SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
------ of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d)
------ of the Securities Exchange Act of 1934
For the transition period from ______ to ______
Commission File Number 0-19604
-------
AAMES FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-4340340
________ ___________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3731 WILSHIRE BOULEVARD, 10TH FLOOR, LOS ANGELES, CALIFORNIA 90010
------------------------------------------------------------------
(Address of Registrant's principal executive offices including ZIP Code)
(213) 351-6100
----------------
(Registrant's telephone number
including area code)
NO CHANGE
----------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
At March 31, 1996, Registrant had 8,992,367 shares of common stock outstanding.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE NO.
PART I Financial Information 3 - 16
1. Financial Statements 3 - 7
2. Management's Discussion and Analysis of
Financial Condition 8 - 16
PART II Other Information 17
6. Exhibits and Reports on Form 8-K 17
Signature Page 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ -------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Excess servicing gain $20,976,000 $6,718,000 $48,889,000 $15,130,000
Commissions 4,214,000 3,579,000 14,430,000 12,645,000
Loan service 5,371,000 2,157,000 13,172,000 5,775,000
Fees and other 2,654,000 1,909,000 7,819,000 5,894,000
----------- ---------- ----------- -----------
Total revenue 33,215,000 14,363,000 84,310,000 39,444,000
----------- ---------- ----------- -----------
Expenses:
Compensation and related
expenses 8,451,000 4,597,000 22,603,000 13,252,000
Sales and advertising costs 4,943,000 2,580,000 12,430,000 6,831,000
General and administrative
expense 3,828,000 1,782,000 8,926,000 5,291,000
Interest expense 2,326,000 1,274,000 5,303,000 2,297,000
----------- ---------- ----------- -----------
Total expenses 19,548,000 10,233,000 49,262,000 27,671,000
----------- ---------- ----------- -----------
Income before income taxes 13,667,000 4,130,000 35,048,000 11,773,000
Provision for income taxes 5,732,000 1,730,000 14,713,000 4,886,000
----------- ---------- ----------- -----------
Net income $7,935,000 $2,400,000 $20,335,000 $6,887,000
=========== ========== =========== ===========
Net income per share:
Primary $0.85 $0.41 $2.19 $1.18
=========== ========== =========== ===========
Fully Diluted $0.80 $0.41 $2.15 $1.18
=========== ========== =========== ===========
Weighted average number
of shares outstanding:
Primary 9,359,000 5,878,000 9,294,000 5,829,000
=========== ========== =========== ===========
Fully Diluted 10,272,000 5,878,000 9,599,000 5,829,000
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $42,814,000 $20,359,000
Loans held for sale, at cost which approximates market 62,085,000 23,775,000
Accounts receivable, less allowance for
doubtful accounts of $425,000 and $360,000 6,077,000 6,090,000
Excess servicing receivable 95,155,000 42,078,000
Mortgage servicing rights 6,899,000
Residual assets 32,613,000 14,882,000
Equipment and improvements, net 4,208,000 2,063,000
Prepaid assets and other 12,828,000 5,376,000
------------ ------------
Total assets $262,679,000 $114,623,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Amounts outstanding under warehouse agreements $ $
Notes payable and obligations under capital leases 138,071,000 23,144,000
Accounts payable and accrued expenses 7,565,000 6,141,000
Accrued compensation and related expenses 2,953,000 1,703,000
Income taxes payable 14,055,000 3,588,000
------------ ------------
Total liabilities 162,644,000 34,576,000
------------ ------------
Stockholders' equity:
Preferred Stock, par value $.001 per
share, 1,000,000 shares authorized;
none outstanding
Common Stock, par value $.001 per share
50,000,000 and 10,000,000 shares authorized;
8,992,367, and 8,813,979 shares outstanding 9,000 9,000
Additional paid-in capital 63,534,000 61,869,000
Retained earnings 36,492,000 18,169,000
------------ ------------
Total stockholders' equity 100,035,000 80,047,000
------------ ------------
Total liabilities and stockholders' equity $262,679,000 $114,623,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Operating activities:
Net income $20,335,000 $6,887,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 640,000 430,000
Deferred income taxes 10,938,000 2,555,000
Deferred rent (100,000) (62,000)
Loans originated or purchased (571,082,000) (262,665,000)
Principal collected and proceeds from
sale of mortgage loans 532,772,000 259,372,000
Provision for losses on receivables
Excess servicing gain (61,900,000) (21,518,000)
Excess servicing amortization 8,823,000 2,932,000
Mortgage servicing rights (7,294,000)
Mortgage servicing rights amortization 395,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 78,000 803,000
Prepaid expenses and other (7,452,000) (2,993,000)
Residual assets (17,731,000) (6,779,000)
(Decrease) increase in:
Accounts payable and accrued expenses 1,392,000 (860,000)
Accrued compensation and
related expenses 1,250,000 348,000
Income taxes payable (471,000) (821,000)
------------ ------------
Net cash used in operating activities (89,407,000) (22,371,000)
------------ ------------
Investing activities:
Purchases of property and equipment (2,715,000) (736,000)
------------ ------------
Net cash used in investing activities (2,715,000) (736,000)
------------ ------------
Financing activities:
Proceeds from sale of stock or exercise of options 1,665,000 18,000
Proceeds from borrowing 115,000,000 20,500,000
Amounts outstanding under warehouse agreements (4,358,000)
Dividends paid (2,015,000) (1,306,000)
Payments on bank notes and long term debt (73,000) (309,000)
------------ ------------
Net cash provided by financing activities 114,577,000 14,545,000
------------ ------------
Net (decrease) increase in cash 22,455,000 (8,562,000)
Cash and cash equivalents at beginning of period 20,359,000 16,513,000
------------ ------------
Cash and cash equivalents at end of period $42,814,000 $7,951,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AAMES FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
- - ------------------------------
The consolidated financial statements of Aames Financial Corporation, a
Delaware corporation, and its subsidiaries (collectively, the "Company")
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted.
The consolidated financial statements include the accounts of Aames
Financial Corporation and all of its subsidiaries after eliminating all
significant intercompany transactions and reflect all normal, recurring
adjustments which are, in the opinion of management, necessary to present a fair
statement of the results of operations of the Company for the interim periods
reported. The results of operations for the Company for the three and nine
months ended March 31, 1996 are not necessarily indicative of the results
expected for the full fiscal year.
NOTE 2: IMPLEMENTATION OF NEW ACCOUNTING STANDARD
- - --------------------------------------------------
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 122, "Accounting for Mortgage
Servicing Rights," which amends SFAS No. 65. The Company elected to adopt SFAS
No. 122 for fiscal year 1996, including an adjustment of $933,000 or $0.10 per
share to its originally reported earnings for its first fiscal quarter. SFAS
No. 122 prohibits retroactive application to fiscal years prior to adoption.
Accordingly, certain information appearing in the Company's financial statements
for fiscal 1995 and before are based on the prior standard and such results are
not directly comparable to the results for fiscal 1996 with respect to the
specific items covered by SFAS No. 65 as amended by SFAS No. 122.
The effect of adopting SFAS No. 122 was to increase the net income of the
Company as reported in the Company's financial statements for the three and nine
months ended March 31, 1996 by $1.4 million or $0.14 per weighted average share
and $3.6 million or $0.37 per weighted average share, respectively, each on a
fully diluted basis.
SFAS No. 122 amends SFAS No. 65 by requiring mortgage banking enterprises,
such as the Company, to recognize mortgage servicing rights ("MSR's") as assets
separate from the mortgage loans to which the MSR's relate. Under SFAS No. 65,
the Company had allocated the entire cost of originating or purchasing a
mortgage loan to the carrying value of such mortgage loan. SFAS No. 122
requires the Company to allocate the total cost of originating or purchasing a
mortgage loan between the mortgage loan asset and the related MSR asset based on
their respective fair values. To the extent that a portion of the total cost of
originating or purchasing mortgage loans has been allocated to the MSR's related
to such loans, relatively greater gains were recognized on the securitization
and sale of mortgage loans because of the reduction of the Company's basis in
such loans as a result of such allocations. However, the Company's basis in the
MSR's is amortized over the lives of the loans to which the MSR's relate,
reducing servicing income in future periods.
<PAGE>
AAMES FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: IMPLEMENTATION OF NEW ACCOUNTING STANDARD
(continued)
To determine the fair value of MSR's, the Company estimates the expected
future net servicing revenue based on common industry assumptions (since market
prices for MSR's under comparable servicing sales contracts are not available to
the Company), as well as on the Company's historical experience.
In determining servicing value impairment at March 31, 1996, the mortgage
loans in the Company's servicing portfolio related to the capitalized MSR's were
segregated by their predominant risk factors. The Company has determined those
risk factors to be loan type (fixed or adjustable), investor type and date of
origination. Such loans were then valued, using the same model as was used
originally to determine their fair value at the date of their origination or
purchase, using current assumptions. The calculated value was then compared to
the book value to determine if a reserve for impairment was required. The
Company determined that no reserve for impairment was required as of March 31,
1996.
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
GENERAL
The results of operations for the three and nine months ended March 31,
1996 reflect the substantial growth of the Company's purchased loan programs and
the expansion of its retail loan office network. During fiscal 1994 the Company
implemented its first purchased loan program under which it purchases closed
mortgage loans on a flow basis from qualified mortgage banking correspondents.
In October 1995, the Company initiated a second purchased loan program under
which it purchases closed mortgage loans which are offered in the secondary
market on a bulk basis. The amount of loans purchased by the Company from
unaffiliated originators ("PURCHASED LOANS") under its purchased loan programs
has grown substantially from $19.7 million in fiscal 1994, to $60.5 million and
$130 million for the three and nine months ended March 31, 1995, respectively,
and to $171 million and $388 million for the three and nine months ended March
31, 1996, respectively. The growth of these purchased loan programs has
contributed significantly to the Company's increased revenue and earnings. The
Company opened its first retail loan office outside California in Nevada in
August 1993 and currently operates 20 loan offices in Arizona, Colorado,
Florida, Illinois, Indiana, Michigan, Minnesota, Nevada, Ohio, Oregon,
Pennsylvania, Utah and Washington. The Company's goal is to accelerate the pace
of its nationwide expansion by opening an additional 10 to 13 retail loan
offices during the remainder of calendar 1996 in five to seven new states. The
Company selects areas for retail loan office expansion pursuant to certain
demographic statistics and other criteria developed by the Company which are
intended to identify the most attractive markets for the Company's products.
The Company also regularly reviews the performance of its existing loan offices
to determine their continued profitability.
For the three and nine months ended March 31, 1996, the Company's total
revenue increased to $33.2 million and $84.3 million, up 131% and 114%,
respectively, when compared to the corresponding periods in the prior year. In
addition, the Company's total expenses as a percentage of total revenue
declined. As a result, the Company's net income increased 231% and 195%,
respectively, for the three and nine months ended March 31, 1996, when compared
to the corresponding periods in the prior year.
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
(continued)
REVENUE
The following table sets forth information regarding the components of the
Company's revenue for the three and nine months ended March 31, 1996 and 1995:
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands) (In thousands)
Excess servicing gain $20,976 $ 6,718 $48,889 $15,130
Commissions 4,214 3,579 14,430 12,645
Loan service:
Servicing spread 3,958 1,458 9,382 3,266
Prepayment fees 798 367 2,138 1,423
Late charges and other
servicing fees 615 332 1,652 1,086
Fees and other:
Closing 515 445 1,731 1,519
Appraisal 274 201 791 737
Underwriting 308 232 1,120 766
Interest income 1,345 741 3,497 1,766
Other 212 290 680 1,106
------- ------- ------- -------
Total revenue $33,215 $14,363 $84,310 $39,444
======= ======= ======= =======
Excess servicing gain for the three and nine months ended March 31, 1996
increased to $21.0 million and $48.9 million, up 212% and 223%, respectively,
when compared to the corresponding periods in the prior year. These increases
were largely the result of more loans having been securitized and sold during
the most recent periods. During the three and nine months ended March 31, 1996,
the Company securitized and sold in the secondary market $201 million and $488
million of loans, respectively, compared to $91.3 million and $216 million for
the corresponding periods in the prior year. The increases in the amount of
loans securitized and sold in the secondary market were attributable to the
Company's purchase of $171 million and $388 million of Purchased Loans during
the three and nine months ended March 31, 1996, respectively, as well as to a
greater volume of mortgage loans originated through the Company's retail loan
office network ("RETAIL LOANS") in these periods. The weighted average
servicing spread on all loans securitized and sold by the Company during the
three and nine months ended March 31, 1996 was 5.08% and 4.91%, respectively,
compared to 4.0% and 3.39%, respectively, for the corresponding periods in the
prior year. The improvement in weighted average servicing spread resulted from
a more favorable interest rate environment at the time the Company completed its
most recent securitizations.
