing Trust Assets, engage counsel to defend the
award in connection with any such application.
(III) EXPENSES OF POST-AWARD PROCEEDINGS. A party
filing an application to vacate or modify the award
of the Arbitrator shall be responsible for his, her,
or its own costs, expenses and attorneys' fees. In
addition, if an application is unsuccessful in that
the party appealing the award does not obtain a
modification or the vacation of the award of the
Arbitrator, the party making the application shall
bear all expenses of the application, including the
reasonable fees and expenses incurred in connection
therewith by the Arbitrator.
6.04 DISTRIBUTION. The Trustees shall distribute the assets of the
Trust then held in the Trust, net of costs and expenses properly chargeable to
the Trust Assets under the Plan or this Agreement, as soon as practicable after
either the award of the Arbitrator or order of the Court approving a consensual
allocation of assets has become final and not subject to modification, reversal
or appeal, and shall make such distribution in accordance with such arbitration
award or such order of the Court. If, subsequent to such distribution, the Trust
shall acquire additional Trust Assets, then as soon as practicable after receipt
by the Trust, the Trustees shall distribute those additional Trust Assets, net
of costs and expenses properly chargeable to the Trust Assets under the Plan or
this Agreement, (including net of attorneys' fees and costs incurred in
connection with obtaining such additional assets) according to the same
allocation determined previously by consensus or arbitration, as the case may
be. With respect to any distribution of the Trust Assets to Allowed Class 7B
Claims which are included within a class action against the Debtor which was
pending on the Petition Date, the Trustees shall make such distribution by
delivering it to an escrow account designated by lead counsel for that class in
such class action and such distribution shall remain in that escrow account
until such time as (i) such lead counsel has been able to apply to the court in
which the respective class action is pending as to the matter of a method of
final distribution and an award of attorneys' fees and costs, and (ii) any order
on such application has become final. Attorneys for the various Class 7B
claimants intend to apply, to the respective courts in which the respective
class actions are pending, for an award of attorneys' fees in an amount not to
exceed one-third of the amount allocated and distributed from the Trust to those
holders or the group of holders of Allowed Class 7B Claims who are actually
represented by the respective attorneys, provided that if a holder of an Allowed
Class 7B Claim is not a member of a class action or other group but is
represented individually on its separate claims, then attorneys' fees for such
individual representations will be pursuant to the respective retainer and fee
arrangements.
ARTICLE VII
GENERAL PROVISIONS
7.01 IRREVOCABILITY. The Trust is irrevocable. Neither the Debtor, nor
the Reorganized Debtor, nor its successors in interest, nor any Affiliates
thereof, hold or may hold any beneficial interest in the income or corpus of the
Trust.
7.02 TERMINATION.
(A) Following either (i) a final determination of the Company
KPMG Claims and other claims constituting Trust Assets,
whether by virtue of prosecution or settlement thereof, or
(ii) a decision by the Representatives not to take any action
with respect to the Company KPMG Claims and other claims
constituting Trust Assets, at such time as all Trust Assets,
including any and all sums resulting from prosecution or
settlement of the Company KPMG Claims or other claims
constituting Trust Assets, have been fully and finally
distributed, the Trustees shall apply to the Court for an
order of the Court terminating the Trust, upon such notice as
the Court shall order.
(B) Upon the Court's order terminating the Trust becoming
final, except to the extent otherwise provided in such order,
the Trust shall be terminated, and the Trustees shall be
discharged of all responsibilities with respect to the Trust.
7.03 SEVERABILITY. Should any provision of this Agreement be determined
to be unenforceable, such determination shall in no way limit or affect the
enforceability and operative effect of any and all other provisions of this
Agreement.
7.04 HEADINGS. The headings used in this Agreement are inserted for
convenience only and shall not affect the construction of any provision of this
Agreement.
7.05 AMENDMENT. When necessary to carry out the purposes of the Trust,
this Agreement may be amended only by an instrument signed by each of the
Trustees then in office; provided, however, that any such amendment must be
consistent with the Plan; and provided further, that such amendment shall become
effective only with the approval of the Court and after notice and a hearing as
the Court may direct.
7.06 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but which counterparts
together shall constitute but one and the same instrument.
7.07 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Settlor, the Trust, and the
Trustees, and their respective successors and assigns, except that neither the
Settlor nor the Trust nor any Trustee may assign or otherwise transfer any of
his, her, or its rights or obligations under this Agreement.
7.08 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of ____________.
7.09 NO ADVERSE ACTION. No Trustee shall take any action that will
adversely affect the qualification of the Trust as a "Designated Settlement
Fund" within the meaning of Section 468B(d)(2) of the Internal Revenue Code.
IN WITNESS WHEREOF, the Settlor and the Initial Trustees have caused
this Agreement to be duly executed by them or their respective authorized
officers.
SETTLOR:
DATED:____________ MERCURY FINANCE COMPANY,
INC.
BY:_________________________
TITLE:________________________
TRUSTEES:
DATED:____________ SHRINERS HOSPITALS FOR
CHILDREN
BY:__________________________
TITLE:_________________________
DATED:____________ MINNESOTA STATE BOARD OF INVESTMENT
BY:___________________________
TITLE:_________________________
DATED:____________
------------------------------
JOSEPH DANIELLE
BY:___________________________
TITLE:_________________________
DATED:____________ T. ROWE PRICE
BY:___________________________
TITLE:_________________________
DATED:____________
------------------------------
MICHAEL DLOOGATCH
BY:___________________________
TITLE:_________________________
DATED:____________ JAMES FERREE
BY:___________________________
TITLE:_________________________
DATED:____________ DAVID J. ISAAK
BY:___________________________
TITLE:_________________________