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
(continued)
Commissions for the three and nine months ended March 31, 1996 increased
to $4.2 million and $14.4 million, up 18% and 14%, respectively, when compared
to the corresponding periods in the prior year. Commission revenue is primarily
a function of the volume of Retail Loan originations and sales and the weighted
average commission rate charged on such loans. Retail Loan originations for the
three and nine months ended March 31, 1996 totaled $48.3 million and $149
million, up 60% and 37%, respectively, from $30.2 million and $109 million for
the corresponding periods in the prior year. During the three and nine months
ended March 31, 1996, the weighted average commission rates charged on Retail
Loans decreased from 9.82% to 7.06% and 9.0% to 8.27%, respectively, when
compared to the same periods in the prior year. The decrease in the weighted
average commission rate was due to competitive pressures in the industry and the
Company's expansion into states where market conditions dictate lower commission
rates. The increase in volume of Retail Loan originations for the three and
nine months ended March 31, 1996 was primarily attributable to the success of
the Company's newer retail loan offices. Commissions for the three months ended
March 31, 1996 include $851,000 of commissions related to Retail Loans
originated before, but sold during, the three months ended March 31, 1996, and
do not include $784,000 of commissions related to Retail Loans originated during
the three months ended, and held for sale at, March 31, 1996. The Company also
originates mortgage loans through its retail loan office network which generally
neither meet the criteria for inclusion in the Company's securitization program
nor are well suited for sale to private investors ("BROKERED LOANS").
Commissions on and the volume of Brokered Loans are significantly lower than
those for Retail Loans and therefore did not have a material impact on the
financial results of the Company over these periods.
Loan service revenue for the three and nine months ended March 31, 1996
increased to $5.4 million and $13.2 million, up 149% and 128%, respectively,
from the corresponding periods in the prior year. Loan service revenue consists
of net servicing spread earned on the principal balances of the loans in the
Company's loan servicing portfolio (i.e., the cash received by the Company in
the form of retained servicing spread (including the normal servicing fee) less
the amortization of the excess servicing receivable and mortgage servicing
rights related to SFAS No. 122), in addition to prepayment fees, late charges
and other fees retained by the Company in connection with the servicing of
loans. The increase in loan service revenue was due primarily to the greater
size of the portfolio of loans serviced. The Company's loan servicing portfolio
increased to $1.0 billion at March 31, 1996, up 92% from the March 31, 1995
balance.
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
(continued)
The following table sets forth delinquency and foreclosure experience of
Retail Loans and Purchased Loans included in the Company's servicing portfolio
for the periods indicated.
Nine Months Ended Year Ended
March 31, June 30,
------------------- ----------------
1996 1995 1995 1994
Dollar amount of delinquent
loans to loans serviced
(period end) (1)(2)(3)
1 Month 4.87% 4.60% 3.88% 3.78%
2 Months 1.80% 1.90% 1.56% 1.61%
3 + Months
Not foreclosed (4) 8.11% 5.20% 5.00% 6.71%
Foreclosed (5) 0.90% 1.90% 1.47% 3.58%
Dollar amount of loans
foreclosed to loans
serviced
(period end)(2)(3) 0.42% 1.40% 1.08% 3.02%
Number of loans foreclosed 102 117 159 215
Principal amount at time
of foreclosure of
foreclosured loans(3)
(in thousands) $ 4,157 $ 4,858 $ 6,565 $11,528
(1) Delinquent loans are loans for which more than one payment is due.
(2) The delinquency and foreclosure percentages are calculated on the basis of
the total dollar amount of mortgage loans originated or purchased by the
Company and serviced as of the end of the periods indicated. The total
outstanding principal balance of such loans serviced by the Company as of the
end of any indicated period includes many loans that will not have been
outstanding long enough to give rise to some or all of the indicated
periods of delinquency
(3) Does not include loans for which only the servicing rights were purchased
by the Company.
(4) Loans for which foreclosure proceedings have not concluded.
(5) Properties acquired following a foreclosure sale and still serviced by the
Company at period end.
For the quarter ended March 31, 1996, losses on mortgage loans securitized
and sold by the Company amounted to 0.056% on an annualized basis. From the
inception of the Company's securitization program through March 31, 1996, losses
on mortgage loans securitized and sold by the Company have totaled $692,000.
The Company has securitized and sold in the secondary market $52.5 million of
loans in fiscal 1993, $107 million in fiscal 1994, $317 million in fiscal 1995
and $488 million during the nine months ended March 31, 1996. Although the
significant growth in the Company's securitization program may result in
increased losses, management believes that adequate reserves for such losses
have been established. (See LIQUIDITY AND CAPITAL RESOURCES below.)
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
(continued)
Fees and other revenue for the three and nine months ended March 31, 1996
increased to $2.7 million and $7.8 million, up 39% and 33%, respectively, from
the corresponding periods in the prior year. Fees and other revenue consist
primarily of fees received by the Company in the form of closing, appraisal and
underwriting fees, plus interest income. Interest income increased due to
interest earned on a larger aggregate amount of loans held by the Company during
the period from the origination or purchase of the loans until their
securitization and sale.
EXPENSES
The following table sets forth the components of the Company's expenses for
the three and nine months ended March 31, 1996 and 1995:
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands) (In thousands)
Compensation and
related expenses $ 8,451 $ 4,597 $22,603 $13,252
Sales and advertising costs 4,943 2,580 12,430 6,831
General and administrative
expenses 3,828 1,782 8,926 5,291
Interest expense 2,326 1,274 5,303 2,297
--------- --------- --------- ---------
Total expenses $19,548 $10,233 $49,262 $27,671
========= ========= ========= =========
As a result of the Company's rapid growth, total expenses for the three and
nine months ended March 31, 1996 increased to $19.5 million and $49.3 million,
up 91% and 78%, respectively, when compared to the corresponding periods in the
prior year. However, total expenses as a percentage of total revenue decreased
to 59% and 58% for the three and nine months ended March 31, 1996, down from 71%
and 70%, respectively, for the comparable periods last year.
Compensation and related expenses for the three and nine months ended March
31, 1996 increased to $8.5 million and $22.6 million, up 84% and 71%,
respectively, when compared to the corresponding periods in the prior year.
These increases were the result of the addition of new personnel and increased
commissions and bonuses paid to certain employees. Compensation and related
expenses for the three months ended March 31, 1996 include $693,000 of deferred
compensation related to loans originated but not sold in the previous quarter
and do not include $674,000 of deferred compensation related to loans originated
during the three months ended, and held for sale at, March 31, 1996.
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND
1995
(continued)
Sales and advertising costs for the three and nine months ended March 31,
1996 increased to $4.9 million and $12.4 million, up 92% and 82%, respectively,
when compared to the corresponding periods in the prior year. The increased
advertising was due primarily to the Company's expansion in a number of states.
General and administrative costs for the three and nine months ended March
31, 1996 increased to $3.8 and $8.9 million, up 115% and 69%, respectively, when
compared to the corresponding periods in the prior year. These increases
resulted primarily from start-up expenses related to the expansion of the
Company's retail loan office network, as well as increased professional and
insurance expenses. Because of growth and the addition of new personnel and
management's expectation of continued Company expansion, a decision was made,
subsequent to the close of the quarter, to relocate the corporate headquarters
office in the second half of fiscal 1997. As a result, general and
administrative expenses in the fourth quarter of fiscal 1996 will increase
because of a one-time charge-off for abandonment of the remaining term of the
Company's existing headquarters lease. Management does not expect such amount
to exceed $2.0 million. Also as a result of its nationwide expansion, the
Company entered into an airplane lease during the quarter which will result in
an increase in general and administrative expenses not to exceed $550,000 in
each quarter throughout the term of the lease.
Interest expense for the three and nine months ended March 31, 1996
increased to $2.3 million and $5.3 million, up 83% and 131%, respectively, when
compared to the corresponding periods in the prior year. These increases were
due to interest paid on $115 million aggregate principal amount of the Company's
5.5% Convertible Subordinated Debentures due 2006 issued in February 1996 and on
$23.0 million aggregate principal amount of the Company's 10.5% Senior Notes due
2002 issued in March 1995. Interest expense also increased as a result of
increased borrowings under warehouse credit facilities used to fund the
origination and purchase of loans prior to their securitization and sale in the
secondary MARKET.
<PAGE>
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require continued access to short-term and long-
term sources of cash. The Company's operating cash requirements include the
funding of (i) loan originations and purchases prior to their securitization and
sale, (ii) over-collateralization amounts in connection with the securitization
and sale of loans, (iii) tax payments due on the recognition of excess servicing
gain, (iv) fees and expenses incurred in connection with the securitization and
sale of loans and (v) ongoing administrative and other operating expenses.
Adequate credit facilities and other sources of fundings, including the
ability of the Company to sell loans in the secondary market, are essential to
the continuation of the Company's ability to originate and purchase loans.
During the nine months ended March 31, 1996 and 1995, the Company used cash
in the
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
FINANCIAL CONDITION
(continued)
approximate amounts of $571 million and $263 million, respectively, for loan
originations and purchases. During the nine months ended March 31, 1996 and
1995, the Company received cash from the proceeds of the securitization and sale
of loans and principal collected on loans of $533 million and $259 million,
respectively. After utilizing available working capital, the Company borrows
money under its warehouse credit facilities to fund its loan originations and
purchases, then repays such borrowings as loans are securitized and sold. Upon
the securitization and sale of loans and the subsequent repayment of short-term
borrowings, the Company's warehouse credit facilities then become available to
fund additional loan originations and purchases. The Company has a $100
million warehouse line of credit provided by an investment banking firm.
This facility, which is secured by certain loans originated or purchased by the
Company, bears interest at the rate of 0.875% over one-month LIBOR, is subject
to periodic renewal by the lender and currently expires on June 14, 1996. In
addition, the Company has a $100 million committed warehouse facility funded by
a syndicate of six commercial banks. This facility is secured by certain loans
originated or purchased by the Company, currently bears interest at the rate of
0.875% over one-month LIBOR and is renewable annually. The current commitment
expires on December 26, 1996. Management expects, although there can be no
assurance, that these facilities will continue to be available in the future.
As indicated above, the Company's ability to continue to originate and
purchase loans is dependent, in part, upon its ability to securitize and sell
loans in the secondary market in order to generate cash proceeds for new
originations and purchases. The value of and market for the Company's loans are
dependent upon a number of factors, including general economic conditions,
interest rates and governmental regulations. Adverse changes in such factors
may affect the Company's ability to purchase or sell loans for acceptable prices
within reasonable periods of time.
A prolonged, substantial reduction in the size of the secondary market for
loans of the types originated and purchased by the Company may adversely affect
the Company's ability to securitize and sell loans with a consequent adverse
impact on the Company's profitability and ability to fund future originations
and purchases.
<PAGE>
In addition, in order to gain access to the secondary market, the Company
has relied on monoline insurance companies to provide financial guarantee
insurance on the senior interests in the real estate mortgage investment conduit
("REMIC") trusts established by the Company. The Company has not attempted to
structure a pool of loans for securitization and sale in the secondary market
based solely on the internal credit enhancements of the pool of loans or the
Company's limited credit. Any substantial reduction in the size or availability
of the secondary market for the Company's loans or the unwillingness of monoline
insurance companies to provide financial guarantee insurance for the senior
interests in REMIC trusts could have a material adverse effect on the Company's
financial position and results of operations. The form of pooling and servicing
agreement for the REMIC trusts generally provides that the monoline insurance
company insuring the senior interests in each REMIC may terminate the
Company's
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
FINANCIAL CONDITION
(continued)
servicing rights, if among other things, the principal amount of loans included
in the REMIC trust which are delinquent for 90 days or more (including
properties acquired upon foreclosure and not sold) exceeds 11.5% of the
aggregate principal amount of the loans included in such trust. At March 31,
1996, five of the Company's 16 REMIC trusts exceeded the foregoing delinquency
standard, although no servicing rights have been terminated. There can be no
assurance that delinquency rates with respect to these REMIC trusts will not
exceed this standard in the future or, if exceeded, that the Company's servicing
rights with respect to the mortgage loans in such trusts would not be
terminated.
As a result of increasing loan originations and purchases and its growing
securitization program, the Company has operated, and expects to continue to
operate, on a negative cash flow basis. The Company completed its first
securitization transaction in the fourth quarter of fiscal 1992 and has
completed a securitization transaction in each of its fiscal quarters since that
time. The Company securitized and sold in the secondary market $201 million and
$488 million of loans in the three and nine months ended March 31, 1996,
respectively, compared to $91.3 million and $216 million in the corresponding
periods of the prior year. The Company used $89.4 million and $22.4 million of
cash in operations during the nine months ended March 31, 1996 and 1995,
respectively. In connection with securitization transactions completed during
these periods, the Company was required to provide credit enhancements in the
form of over-collateralization amounts. In addition, during the life of the
related REMIC trusts, the Company subordinates a portion of the excess servicing
spread otherwise due to it to the rights of holders of senior interests as a
credit enhancement to support the sale of the senior interests. In connection
with the securitizations effected during the three and nine months ended March
31, 1996, the initial over-collateralization amounts were $1.8 million and $3.8
million, respectively. The terms of the REMIC trusts generally require that all
excess servicing spread otherwise payable to the Company during the early months
of the trusts be used to repay the senior interests in order to increase over-
collateralization to specified maximums (or, in the case of certain earlier
securitizations, to increase cash reserve accounts). The accumulated amounts of
such over-collateralization requirements and cash reserve accounts were $32.6
million at March 31, 1996 and are reflected on the Company's balance sheet as
"Residual assets."
In addition, the increasing use of securitization transactions as a funding
source by the Company has resulted in a significant increase in the amount of
excess servicing gain recognized by the Company. During the three and nine
months ended March 31, 1996, the Company recognized excess servicing gain in the
amount of $21.0 million and $48.9 million, respectively, compared to $6.7
million and $15.1 million for the corresponding periods in the prior year. The
recognition of excess servicing gain has a negative impact on the cash flow of
the Company since the Company is required to pay federal and state income taxes
on excess servicing gain in the period recognized, although the Company does not
receive the cash representing the gain until later periods as the related loans
are repaid or otherwise collected.
The Company has funded these cash requirements primarily from the sale of
its equity and debt securities and from bank borrowings. In December 1991 and
July 1993, the Company effected public offerings of its common stock with net
proceeds to the Company aggregating $21.0 million. In March 1995, the Company
completed an offering of its 10.5% Senior Notes due 2002 with net
proceeds to the
<PAGE>
AAMES FINANCIAL CORPORATION
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
FINANCIAL CONDITION
(continued)
Company of $22.0 million. In June 1995, the Company effected an additional
public offering of its common stock with net proceeds to the Company of $40.0
million. In February 1996, the Company completed an offering of its 5.5 %
Convertible Subordinated Debentures due 2006 with net proceeds to the Company of
$112 million.
The Company had cash and cash equivalents of approximately $42.8 million at
March 31, 1996. Of this sum, $21.7 million was held in a restricted account in
connection with the Company's most recent securitization, which amount was
released to the Company in April 1996.
Because the Company expects to continue to operate on a negative cash flow
basis for the foreseeable future, it anticipates that it will need to effect
additional debt or equity financings regularly. The type, timing and terms of
financing selected by the Company will be dependent upon the Company's needs and
availability of financing sources and prevailing conditions in the financial
markets.
OUTLOOK
Except for the historical information contained herein, the matters
discussed herein are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements, including those
discussed in the Company's Annual Report on Form 10-K for the year ended June
30, 1995 and under the caption, "Risk Factors," in the Company's Registration
Statement (No. 33-91640) filed with the Securities and Exchange Commission.
<PAGE>
AAMES FINANCIAL CORPORATION
OTHER INFORMATION
PART II
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.27 Employment Agreement, dated as of January 1, 1997,
between the Registrantand Gary K. Judis.
10.28 Employment Agreement, dated as of March 11, 1996,
between the Registrant and Cary H. Thompson.
10.29 Indenture, dated as of February 26, 1996, by and
between the Registrant and The Chase Manhattan Bank,
N.A., as trustee.
10.30 Aircraft Lease Agreement, dated as of March 8, 1996,
between C.I.T. Leasing Corporation, as lessor, and
Oxford Aviation Corporation, Inc. ("OXFORD"), as
lessee. Oxford is a wholly owned subsidiary of the
Registrant.
10.31 Corporate Guaranty Agreement, dated as of March 8,
1996, between the Registrant, as guarantor, and C.I.T.
Leasing Corporation in connection with Exhibit 10.30.
27.01 Financial Data Schedule
(b) Reports on Form 8-K: Current Report on Form 8-K dated
January 23, 1996.
<PAGE>
AAMES FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.
AAMES FINANCIAL CORPORATION
Date: May 15, 1996 By:/s/ Gregory J. Witherspoon
--------------------------------
Gregory J. Witherspoon
Executive Vice President - Finance and
Chief Financial Officer
By:/s/ Mark E. Elbaum
--------------------------------------
Mark E. Elbaum
Senior Vice President - Finance and
Principal Accounting Officer
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made and entered into
as of November 30, 1995 by and between AAMES FINANCIAL CORPORATION, a Delaware
corporation (the "Company'), and Gary K. Judis, an individual ("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as Chief Executive Officer, President and
Chairman of the Board of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Executive agree as set forth below.
1. PRIOR EMPLOYMENT AGREEMENT. The Company and Executive are
parties to that certain Executive Employment Agreement, dated as of December
22, 1991, (the "Prior Agreement"). Paragraph 3 of the Prior Agreement shall
govern the compensation and benefits payable to Executive through December 31,
1996 (the term under the Prior Agreement). Sections 4 and 5 of this Agreement
shall become effective on January 1, 1997; PROVIDED, HOWEVER, Sections 4(c),
4(d), 5(f) and 5(g) shall be effective from and after the date hereof. All
other sections of this Agreement shall be effective from and after the date
hereof.
2. EMPLOYMENT AND DUTIES. The Company hereby employs Executive to
serve as Chief Executive Officer, President and Chairman of the Board of the
Company, with the powers and duties customarily accorded to such positions,
including those powers and duties set forth in the Bylaws of the Company for
such office and such other duties consistent therewith as may be assigned to
Executive from time to time by the Board of Directors of the Company (the
"Board"). Executive shall report to the Board. Executive shall endeavor in
good faith to perform his duties in an efficient, faithful and business-like
manner. During the term of his employment, it is intended that Executive also
serve as a Director on the Board of Directors of the Company (the "Board") and
the Company will take action within its powers to include Executive among the
slate of directors proposed to be nominated by the Board at any applicable
stockholders meeting.
3. TERM. The initial term of this Agreement shall begin on the
date hereof and shall expire on June 30, 2001 unless terminated earlier as set
forth in Section 7 hereof or by mutual agreement of the parties hereto (the
"Initial Term"). At the expiration of the Initial Term and each anniversary
thereafter, the term of this Agreement shall automatically be extended for an
additional year (the "Extension Term") unless either party shall have given
written notice to the other party at least ninety days prior to the end of the
Initial Term or the Extension Term, as the case may be, that it does not desire
to extend the term of this Agreement. If Executive's employment under this
Agreement is extended for an Extension Term, it shall thereafter or during any
Extension Term be terminable (other than upon expiration) only as provided in
Section 7 or by mutual agreement of the parties hereto.
<PAGE>
4. COMPENSATION.
(a) BASE SALARY. During the term of this Agreement, Executive
shall be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the Company's 1997 fiscal year,
Executive's Base Salary shall be $850,000. The annual Base Salary payable to
Executive shall be reviewed at least annually; PROVIDED, HOWEVER, that
Executive's Base Salary shall not be reduced below $850,000 per annum during
the term of this Agreement.
(b) PERFORMANCE BONUS. Commencing with the Company's 1997
fiscal year, Executive shall be entitled to participate in the Company's
performance bonus plan for executive officers. Under such plan, executives of
the Company are currently paid on a quarterly basis a performance bonus (the
"Performance Bonus") measured by return on average equity during the relevant
period. For the last two fiscal quarters of fiscal 1997, Executive shall be
entitled to an annual Performance Bonus in the amount of $60,000 (the "Payment
Amount") for every percentage point for which return on average equity exceeds
15% for the fiscal year (the "Target ROE"). The Performance Bonus will be paid
quarterly based on each quarter's results with an adjustment at the end of the
fiscal year based upon the audited financial statements of the Company. The
annual Performance Bonus for fiscal 1997 as computed above shall be reduced by
one-half for the 1997 fiscal year as a whole, reflecting the effective date of
this provision occurring one-half way through the 1997 fiscal year. The
computations and payment of the Performance Bonus shall be as provided in the
Company's performance bonus plan. The Payment Amount and Target ROE for fiscal
years following fiscal 1997 shall be as determined by the Board's compensation
committee prior to the commencement of any fiscal year. Notwithstanding
anything to the contrary contained hereon, Executive shall be entitled to
receive a Performance Bonus in a minimum amount of $100,000 ($50,000 for the
last six months of fiscal 1997) during each fiscal year during the term of
this Agreement.
(c) STOCK BONUS. Executive shall be entitled to continue to
receive stock options (the "Options") under the Company's stock option plans
with annual awards to be determined by the Compensation Committee of the Board,
but in any case in amounts consistent with awards granted prior to the date
hereof.
(d) TAX BONUS. The Options shall provide for the payment to
Executive of a bonus (the "Tax Bonus") equal to an amount that when reduced by
any withholding taxes or taxes otherwise payable by Executive with respect to
the Tax Bonus will equal the taxes payable by Executive as a result of the
recognition of ordinary income on exercise of such options or on the
disposition of any underlying share. Notwithstanding the foregoing, in no
event shall the Tax Bonus exceed the net tax savings recognized by the Company
as a result of the exercise of the Option, the disposition of the underlying
shares and the payment of the Tax Bonus. In the event the Company does not
realize a tax savings in the year of exercise as a result of a tax loss or the
benefit of a net operating loss, the maximum amount of the Tax Bonus shall be
computed by multiplying the aggregate expense recognized by the Company as a
result of the exercise of the option, the disposition of the underlying shares
and the payment of the Tax Bonus by the highest applicable corporate tax rate
for federal tax purposes.
5. OTHER EXECUTIVE BENEFITS. During the term of this Agreement,
<PAGE>
the Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) MEDICAL AND DENTAL COVERAGE. During the term hereof, the
Company shall pay all medical and dental expenses incurred by Executive on
behalf of Executive and his immediate family, regardless of whether such
expenses are in excess of those converted under any medical or dental plans
maintained b the Company.
(b) VACATION. Executive shall be entitled to five (5) weeks
during each year of employment with the Company thereafter for the term of this
Agreement.
(c) BUSINESS EXPENSES. The Company will pay or reimburse
Executive for any out-of-pocket expenses incurred by Executive in the course of
providing his services hereunder, which comply with the Company's travel and
expense policies adopted from time to time by the Board for the executive
officers. In the case of out-of-town travel, Executive shall be entitled to be
reimbursed for first class air fare, transfers, accommodations and restaurants
for himself and his spouse when she accompanies him. Such reimbursement shall
be made by the Company in the same manner and within the same time period as
applicable to the other executive officers of the Company.
(d) AUTOMOBILE. The Company shall provide Executive with the
use of a luxury automobile of his choice. On the earlier of significant damage
or destruction or attaining two years of age, the Company shall replace such
automobile with a new automobile selected by Executive. The Company shall pay
all costs of insurance, repair, maintenance and operation of such automobile.
(e) BENEFIT PLANS. Executive shall be entitled to participate
in any pension, profit-sharing, stock option, stock purchase or other benefit
plan of the Company now existing or hereafter adopted for the benefit of
employees generally or the senior executives of the Company.
(f) LIFE INSURANCE. Provided the following policies may be
obtained at a reasonable cost, the Company shall provide Executive with a
$1,000,000 standard term life insurance policy and a $1,000,000 standard term
accidental death policy.
(g) DISABILITY. Provided the following policy may be obtained
at a reasonable cost, the Company shall provide Executive with a long-term
disability policy which provides for an annual disability payment in an amount
equal to 125% of Executive's Base Salary.
6. CONFIDENTIAL INFORMATION.
(a) NON-DISCLOSURE. Executive hereby agrees, during the term
of this Agreement, he will not disclose to any person or otherwise use or
exploit any proprietary or confidential information, including, without
limitation, trade secrets, processes, records of research, proposals, reports,
methods, processes, techniques, computer software or programming, or budgets or
other financial information, regarding the Company, its business, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of assigned duties for the Company. Notwithstanding anything
herein to the contrary, the term "Confidential Information" shall not include
<PAGE>
information which (i) is or becomes generally available to the public other
than as a result of disclosure by Executive in violation of this Agreement,
(ii) is or becomes available to Executive on a non-confidential basis from a
source other than the Company, provided that such source is not known by
Executive to be furnishing such information in violation of a confidentiality
agreement with or other obligation of secrecy to the Company, (iii) has been
made available, or is made available, on an unrestricted basis to a third party
by the Company, by an individual authorized to do so or (iv) is known by
Executive prior to its disclosure to Executive. Executive may use and disclose
Confidential Information to the extent necessary to assert any right or defend
against any claim arising under this Agreement or pertaining to Confidential
Information or its use, to the extent necessary to comply with any applicable
statute, constitution, treaty, rule, regulation, ordinance or order, whether of
the United States, any state thereof, or any other jurisdiction applicable to
Executive, or if Executive receives a request to disclose all or any part of
the information contained in the Confidential Information under the terms of a
subpoena, order, civil investigative demand or similar process issued by a
court of competent jurisdiction or by a governmental body or agency, whether of
the United States or any state thereof, or any other jurisdiction applicable to
Executive.
(b) INJUNCTIVE RELIEF. Executive agrees that the remedy at law
for any breach by him of the covenants and agreements set forth in this Section
5 may be inadequate and that in the event of any such breach, the Company may,
in addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
7. TERMINATION.
(a) TERMINATION BY COMPANY FOR "CAUSE" OR VOLUNTARILY BY
EXECUTIVE. The Company may terminate this Agreement for "Cause" effective
immediately upon written notice thereof to Executive. For purposes of this
Agreement, "Cause" shall mean and be limited to the following events: (i) an
act of fraud, embezzlement or similar conduct by Executive involving the
Company; (ii) any action by Executive involving the arrest of Executive for
violation of any criminal statute constituting a felony if the Board reasonably
determines that the continuation of Executive's employment after such event
would have a adverse impact on the operations or reputation of the Company in
the financial community; or (iii) a continuing, repeated willful failure or
refusal by Executive to perform his duties; PROVIDED, HOWEVER, that this
Agreement may not be terminated under this subclause (iii) unless Executive
shall have first received written notice from the Board advising Executive of
the specific acts or omissions alleged to constitute a failure or refusal to
perform and such failure or refusal to perform continues after Executive shall
have had a reasonable opportunity to correct the acts or omissions cited in
such notice.
In the event of termination for "Cause" or voluntarily by Executive
other than as permitted in Sections 7(b)(i) and (ii) and 7(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and (y) all Options that have become
exercisable as of the date of termination shall become and shall remain so for
a period of 90 days.
<PAGE>
(b) TERMINATION BY COMPANY OTHER THAN FOR "CAUSE."
i) DEATH. Provided that notice of termination has not
previously been given under any Section hereof, if Executive shall die
during the term of this Agreement, this Agreement and all of the Company's
obligations hereunder shall terminate, except that Executive's estate or
designated beneficiaries shall be entitled to receive (A) all earned and
unpaid Base Salary through the date of termination; (B) the Base Salary
and Performance Bonus and all benefits with respect to the then current
contract year which would have been payable or provided to Executive had
the term ended two years following the last day of the month in which
Executive's death occurred; and (C) all other benefits that may be due to
Executive or Executive's estate or beneficiaries under the general
provisions of any benefit plan, stock incentive plan or other plan in
which Executive is then a participant, which benefits shall continue to be
provided for a period of two years following the date of death. In
addition, all stock options that have become exercisable as of the date of
death shall remain so for a period of twelve (12) months.
ii) DISABILITY. Provided that notice of termination has
not previously been given under any Section hereof, if Executive becomes
ill or is injured or disabled during the term such that Executive fails to
perform all or substantially all of the duties to be rendered hereunder
and such failure continues for a period in excess of 26 consecutive weeks
(a "Disability"), the Company shall continue to employ Executive under
this Agreement for two years from the date of the Disability (which one
year period shall commence at the beginning of the 26 week period referred
to herein) and shall continue to pay Executive the Base Salary in effect
on the date of the Disability (determined at the beginning of the 26 week
period referred to herein), the Performance Bonus and all benefits then in
effect; provided, that (A) the Company may relieve Executive of his duties
and responsibilities hereunder to the extent permitted by law and (B) any
long-term disability payments received by Executive under any disability
insurance plan made available to Executive by the Company if the premiums
were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during
the term and subsequent to the Disability commencement date (which shall
be at any time following the end of the 26 week period referred to herein)
Executive shall fully recover, the Company shall have the right
(exercisable within 60 days after receipt of notice from Executive of such
recovery), but not the obligation, to restore Executive to full-time
service at full compensation. If the Company elects not to restore
Executive to full-time service, Executive shall be entitled to obtain
other employment. If Executive is not restored to full-time employment
with the Company, all stock options that have become exercisable as of the
date of Disability (determined at the end of the 26 week period referred
to herein) shall remain so for a period of 12 months.
iii) WITHOUT CAUSE. If the Company elects to terminate
Executive for any reason whatsoever other than as provided in Section 7(a)
or if the Company causes a Defacto Termination of Executive (as defined
below) (each a "Severance Termination"), Executive shall receive the
"Separation Package." As used herein, the "Separation Package" shall
consist of three years' Base Salary (at the annual rate in effect at the
date of the Severance Termination) plus an amount equal to the Performance
<PAGE>
Bonus actually paid to Executive with respect to the eight fiscal quarters
preceding the date of the Severance Termination (or if the date of the
Severance Termination occurs before January 1, 2000, the total amount
payable with respect to Base Salary and Performance Bonus shall be the
actual amount paid to Executive (base salary and bonus) over the three
year period prior to the date of Severance Termination). In addition, all
Options which are scheduled to vest during the 12 months following the
date of the Severance Termination shall vest as of such date. Further,
all options which have become exercisable as of the date of the Severance
Termination (including those which do so as a result of the provisions of
the preceding sentence) shall remain so for a period of 12 months. In the
event of a Severance Termination, Executive will also be provided with
reasonable office space and secretarial support as well as the same
mailing address and telephone number which Executive had during the term
for up to six months, and the Company shall pay the costs of outplacement
services with a provider of its choice at a level appropriate to
Executive's title and position as requested by Executive. For purposes
of this paragraph, a "Defacto Termination" shall include any of the
following events: (i) the Company shall fail to pay or shall reduce the
Base Salary, Performance Bonus or other benefits provided herein, except
as permitted hereunder, or shall otherwise breach any material provision
hereof which breach is not cured within 10 days after receipt of notice
thereof from Executive; (ii) the Company shall fail to cause Executive to
remain the Chief Operating Officer of the Company; (iii) Executive shall
not be continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above (whether or not accompanied by
a change in title); (iv) the Company shall require Executive's primary
services to be rendered in an area other than the Company's principal
offices in the Los Angeles metropolitan area; or (v) after a Change in
Control (as defined below), the Company increases the base salary for
senior executives of the Company generally without similarly increasing
the Base Salary of Executive. For purposes of clause (iii), Executive
shall be deemed not to have been continuously afforded the authority,
powers, responsibilities and privileges contemplated in Section 1 above if
there shall occur any reduction in the scope, level or nature of
Executive's employment hereunder, or any demotion, any phasing out or
assignment to others, of the duties contemplated herein.
(c) CHANGE IN CONTROL.
i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 7 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Section 7(a) and 7(b).
ii) Executive may (but shall not be obligated to)
terminate this Agreement effective 30 days after the giving of such notice
given at any time within two years following a Change in Control. In the event
that Executive elects to terminate this Agreement pursuant to this Section
7(c)(ii), Executive shall be entitled to the following payments:
(A) If the Change in Control is effected to an
Adverse Person (as defined below), then Executive shall be entitled to and
receive the Severance Package. In addition, all Options then held by Executive
which are not yet vested shall vest as of the date of the Severance
<PAGE>
Termination. Further, all options that have become exercisable as of the date
of the Severance Termination (including those which do so as a result of the
provisions of the preceding sentence) shall remain so for the entire remaining
term of the Options.
(B) If the Change in Control is effected to a person
other than an Adverse Person, Executive shall be entitled to receive the
Severance Package. In addition, all Options which are scheduled to vest during
the 12 months following the termination date shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date
of such termination (including those which do so as a result of the provisions
of the preceding sentence) shall remain so for a period of 12 months.
(d) TERMINATION BY EXECUTIVE. Executive may (but shall not be
obligated to) terminate this Agreement effective 30 days after the giving of
such notice given at any time within two years following a Change in Control
(as defined herein) or upon the occurrence of any of the following events: (i)
the Company shall fail to pay or shall reduce the Base Salary, Performance
Bonus or other benefits provided herein, except as permitted hereunder, or
shall otherwise breach any material provision hereof which breach is not cured
within 10 days after receipt of notice thereof from Executive; (ii) the Company
shall fail to cause Executive to remain the Chief Executive Officer of the
Company; (iii) Executive shall not be continuously afforded the authority,
powers, responsibilities and privileges contemplated in Section 1 above
(whether or not accompanied by a change in title); (iv) the Company shall
require Executive's primary services to be rendered in an area other than the
Company's principal offices in the Los Angeles metropolitan area; or (v) after
a Change in Control, the Company increases the base salary for senior
executives of the Company generally without similarly increasing the Base
Salary of Executive. For purposes of clause (iii), Executive shall be deemed
not to have been continuously afforded the authority, powers, responsibilities
and privileges contemplated in Section 1 above if there shall occur any
reduction in the scope, level or nature of Executive's employment hereunder, or
any demotion, any phasing out or assignment to others, of the duties
contemplated herein.
As full payment of any amounts due and owing to Executive if
termination occurs under this section, if Executive elects to terminate the
Agreement as a result of a Change in Control or for any other reason set forth
in clauses (i) through (v) above, then Executive shall have no further
obligation to perform services for the Company but shall be entitled to receive
from the Company the Severance Package (as defined above). In addition, all
Options which would vest as of the next scheduled vesting date shall become
immediately exercisable and all vested options shall remain exercisable for the
balance of their 10-year term.
(e) PAYMENT OF TERMINATION AMOUNTS. Executive may elect to
have all amounts to be paid to Executive pursuant to this Section 7 payable (i)
over the remaining term of this Agreement or for such shorter period as
expressly provided for herein, as applicable, or (ii) in a lump sum within 30
days following termination; PROVIDED, HOWEVER, in the case of death or
disability, the Performance Bonus component shall be payable at such time as
performance-based bonuses are paid to similarly situated employees of the
Company and only if the specified Target ROE for the applicable periods are
actually met. In the event Executive elects to be paid pursuant to clause
(i), Executive agrees promptly to notify the Company in writing of Executive's
<PAGE>
acceptance of full-time employment; within 15 days after receipt of such
notice, the Company shall pay Executive in a lump sum any amounts which remain
otherwise due to Executive hereunder.
(f) STOCK AND SIMILAR RIGHTS. Except with regard to the
vesting and exercise dates of Options as set forth in this Section 7,
Executive's rights under any other agreement or plan under which stock options,
restricted stock or similar awards are granted shall be determined in
accordance with the terms and provisions of such plans or agreements.
(g) NO MITIGATION OR OFFSET. Payment of any sum under this
Section 7 shall not be subject to any claim of mitigation nor shall the Company
be entitled to any right of offset with respect thereto.
(h) OTHER INSURANCE POLICIES. Upon any termination of
Executive's employment, and upon reimbursement of the Company of all amounts
paid by the Company in connection with such policies, Executive shall have the
right to purchase or otherwise direct the disposition or assignment of any
disability insurance policy on him held by the Company (excluding only group
disability insurance policies) upon the payment of One Dollar ($1.00) as the
total consideration for each such policy.
8. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
(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) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Voting Securities"); PROVIDED, HOWEVER, that neither of the following
acquisitions shall constitute a Change in Control; (i) any acquisition by the
Company or (ii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; PROVIDED, HOWEVER, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the stockholders of the Company, shall be approved by a vote of a
least a majority of the directors then compromising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board;
or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation") entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
<PAGE>
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of
Outstanding Voting Securities immediately prior to such reorganization, merger,
or consolidation; (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, the Resulting Corporation, and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or
indirectly 20% or more of the combined voting power of the Resulting
Corporation Voting Securities; and (iii) at least a majority of the members of
the Board shall have been members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization, merger or
consolidation; or
(d) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation (the "Buyer") with respect to which (x) following such
sale or other disposition, more than 60% of the combined voting power of
securities of Buyer entitled to vote generally in the election of directors
("Buyer Voting Securities"), shall be owned beneficially, directly or
indirectly, by all or substantially all of the Persons who were the beneficial
owners of the Outstanding Voting Securities immediately prior to such sale or
other disposition, in substantially the same proportion as their respective
ownership of Outstanding Voting Securities, immediately prior to such sale or
other disposition; (y) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or Buyer and any Person that
shall immediately prior to such sale or other disposition own beneficially,
directly or indirectly, 20% or more of the combined voting power of Outstanding
Voting Securities), shall own beneficially, directly or indirectly, 20% or more
of the combined voting power or, Buyer Voting Securities; and (z) at least a
majority of the members of the board of directors of Buyer shall have been
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition
or assets of the Company.
For purposes of this Agreement, an Adverse Person shall mean any
person which acquires control of the Company in a transaction involving a
Change of Control other than a transaction which, before the time of the
transaction, has been approved by the Board of Directors of the Company.
9. INSURANCE. During the term, the Company shall maintain, at no
cost to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $45,000,000.
10. GENERAL PROVISIONS.
(a) NOTICES. All notices, requirements, requests, demands,
claims or other communications hereunder shall be in writing. Any notice,
requirement, request, demand, claim or other communication hereunder shall be
deemed duly given (i) if personally delivered, when so delivered, (ii) if
mailed, two (2) business days after having been set by registered or certified
mail, return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below,
and the appropriate telephonic confirmation is received, provided that such
<PAGE>
notice or other communication is promptly thereafter mailed in accordance with
the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service under circumstances by which such service guarantees next day
delivery, the date following the date so sent:
IF TO THE COMPANY, TO:
AAMES FINANCIAL CORPORATION
3731 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90010
ATTN: CHIEF OPERATING OFFICER
IF TO EXECUTIVE TO:
GARY K. Judis
-------------------------------
-------------------------------
-------------------------------
Any party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
party notice in the manner herein set forth.
(b) ASSIGNMENT. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; PROVIDED HOWEVER, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and the benefits
hereunder will automatically be deemed assigned to any such corporation,
subject, however, to Executive's right to terminate this Agreement to the
extent provided in Section 7. In the event of any assignment of this Agreement
to any corporation acquiring all or substantially all of the assets of the
Company or to any other corporation into which the Company may be merged or
consolidated, the responsibilities and duties assigned to Executive by such
successor corporation shall be the responsibilities and duties of, and
compatible with the status of, a senior executive officer of such successor
corporation. The Company may delegate any of its obligations hereunder to any
subsidiary of the Company, provided that such delegation shall not relieve the
Company of any of its obligations hereunder. Executive may not assign its
rights hereunder or delegate his duties hereunder to any Person.
(c) AFTRA\SAG COMPENSATION. Executive has from time to time
provided the voice for certain radio and television advertisements of the
Company in the past and may continue to do so in the future. In this
connection, Executive is a member of American Federation of Television and
Radio Actors and the Screen Actors Guild. In addition to the other
compensation provided to Executive hereunder, Executive shall be paid a one-
time fee of $1,500 per advertisement for which he provides the voice over
during the term hereunder.
(d) COMPLETE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof
and supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or
<PAGE>
communications in respect of such subject matter.
(e) AMENDMENTS. This Agreement may be modified, amended,
superseded or terminated only by a writing duly signed by both parties.
(f) SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
(g) NO WAIVER. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of either party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall be
considered a waiver or to deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(h) BINDING EFFECT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(i) COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which when taken together shall
constitute one and the same document.
(j) GOVERNING LAW. This Agreement has been negotiated and
entered into in the State of California and shall be construed in accordance
with the laws of the State of California.
(k) ARBITRATION. The parties hereby expressly agree that any
controversy or claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The
costs of the arbitrator shall be borne equally. Each party shall be
responsible for its own attorneys' fees and costs. However, the arbitrator
shall have the right to award costs and expenses (including actual attorneys'
fees) to the prevailing party as well as equitable relief. The award of the
arbitrator shall be final and binding and shall be enforceable in any court of
competent jurisdiction. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(l) HEADINGS. The headings included in this Agreement are for
the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has
executed the same as of the day and year first above written.
<PAGE>
AAMES FINANCIAL CORPORATION
By: /s/ Gary K. Judis
-------------------------------------------
Its:
-------------------------------------------
/s/ Gary K. Judis
-----------------------------------------------
GARY K. JUDIS
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made and entered into
as of March 11, 1996 by and between AAMES FINANCIAL CORPORATION, a Delaware
corporation (the "Company'), and CARY H. THOMPSON, an individual ("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as Chief Operating Officer of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Executive agree as set forth below.
1. EMPLOYMENT AND DUTIES. The Company hereby employs Executive to
serve as Chief Operating Officer of the Company, with the powers and duties
customarily accorded to such position, including those powers and duties set
forth in the Bylaws of the Company for such office and such other duties
consistent therewith as may be assigned to Executive from time to time by the
Chief Executive Officer (the "CEO") of the Company. Initially, Executive's
managerial and supervisorial duties shall be limited to those departments and
operations as determined by the CEO and subsequently expanded to include other
departments and operations as directed by the CEO. Executive shall report to
the CEO; PROVIDED, HOWEVER, so long as Gary Judis is employed by the Company in
any capacity, Executive shall report only to Gary Judis. Executive shall
endeavor in good faith to perform his duties in an efficient, faithful and
business-like manner. During the term of his employment, it is intended that
Executive also serve as a Director on the Board of Directors of the Company
(the "Board") and the Company will take action within its powers to include
Executive among the slate of directors proposed to be nominated by the Board at
any applicable stockholders meeting.
2. TERM. The initial term of this Agreement shall begin as soon as
practicable following the date hereof but in any event prior to March 15, 1996.
The initial term shall expire on June 30, 2001 unless terminated earlier as set
forth in Section 6 hereof or by mutual agreement of the parties hereto (the
"Initial Term"). At the expiration of the Initial Term and each anniversary
thereafter, the term of this Agreement shall automatically be extended for an
additional year (the "Extension Term") unless either party shall have given
written notice to the other party at least ninety days prior to the end of the
Initial Term or the Extension Term, as the case may be, that it does not desire
to extend the term of this Agreement. If Executive's employment under this
Agreement is extended for an Extension Term, it shall thereafter or during any
Extension Term be terminable (other than upon expiration) only as provided in
Section 6 or by mutual agreement of the parties hereto.
3. COMPENSATION.
(a) BASE SALARY. During the term of this Agreement, Executive
shall be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the first year of the term of this
Agreement, Executive's Base Salary shall be $400,000. The annual Base Salary
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<PAGE>
payable to Executive shall be reviewed at least annually; PROVIDED, HOWEVER,
that Executive's Base Salary shall not be reduced below $400,000 per annum
during the term of this Agreement.
(b) PERFORMANCE BONUS. Executive shall be entitled to
participate in the Company's performance bonus plan for executive officers.
Under such plan, executives of the Company are currently paid on a quarterly
basis a performance bonus (the "Performance Bonus") measured by return on
average equity during the relevant period. For fiscal 1996, Executive shall be
entitled to an annual Performance Bonus in the amount of $30,000 (the "Payment
Amount") for every percentage point for which return on average equity exceeds
15% for the fiscal year (the "Target ROE"). The Performance Bonus will be paid
quarterly based on each quarter's results with an adjustment at the end of the
fiscal year based upon the audited financial statements of the Company. If the
Executive is employed for less than the full fiscal year, his Performance Bonus
will be adjusted pro rata based upon the actual period of employment. The
computations and payment of the Performance Bonus shall be as provided in the
Company's performance bonus plan. The Payment Amount and Target ROE for fiscal
years following fiscal 1996 shall be as determined by the Board's compensation
committee prior to the commencement of any fiscal year.
(c) STOCK BONUS. On the commencement of the Initial Term, the
Company shall grant Executive non-qualified options to purchase 500,000 shares
of the Company's Common Stock (the "Options"). Of such Options, 100,000 shall
vest immediately upon grant and an additional 100,000 shall vest on each
anniversary of the commencement of the Initial Term. The Options will be
exercisable at an exercise price equal to $25-7/8 (the Closing Price of the
Company's Common Stock on the New York Stock Exchange on January 17, 1996, the
date the Board of Directors of the Company approved this offer of employment be
made to Executive). Once vested, the Options will remain exercisable by
Executive, whether or not Executive remains employed by the Company, until the
tenth anniversary of the date of the initial grant (subject to the effect, if
any, of Section 6(a)(x) below). The Company shall register the shares of
Common Stock issuable upon exercise of the Options and shall use its best
efforts to maintain a current registration statement under the Securities Act
of 1933, as amended, in respect of such shares. In the event the Company does
not realize a tax savings in the year of exercise as a result of a tax loss or
the benefit of a net operating loss, the maximum amount of the Tax Bonus shall
be computed by multiplying the aggregate expense recognized by the Company as a
result of the exercise of the option, the disposition of the underlying shares
and the payment of the Tax Bonus by the highest applicable corporate tax rate
for federal tax purposes. The Options shall be issued under the Company's
stock incentive plans maintained for its executives and shall contain standard
anti-dilution mechanisms to adjust for stock dividends, stock splits, reverse
stock splits, recapitalizations, consolidations and mergers as are provided for
therein.
(d) TAX BONUS. The Options shall provide for the payment to
Executive of a bonus (the "Tax Bonus") equal to an amount that when reduced by
any withholding taxes or taxes otherwise payable by Executive with respect to
the Tax Bonus will equal the taxes payable by Executive as a result of the
recognition of ordinary income on exercise of such options or on the
disposition of any underlying share. The Tax Bonus shall be based on the
maximum marginal combined federal and state income tax rate applicable to
individuals (the "Individual Tax Rate"), except that if the maximum marginal
combined federal and state income tax rate applicable to corporations (the
"Corporate Tax Rate") is less than the "Individual Tax Rate" for the year in
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<PAGE>
which the Company is entitled to a deduction as a result of the exercise of the
Option or disposition of the underlying shares, the Tax Bonus shall be computed
based on the Corporate Tax Rate. If as a result of a change in the law the
Company is not entitled to a deduction on the exercise of the Option or
disposition of the underlying shares, the Corporate Tax Rate shall be deemed to
be zero.
4. OTHER EXECUTIVE BENEFITS. During the term of this Agreement,
the Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) MEDICAL AND DENTAL COVERAGE. The Company agrees to provide
coverage to Executive and dependent members of his family under the same
medical and dental plans as may be maintained from time to time in the
discretion of the Company's Board for the benefit of the CEO and the dependent
members of his family.
(b) VACATION. Executive shall be entitled to four (4) weeks of
paid vacation during Executive's first year of employment with the Company and
shall be entitled to five (5) weeks during each year of employment with the
Company thereafter for the term of this Agreement. In each case, such
entitlement shall accrue pro rata over the contract year and shall be taken at
such time or times as shall not unreasonably interfere with the operations of
the Company.
(c) BUSINESS EXPENSES. The Company will pay or reimburse
Executive for any out-of-pocket expenses incurred by Executive in the course of
providing his services hereunder, which comply with the Company's travel and
expense policies adopted from time to time by the Board for the CEO. Such
reimbursement shall be made by the Company in the same manner and within the
same time period as applicable to the other executive officers of the Company.
(d) AUTOMOBILE. The Company shall provide Executive with the
use of a luxury automobile that is selected by Executive and approved by the
CEO. On the earlier of significant damage or destruction or attaining three
years of age, the Company shall replace such automobile with a new automobile
selected by Executive and approved by the CEO. The Company shall pay all costs
of insurance, repair, maintenance and operation of such automobile.
(e) BENEFIT PLANS. Executive shall be entitled to participate
in any pension, profit-sharing, stock option, stock purchase or other benefit
plan of the Company now existing or hereafter adopted for the benefit of
employees generally or the senior executives of the Company.
(f) LIFE INSURANCE. Provided the following policies may be
obtained at a reasonable cost, the Company shall provide Executive with a
$1,000,000 standard term life insurance policy and a $1,000,000 standard term
accidental death policy.
(g) DISABILITY. Provided the following policy may be obtained
at a reasonable cost, the Company shall provide Executive with a long-term
disability policy which provides for an annual disability payment in an amount
equal to 125% of Executive's Base Salary.
5. CONFIDENTIAL INFORMATION.
(a) NON-DISCLOSURE. Executive hereby agrees, during the term
of this Agreement, he will not disclose to any person or otherwise use or
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<PAGE>
exploit any proprietary or confidential information, including, without
limitation, trade secrets, processes, records of research, proposals, reports,
methods, processes, techniques, computer software or programming, or budgets or
other financial information, regarding the Company, its business, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of assigned duties for the Company. Notwithstanding anything
herein to the contrary, the term "Confidential Information" shall not include
information which (i) is or becomes generally available to the public other
than as a result of disclosure by Executive in violation of this Agreement,
(ii) is or becomes available to Executive on a non-confidential basis from a
source other than the Company, provided that such source is not known by
Executive to be furnishing such information in violation of a confidentiality
agreement with or other obligation of secrecy to the Company, (iii) has been
made available, or is made available, on an unrestricted basis to a third party
by the Company, by an individual authorized to do so or (iv) is known by
Executive prior to its disclosure to Executive. Executive may use and disclose
Confidential Information to the extent necessary to assert any right or defend
against any claim arising under this Agreement or pertaining to Confidential
Information or its use, to the extent necessary to comply with any applicable
statute, constitution, treaty, rule, regulation, ordinance or order, whether of
the United States, any state thereof, or any other jurisdiction applicable to
Executive, or if Executive receives a request to disclose all or any part of
the information contained in the Confidential Information under the terms of a
subpoena, order, civil investigative demand or similar process issued by a
court of competent jurisdiction or by a governmental body or agency, whether of
the United States or any state thereof, or any other jurisdiction applicable to
Executive.
(b) INJUNCTIVE RELIEF. Executive agrees that the remedy at law
for any breach by him of the covenants and agreements set forth in this Section
5 may be inadequate and that in the event of any such breach, the Company may,
in addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
6. TERMINATION.
(a) TERMINATION BY COMPANY FOR "CAUSE" OR VOLUNTARILY BY
EXECUTIVE. The Company may terminate this Agreement for "Cause" effective
immediately upon written notice thereof to Executive. For purposes of this
Agreement, "Cause" shall mean and be limited to the following events: (i) an
act of fraud, embezzlement or similar conduct by Executive involving the
Company; (ii) any action by Executive involving the arrest of Executive for
violation of any criminal statute constituting a felony if the Board reasonably
determines that the continuation of Executive's employment after such event
would have a adverse impact on the operations or reputation of the Company in
the financial community; or (iii) a continuing, repeated willful failure or
refusal by Executive to perform his duties; PROVIDED, HOWEVER, that this
Agreement may not be terminated under this subclause (iii) unless Executive
shall have first received written notice from the Board advising Executive of
the specific acts or omissions alleged to constitute a failure or refusal to
perform and such failure or refusal to perform continues after Executive shall
have had a reasonable opportunity to correct the acts or omissions cited in
such notice.
In the event of termination for "Cause," or voluntarily by Executive
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<PAGE>
other than as permitted in Sections 6(b)(i) and 6(b(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and (y) all Options that have become
exercisable as of the date of termination shall remain so for a period of 90
days.
(b) TERMINATION BY COMPANY OTHER THAN FOR "CAUSE."
i) DEATH. Provided that notice of termination has not
previously been given under any Section hereof, if Executive shall die
during the term of this Agreement, this Agreement and all of the Company's
obligations hereunder shall terminate, except that Executive's estate or
designated beneficiaries shall be entitled to receive (A) all earned and
unpaid Base Salary through the date of termination; (B) the Base Salary,
Performance Bonus, and all benefits with respect to the then current
contract year which would have been payable or provided to Executive had
the term ended one year following the last day of the month in which
Executive's death occurred; and (C) all other benefits that may be due to
Executive or Executive's estate or beneficiaries under the general
provisions of any benefit plan, stock incentive plan or other plan in
which Executive is then a participant, which benefits shall continue to be
provided for a period of one year following the date of death. In
addition, of the Options which are scheduled to vest on the next
anniversary of the commencement of the Initial Term, a percentage of such
number of Options shall vest at the date of death determined by dividing
the number of days which have elapsed since the last such anniversary by
the number 365 and multiplying the result by 100. Further, all Options
that have become exercisable as of the date of death (including those
which do so as a result of the provisions of the preceding sentence) shall
remain so for a period of twelve (12) months.
ii) DISABILITY. Provided that notice of termination has
not previously been given under any Section hereof, if Executive becomes
ill or is injured or disabled during the term such that Executive fails to
perform all or substantially all of the duties to be rendered hereunder
and such failure continues for a period in excess of 26 consecutive weeks
(a "Disability"), the Company shall continue to employ Executive under
this Agreement for one year from the date of the Disability (which one
year period shall commence at the beginning of the 26 week period referred
to herein) and shall continue to pay Executive the Base Salary in effect
on the date of the Disability (determined at the beginning of the 26 week
period referred to herein), the Performance Bonus and all benefits then in
effect; provided, that (A) the Company may relieve Executive of his duties
and responsibilities hereunder to the extent permitted by law and (B) any
long-term disability payments received by Executive under any disability
insurance plan made available to Executive by the Company if the premiums
were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during
the term and subsequent to the Disability commencement date (which shall
be at any time following the end of the 26 week period referred to herein)
Executive shall fully recover, the Company shall have the right
(exercisable within 60 days after receipt of notice from Executive of such
recovery), but not the obligation, to restore Executive to full-time
service at full compensation. If the Company elects not to restore
Executive to full-time service, Executive shall be entitled to obtain
other employment. If Executive is not restored to full-time employment
with the Company, all stock options that have become exercisable as of the
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<PAGE>
date of Disability (determined at the end of the 26 week period referred to
herein) shall remain so for a period of 12 months.
iii) WITHOUT CAUSE. If the Company elects to terminate
Executive for any reason whatsoever other than as provided in Section 6(a)
or if the Company causes a Defacto Termination of Executive (as defined
below) (each a "Severance Termination"), Executive shall receive the
"Separation Package." As used herein, the "Separation Package" shall
consist of two years' Base Salary (at the annual rate in effect at the
date of the Severance Termination) plus an amount equal to the Performance
Bonus actually paid to Executive with respect to the eight fiscal quarters
preceding the date of the Severance Termination (or if Executive has been
employed for less than two years, the amount of Performance Bonus paid to
Executive for the entire period of employment multiplied by a fraction,
the numerator of which is the number eight and the denominator of which is
the actual number of fiscal quarters for which Executive was employed by
the Company). In addition, all Options which are scheduled to vest on the
next anniversary of the commencement of the Initial Term shall vest as of
the date of the Severance Termination. Further, all options that have
become exercisable as of the date of such termination (including those
which do so as a result of the provisions of the preceding sentence) shall
remain so for a period of 12 months. In the event of a Severance
Termination, Executive will also be provided with reasonable office space
and secretarial support as well as the same mailing address and telephone
number which Executive had during the term for up to six months, and the
Company shall pay the costs of outplacement services with a provider of
its choice at a level appropriate to Executive's title and position as
requested by Executive. For purposes of this paragraph, a "Defacto
Termination" shall include any of the following events: (i) the Company
shall fail to pay or shall reduce the Base Salary, Performance Bonus or
other benefits provided herein, except as permitted hereunder, or shall
otherwise breach any material provision hereof which breach is not cured
within 10 days after receipt of notice thereof from Executive; (ii) the
Company shall fail to cause Executive to remain the Chief Operating
Officer of the Company; (iii) Executive shall not be continuously afforded
the authority, powers, responsibilities and privileges contemplated in
Section 1 above (whether or not accompanied by a change in title); (iv)
the Company shall require Executive's primary services to be rendered in
an area other than the Company's principal offices in the Los Angeles
metropolitan area; or (v) after a Change in Control (as defined below),
the Company increases the base salary for senior executives of the Company
generally without similarly increasing the Base Salary of Executive. For
purposes of clause (iii), Executive shall be deemed not to have been
continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any
reduction in the scope, level or nature of Executive's employment
hereunder, or any demotion, any phasing out or assignment to others, of
the duties contemplated herein.
(c) CHANGE IN CONTROL.
i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 6 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Section 6(a) and 6(b).
6
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ii) Executive may (but shall not be obligated to) terminate
this Agreement effective 30 days after the giving of such notice given at any
time within two years following a Change in Control. In the event that
Executive elects to terminate this Agreement pursuant to this Section 6(c)(ii),
Executive shall be entitled to the following payments:
(A) If the Change in Control is effected to an Adverse
Person (as defined below), then Executive shall be entitled to and receive the
Severance Package. In addition, all Options then held by Executive which are
not yet vested shall vest as of the date of the Severance Termination.
Further, all options that have become exercisable as of the date of the
Severance Termination (including those which do so as a result of the
provisions of the preceding sentence) shall remain so for the entire remaining
term of the Options.
(B) If the Change in Control is effected to a person
other than an Adverse Person, Executive shall be entitled to receive the
Severance Package. In addition, all Options which are scheduled to vest during
the 12 months following the termination date shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date
of such termination (including those which do so as a result of the provisions
of the preceding sentence) shall remain so for a period of 12 months.
(d) PAYMENT OF TERMINATION AMOUNTS. Executive may elect to have
all amounts to be paid to Executive pursuant to this Section 6 payable (i) over
the remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination. PROVIDED, HOWEVER, in the case of death or disability
the Performance Bonus component shall be payable at such time as performance-
based bonuses are paid to similarly situated employees of the Company and only
if the specified Target ROE for the applicable periods are actually met. In
the event Executive elects to be paid pursuant to clause (i), Executive agrees
promptly to notify the Company in writing of Executive's acceptance of full-
time employment; within 15 days after receipt of such notice, the Company shall
pay Executive in a lump sum any amounts which remain otherwise due to Executive
hereunder.
(e) STOCK AND SIMILAR RIGHTS. Except with regard to the vesting
and exercise dates of Options as set forth in this Section 6, Executive's
rights under any other agreement or plan under which stock options, restricted
stock or similar awards are granted shall be determined in accordance with the
terms and provisions of such plans or agreements.
(f) NO MITIGATION OR OFFSET. Payment of any sum under this
Section 6 shall not be subject to any claim of mitigation nor shall the Company
be entitled to any right of offset with respect thereto.
(g) OTHER INSURANCE POLICIES. Upon any termination of Executive's
employment, and upon reimbursement of the Company of all amounts paid by the
Company in connection with such policies, Executive shall have the right to
purchase or otherwise direct the disposition or assignment of any disability
insurance policy on him held by the Company (excluding only group disability
insurance policies) upon the payment of One Dollar ($1.00) as the total
consideration for each such policy.
7. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
7
<PAGE>
(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)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Voting Securities"); PROVIDED, HOWEVER, That neither of the following
acquisitions shall constitute a Change in Control; (i) any acquisition by the
Company or (ii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; PROVIDED, HOWEVER, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
stockholders of the Company, shall be approved by a vote of a least a majority
of the directors then compromising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation") entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of
Outstanding Voting Securities immediately prior to such reorganization, merger,
or consolidation; (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, the Resulting Corporation, and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or
indirectly 20% or more of the combined voting power of the Resulting
Corporation Voting Securities; and (iii) at least a majority of the members of
the Board shall have been members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization, merger or
consolidation; or
(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or
other disposition, more than 60% of the combined voting power of securities of
Buyer entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
of Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or Buyer and any Person that shall
8
<PAGE>
immediately prior to such sale or other disposition own beneficially, directly
or indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20% or more of the
combined voting power or, Buyer Voting Securities; and (z) at least a majority
of the members of the board of directors of Buyer shall have been members of
the Incumbent Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition or assets of
the Company.
For purposes of this Agreement, an Adverse Person shall mean any
person which acquires control of the Company in a transaction involving a
Change of Control other than a transaction which, before the time of the
transaction, has been approved by the Board of Directors of the Company.
8. INSURANCE. During the term, the Company shall maintain, at no cost to
Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $45,000,000.
9. GENERAL PROVISIONS.
(a) NOTICES. All notices, requirements, requests, demands, claims
or other communications hereunder shall be in writing. Any notice,
requirement, request, demand, claim or other communication hereunder shall be
deemed duly given (i) if personally delivered, when so delivered, (ii) if
mailed, two (2) business days after having been set by registered or certified
mail, return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below,
and the appropriate telephonic confirmation is received, provided that such
notice or other communication is promptly thereafter mailed in accordance with
the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service under circumstances by which such service guarantees next day
delivery, the date following the date so sent:
IF TO THE COMPANY, TO:
AAMES FINANCIAL CORPORATION
3731 Wilshire Boulevard
Los Angeles, California 90010
Attn: Chief Executive Officer
IF TO EXECUTIVE TO:
Cary H. Thompson
1944 Fairburn Avenue
Los Angeles, California 90025
Any party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
party notice in the manner herein set forth.
(b) ASSIGNMENT. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; PROVIDED HOWEVER, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and the benefits
9
<PAGE>
hereunder will automatically be deemed assigned to any such corporation,
subject, however, to Executive's right to terminate this Agreement to the
extent provided in Section 6. In the event of any assignment of this Agreement
to any corporation acquiring all or substantially all of the assets of the
Company or to any other corporation into which the Company may be merged or
consolidated, the responsibilities and duties assigned to Executive by such
successor corporation shall be the responsibilities and duties of, and
compatible with the status of, a senior executive officer of such successor
corporation. The Company may delegate any of its obligations hereunder to any
subsidiary of the Company, provided that such delegation shall not relieve the
Company of any of its obligations hereunder. Executive may not assign its
rights hereunder or delegate his duties hereunder to any Person.
(c) COMPLETE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof
and supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or
communications in respect of such subject matter.
(d) AMENDMENTS. This Agreement may be modified, amended,
superseded or terminated only by a writing duly signed by both parties.
(e) SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
(f) NO WAIVER. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of either party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall be
considered a waiver or to deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(g) BINDING EFFECT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(h) COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which when taken together shall
constitute one and the same document.
(i) GOVERNING LAW. This Agreement has been negotiated and
entered into in the State of California and shall be construed in accordance
with the laws of the State of California.
(j) ARBITRATION. The parties hereby expressly agree that any
controversy or claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The
10
<PAGE>
costs of the arbitrator shall be borne equally. Each party shall be
responsible for its own attorneys' fees and costs. However, the arbitrator
shall have the right to award costs and expenses (including actual attorneys'
fees) to the prevailing party as well as equitable relief. The award of the
arbitrator shall be final and binding and shall be enforceable in any court of
competent jurisdiction. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(k) HEADINGS. The headings included in this Agreement are for
the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has
executed the same as of the day and year first above written.
AAMES FINANCIAL CORPORATION
By: /s/ Gary K. Judis
----------------------
Gary K. Judis
Its: Chief Executive Officer
/s/ Cary H. Thompson
--------------------
CARY H. THOMPSON
11
EXHIBIT 10.29
EXECUTION COPY
------------------
AAMES FINANCIAL CORPORATION,
Issuer,
and
THE CHASE MANHATTAN BANK, N.A.,
Trustee
------------------
INDENTURE
------------------
U.S.$115,000,000
5 1/2% Convertible Subordinated Debentures due 2006
------------------
Dated as of February 26, 1996
1
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Incorporation by Reference of TIA . . . . . . . . . . . . 9
SECTION 1.3. Rules of Construction . . . . . . . . . . . . . . . . . .10
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . .11
SECTION 2.2. Execution and Authentication. . . . . . . . . . . . . . .13
SECTION 2.3. Registrar and Paying Agent. . . . . . . . . . . . . . . .14
SECTION 2.4. Paying Agent to Hold Assets in Trust. . . . . . . . . . .15
SECTION 2.5. Securityholder Lists. . . . . . . . . . . . . . . . . . .15
SECTION 2.6. Transfer and Exchange; Restrictions on Transfer . . . . .16
SECTION 2.7. Exchange. . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 2.8. Replacement Securities. . . . . . . . . . . . . . . . . .24
SECTION 2.9. Outstanding Securities. . . . . . . . . . . . . . . . . .25
SECTION 2.10. Treasury Securities . . . . . . . . . . . . . . . . . . .25
SECTION 2.11. Temporary Securities. . . . . . . . . . . . . . . . . . .25
SECTION 2.12. Cancellation. . . . . . . . . . . . . . . . . . . . . . .26
SECTION 2.13. Payment . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 2.14. Defaulted Interest. . . . . . . . . . . . . . . . . . . .28
SECTION 2.15. Computation of Interest . . . . . . . . . . . . . . . . .28
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption . . . . . . . . . . . . . . . . . . .29
SECTION 3.2. Effect of Notice of Redemption. . . . . . . . . . . . . .31
SECTION 3.3. Deposit of Redemption Price . . . . . . . . . . . . . . .31
SECTION 3.4. Securities Redeemed in Part . . . . . . . . . . . . . . .32
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities . . . . . . . . . . . . . . . . . .33
SECTION 4.2. Maintenance of Office or Agency . . . . . . . . . . . . .33
SECTION 4.3. Corporate Existence . . . . . . . . . . . . . . . . . . .34
SECTION 4.4. Payment of Taxes and Other Claims . . . . . . . . . . . .35
SECTION 4.5. Maintenance of Properties and Insurance . . . . . . . . .35
SECTION 4.6. Compliance Certificate; Notice of Default . . . . . . . .36
SECTION 4.7. Reports . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 4.8. Limitation on Status as Investment Company. . . . . . . .36
SECTION 4.9. Waiver of Stay, Extension or Usury Laws . . . . . . . . .37
SECTION 4.10. Rule 144A Information Requirement . . . . . . . . . . . .37
2
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ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation . . . . . . .38
SECTION 5.2. Successor Corporation Substituted . . . . . . . . . . . .38
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . .39
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment .40
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . .42
SECTION 6.4. Trustee May File Proofs of Claim. . . . . . . . . . . . .42
SECTION 6.5. Trustee May Enforce Claims Without Possession of
Securities . . . . . . . . . . . . . . . . . . . . .43
SECTION 6.6. Priorities. . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 6.7. Limitation on Suits . . . . . . . . . . . . . . . . . . .44
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
Premium, Interest and Additional Amounts . . . . . .44
SECTION 6.9. Rights and Remedies Cumulative. . . . . . . . . . . . . .44
SECTION 6.10. Delay or Omission Not Waiver. . . . . . . . . . . . . . .45
SECTION 6.11. Control by Holders. . . . . . . . . . . . . . . . . . . .45
SECTION 6.12. Waiver of Past Default. . . . . . . . . . . . . . . . . .45
SECTION 6.13. Undertaking for Costs . . . . . . . . . . . . . . . . . .45
SECTION 6.14. Restoration of Rights and Remedies. . . . . . . . . . . .46
SECTION 6.15. Enforcement of Rights of Conversion by Holders. . . . . .46
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . .47
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . .48
SECTION 7.3. Individual Rights of Trustee. . . . . . . . . . . . . . .49
SECTION 7.4. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . .49
SECTION 7.5. Notice of Default . . . . . . . . . . . . . . . . . . . .49
SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . .49
SECTION 7.7. Compensation and Indemnity. . . . . . . . . . . . . . . .50
SECTION 7.8. Replacement of Trustee. . . . . . . . . . . . . . . . . .51
SECTION 7.9. Successor Trustee by Merger, Etc. . . . . . . . . . . . .52
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . .52
SECTION 7.11. Preferential Collection of Claims Against Company . . . .52
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. Satisfaction and Discharge of Indenture . . . . . . . . .53
SECTION 8.2. Repayment to the Company. . . . . . . . . . . . . . . . .53
3
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ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders. . . .54
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
Consent of Holders . . . . . . . . . . . . . . . . .54
SECTION 9.3. Compliance with TIA . . . . . . . . . . . . . . . . . . .55
SECTION 9.4. Revocation and Effect of Consents . . . . . . . . . . . .55
SECTION 9.5. Notation on or Exchange of Securities . . . . . . . . . .56
SECTION 9.6. Trustee to Sign Amendments, Etc.. . . . . . . . . . . . .56
ARTICLE X
MEETINGS
SECTION 10.1. Meetings and Votes of Holders . . . . . . . . . . . . . .57
SECTION 10.2. Action by Holders . . . . . . . . . . . . . . . . . . . .60
ARTICLE XI
AGENTS
SECTION 11.1. Offices, Resignation, Successors, Etc. of Agents;
Paying, Conversion and Transfer Agencies. . . .61
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Indebtedness. . . . . .63
SECTION 12.2. No Payment on Securities in Certain Circumstances . . . .63
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution,
Liquidation or Reorganization. . . . . . . . . . . .65
SECTION 12.4. Securityholders to Be Subrogated to Rights
of Holders of Senior Indebtedness. . . . . . . . . .66
SECTION 12.5. Obligations of the Company Unconditional. . . . . . . . .66
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice . . . . . . . . . . . . . . . .67
SECTION 12.7. Application by Trustee of Assets Deposited with It. . . .67
SECTION 12.8. Subordination Rights Not Impaired by Acts or
Omissions of the Company or
Holders of Senior Indebtedness . . . . . . . . . . .68
SECTION 12.9. Securityholders Authorize Trustee to Effectuate
Subordination of Securities. . . . . . . . . . . . .68
SECTION 12.10. Right of Trustee to Hold Senior Indebtedness68
SECTION 12.11. Article XII Not to Prevent Events of Default. . . . . . .69
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness . . . . . . . . . . . . . . . . . . .69
4
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ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1. Conversion Privilege. . . . . . . . . . . . . . . . . . .70
SECTION 13.2. Exercise of Conversion Privilege. . . . . . . . . . . . .70
SECTION 13.3. Fractional Interests. . . . . . . . . . . . . . . . . . .71
SECTION 13.4. Adjustment of Conversion Price. . . . . . . . . . . . . .67
SECTION 13.5. Notice of Certain Events. . . . . . . . . . . . . . . . .72
SECTION 13.6. Continuation of Conversion Privilege in
Case of Reclassification, Change,
Merger, Consolidation or Sale of Assets. . . . . . .73
SECTION 13.7. Taxes on Conversion . . . . . . . . . . . . . . . . . . .74
SECTION 13.8. Company to Provide Stock. . . . . . . . . . . . . . . . .74
SECTION 13.9. Disclaimer of Responsibility for Certain Matters. . . . .75
SECTION 13.10. Return of Funds Deposited for Redemption of
Converted Securities . . . . . . . . . . . . . . . .75
XIV
MISCELLANEOUS
SECTION 14.1. TIA Controls. . . . . . . . . . . . . . . . . . . . . . .76
SECTION 14.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . .76
SECTION 14.3. Communications by Holders with Other Holders. . . . . . .77
SECTION 14.4. Certificate and Opinion as to Conditions Precedent. . . .77
SECTION 14.5. Statements Required in Certificate or Opinion . . . . . .77
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar . . . . . . . .78
SECTION 14.7. Legal Holidays. . . . . . . . . . . . . . . . . . . . . .78
SECTION 14.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .78
SECTION 14.9. Governing Law . . . . . . . . . . . . . . . . . . . . . .78
SECTION 14.10. Agent for Service of Process. . . . . . . . . . . . . . .79
SECTION 14.11. No Adverse Interpretation of Other Agreements . . . . . .79
SECTION 14.12. No Recourse Against Others. . . . . . . . . . . . . . . .80
SECTION 14.13. Successors. . . . . . . . . . . . . . . . . . . . . . . .80
SECTION 14.14. Duplicate Originals . . . . . . . . . . . . . . . . . . .80
SECTION 14.15. Severability. . . . . . . . . . . . . . . . . . . . . . .80
SECTION 14.16. Table of Contents, Headings, Etc. . . . . . . . . . . . .80
SECTION 14.17. Qualification of Indenture. . . . . . . . . . . . . . . .80
SECTION 14.18. Registration Rights . . . . . . . . . . . . . . . . . . .81
EXHIBITS
Exhibit A - Form of Security . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Regulation S Global Security . . . . . . . . . . . B-1
5
<PAGE>
INDENTURE, dated as of February 26, 1996, between AAMES FINANCIAL
CORPORATION, a Delaware corporation (the "Company"), and THE CHASE MANHATTAN
BANK, N.A., as Trustee.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 5 1/2%
Convertible Subordinated Debentures due 2006 and the Coupons:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Accredited Investor Securities" shall have the meaning specified in
Section 2.1(b).
"Additional Amounts" shall have the meaning specified in Section 2 of the
form of Registered Security and Bearer Security attached hereto as Exhibit A.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, (ii)
any spouse, immediate family member, or other relative who has the same
principal residence of any person described in clause (i) above, and (iii) any
trust in which any person described in clause (i) or (ii) above has a
beneficial interest. For purposes of this definition, the term "control" means
the power to direct the management and policies of a person, directly or
through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise.
"Agent" shall have the meaning set forth in Section 2.3.
"Authorized Newspaper" means a leading newspaper, in an official language
of the country of publication or in the English language, customarily published
on each Business Day whether or not published on Saturdays, Sundays or
holidays, and of general circulation in the place in connection with which the
term is used or in the financial community of such place. If by reason of the
temporary or permanent suspension of publication of any newspaper or by reason
of any other cause it shall be impossible to make publication of such notice in
an Authorized Newspaper as herein provided, then such publication or other
notice in lieu thereof as shall be made by the Trustee shall constitute
sufficient publication of such notice, if such publication or other notice
shall, so far as may be possible, approximate the terms and conditions of the
publication in lieu of which it is given.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal, state
or foreign law for the relief of debtors.
"Bearer Securities" shall have the meaning set forth in Section 2.1(c).
"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
6
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"Board Resolution" means, with respect to any person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such person
to have been duly adopted by the Board of Directors or any authorized committee
thereof and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means, with respect to any act to be performed hereunder or
under the Securities, each Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in the place where such act is to
occur are authorized or obligated by applicable law, regulation or executive
order to close.
"Capitalized Lease Obligation" means rental obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations
or other equivalents of or interests (however designated) in stock issued by
that corporation.
"Cash" means such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means (i) any merger or consolidation of the Company
with or into any person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the assets of the Company,
on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total
voting power in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee or surviving
entity, (ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election
of directors of the Company, or (iii) during any period of 12 consecutive
months after the Closing Date, individuals who at the beginning of any such
12-month period constituted the Board of Directors of the Company (together
with any new directors whose election by such Board or whose nomination for
election by the shareholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of the
Board of Directors of the Company then in office. For purposes of this
definition, (i) the terms "person" and "group" shall have the meanings used for
purposes of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the
Closing Date, whether or not applicable; and (ii) the term "beneficial owner"
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shall have the meaning used in Rules 13d-3 and 13d-5 under the Exchange Act as
in effect on the Closing Date, where or not applicable, except that a "person"
shall not 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 or upon the occurrence of certain events.
"Change of Control Notice Date" shall have the meaning specified in
Section 3.1.
"Closing Date" means February 26, 1996, or such other time on the same or
such other date, not later than 5:00 p.m., London time, on the fifth Business
Day in London thereafter, as the Managers and the Company may agree.
"Closing Price" means for any day the last reported sales price of the
Common Stock, regular way, or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices for the
Common Stock, regular way, in either case on the New York Stock Exchange, Inc.
or, if the Common Stock is not listed or admitted to trading on such exchange,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the closing sale price quoted on the Nasdaq
National Market, or if not so quoted, as determined by the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Depositary" means The Chase Manhattan Bank, N.A. (London Office),
as depositary for Cedel and the Euroclear Operator.
"Common Stock" means the Company's common stock, par value $0.001 per
share, or as such stock may be reconstituted from time to time.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"Conversion Agent" means The Chase Manhattan Bank, N.A., in its capacity
as Conversion Agent pursuant to its appointment as such under Section 2.3, and
its successor or successors as such conversion agent qualified and appointed in
accordance with Section 11.1.
"Conversion Price" shall have the meaning specified in Section 13.1.
"Conversion Shares" shall have the meaning specified in Section 13.1.
"Coupon" means any interest coupon appertaining to any security.
"Current Market Price" means, on any date, the average of the Closing
Prices for the 15 consecutive Trading Days during which the principal trading
market for the Common Stock is open commencing 25 Trading Days before the day
in question.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event or condition that is, or after notice or passage
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of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.14.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"DTC" means The Depository Trust Company.
"Euroclear Operator" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Exchange Date" shall have the meaning specified in Section 2.7(d).
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board ("FASB") or in such
other statements by such other entity as approved by a significant segment of
the accounting profession which are in effect in the United States; provided,
however, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles which are
in effect as of the Closing Date.
"Holder" or "Securityholder" means, with respect to a Registered Security,
the person in whose name a Registered Security is registered on the Registrar's
books and, with respect to a Bearer Security, the bearer of such Bearer
Security and, with respect to a Coupon, the bearer thereof.
"Holder Redemption Date" means a date not less than 30 nor more than 60
days after a Change of Control Notice Date (except as otherwise required by
law).
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, (i)
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except such as would constitute trade payables to trade
creditors in the ordinary course of business that are not more than 90 days
past their original due date, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities of others of the kind described in the
preceding clause (a) or (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or
9
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acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings, refunding (whether direct or indirect) of any liability of the
kind described in any of the preceding clauses (a), (b) or (c), or this clause
(d), whether or not between or among the same parties.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities.
"Interest Record Date" means an Interest Record Date specified in the
Securities whether or not such Interest Record Date is a Business Day.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Junior Securities" of any Person means any Capital Stock and any
Indebtedness of such Person that is (i) subordinated in right of payment to the
Securities and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Securities and (ii) subordinated in right of payment to all Senior Indebtedness
at least to the same extent as the Securities.
"Lien" means any mortgage, lien, pledge, charge, security interest or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"London Office" shall have the meaning specified in Section 2.3.
"Managers" means NatWest Securities Limited, Lehman Brothers Inc. and
Piper Jaffray Inc. and the subscribers named on Schedule I to the Subscription
Agreement.
"Notice of Default" shall have the meaning specified in Section 6.1(d).
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Senior Indebtedness.
"Officer" means, with respect to the Company, the Chief Executive Officer,
the President, any Executive Vice President, Senior Vice President or Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of the Company.
"Officers' Certificate" means, with respect to the Company, a certificate
signed by one or more Officers or one or more Officers and an Assistant
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Secretary of the Company and otherwise complying with the requirements of
Sections 14.4 and 14.5, if applicable.
"Opinion of Counsel" means a written opinion from legal counsel (who,
unless otherwise specified, may be an employee of the Company) who is
reasonably acceptable to the Trustee and which complies with the requirements
of Sections 14.4 and 14.5, if applicable.
"Paying Agent" means The Chase Manhattan Bank, N.A., in its capacity as
Paying Agent pursuant to its appointment as such under Section 2.3, and its
successor or successors as such paying agent qualified and appointed in
accordance with Section 11.1, and any additional Paying Agents appointed by the
Company as described in Section 2.3.
"Payment Blockage Period" means the period ending 179 days after the
Payment Notice is delivered as set forth in Section 12.2(b).
"Payment Default" shall have the meaning specified in Section 12.2.
"Payment Notice" shall have the meaning specified in Section 12.2.
"Person" or "person" means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, unincorporated
association, governmental regulatory entity, country, state or political
subdivision thereof, trust, municipality or other entity.
"Principal" of any Indebtedness means the principal of such Indebtedness
plus, without duplication, any applicable premium on such Indebtedness.
"Principal Corporate Trust Office" shall have the meaning specified in
Section 2.3.
"Property" means any right or interest in or to property or assets of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"QIBs" shall have the meaning specified in Section 2.1(b).
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to Article III of this
Indenture and Section 3 in the form of Security.
"Redemption Price," when used with respect to any Security to be redeemed,
means the redemption price for such redemption pursuant to Section 3 in the
form of Security, which shall include, without duplication, in each case,
accrued and unpaid interest and Additional Amounts, if any, to and including
the Redemption Date.
"Registered Accredited Investor Securities" shall have the meaning
specified in Section 2.1(e).
"Registered Regulation S Securities" shall have the meaning specified in
Section 2.1(c).
"Registered Securities" shall have the meaning specified in Section
2.1(c).
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"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of February 16, 1996, by and among the Company and the persons listed
on Schedule I thereto, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"Regulation S Global Security" shall have the meaning specified in Section
2.1(c).
"Resale Restriction Termination Date" shall have the meaning specified in
Section 2.6(i).
"Restricted Common Stock" shall have the meaning specified in Section
13.6(b).
"Restricted Security" shall have the meaning specified in Section 2.1(f).
"Rule 144A Global Security" shall have the meaning specified in Section
2.1(d).
"Rule 144A Securities" shall have the meaning specified in Section 2.1(b).
"Securities" means, collectively, the 5 1/2% Convertible Subordinated
Debentures due 2006, as supplemented from time to time in accordance with the
terms hereof, issued under this Indenture and "Security" means any of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Securities Custodian" means the Trustee, as custodian with respect to the
Securities in global form, or any successor entity thereto.
"Security Register" shall have the meaning specified in Section 2.3.
"Senior Indebtedness" of the Company means any principal, premium, if any,
and interest or other monetary obligation on (i) any Indebtedness of the
Company (other than the Securities and indebtedness ranking PARI PASSU with or
subordinate to the Securities pursuant to the terms of the instrument creating
or evidencing such indebtedness, but including guarantees given by the
Company), whether outstanding on the date of this Indenture or thereafter. In
no event shall Senior Indebtedness include (a) indebtedness of the Company owed
or owing to any subsidiary of the Company or any officer, director or employee
of the Company or any subsidiary thereof or (b) any liability for taxes owed or
owing by the Company.
"Significant Subsidiary" shall have the meaning assigned to that term
under Regulation S-X promulgated by the Commission, as in effect on the date of
this Indenture.
"Stated Maturity," when used with respect to any Security, means March 15,
2006.
"Subscription Agreement" means that certain Subscription Agreement, dated
February 16, 1996, by and among the Company and the Managers named in Schedule
I thereto, as such agreement may be amended, modified or supplemented from time
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to time in accordance with the terms thereof.
"Subsidiary" with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power normally entitled to vote in
the election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner, or (iii) any
other person (other than a corporation) in which such person, one or more
Subsidiaries of such person, or such person and one or more Subsidiaries of
such person, directly or indirectly, at the date of determination thereof has
at least majority ownership interest.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the New York Stock
Exchange (or, if the Common Stock is not listed or admitted to trading thereon,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading).
"Transfer Agent" shall have the meaning specified in Section 4.2(b).
"Transfer Notice" means the certification set forth on the reverse of each
Security.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
administration (or any successor group) of the Trustee or any other officer of
the Trustee customarily performing functions similar to those performed by the
Persons who at that time shall be such officers, and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to
whom such trust matter is referred because of such person's knowledge of and
familiarity with the particular subject.
"U.S. Government Obligations" means direct noncallable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
SECTION 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
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"obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision;
(7) including shall be deemed to mean "including, without limitation,";
and
(8) references to Sections or Articles refer to such Section or Article
in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
(a) The Company has, by a Subscription Agreement, dated February 16, 1996
(the "Subscription Agreement"), by and among the Company and the several
managers named in Schedule I thereto (the "Managers"), agreed to issue and sell
to the Managers up to U.S.$115,000,000 aggregate principal amount of its 5 1/2%
Convertible Subordinated Debentures due 2006.
(b) Pursuant to the Subscription Agreement, the Managers may resell the
Securities to (i) persons who are not "U.S. Persons" (as such term is defined
in Regulation S promulgated by the Commission pursuant to the Securities Act)
in transactions that meet the requirements of Regulation S, (ii) "qualified
institutional buyers" (as such term is defined in Rule 144A promulgated by the
Commission pursuant to the Securities Act and hereinafter referred to as
"QIBs") in reliance on Rule 144A (the Securities that are resold by the
Managers pursuant to Rule 144A being hereinafter referred to as the "Rule 144A
Securities"), and (iii) institutional "accredited investors" (within the
meaning of Rule 501(a)(1), (2), (3) or (7) promulgated by the Commission
pursuant to the Securities Act) (the Securities that are resold by the Managers
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to institutional "accredited investors" being hereinafter referred to as the
"Accredited Investor Securities").
(c) The Securities will initially be issued in the form of a temporary
global debenture in bearer form without coupons or conversion rights in the
aggregate principal amount of the entire issue of Securities less the aggregate
principal amount of the Rule 144A Securities and Accredited Investor Securities
concurrently issued, substantially in the form of Exhibit B hereto (the
"Regulation S Global Security"). As hereinafter provided, the Regulation S
Global Security may subsequently be exchanged for Securities in printed
definitive form either as (i) bearer Securities ("Bearer Securities") in
denominations of U.S.$1,000 and U.S.$10,000 and with interest Coupons attached
thereto, representing the semi-annual interest payable thereon, or (ii) fully
registered Securities ("Registered Regulation S Securities") in denominations
of U.S.$1,000 and integral multiples thereof, without interest Coupons attached
thereto. Bearer Securities shall be substantially in the form of Exhibit A
hereto, including the Coupons set forth therein but excluding the bracketed
legends, the bracketed schedule and the information appearing therein that
relates to the Registered Securities only. Registered Regulation S Securities
shall be substantially in the form of Exhibit A hereto excluding the bracketed
legends. The Securities which are not Bearer Securities or the Regulation S
Global Security are hereinafter collectively referred to as the "Registered
Securities."
(d) The Rule 144A Securities will initially be issued in the form of a
global security in the aggregate principal amount of the Rule 144A Securities,
which security shall be in substantially the form of Exhibit A hereto,
including the bracketed legends relating to clearance and settlement through
The Depository Trust Company and restrictions on transfer imposed under the
Securities Act and including the bracketed schedule but excluding the Coupons,
and is hereinafter referred to as the "Rule 144A Global Security."
(e) The Accredited Investor Securities will initially be issued in fully
registered form in denominations of U.S.$1,000 and integral multiples thereof,
which Securities shall be in substantially the form of Exhibit A hereto,
excluding the bracketed legend relating to clearance and settlement through The
Depository Trust Company and excluding the bracketed legend relating to
restrictions on transfer imposed under the Securities Act, the Coupons and the
bracketed schedule, and are hereinafter collectively referred to as "Registered
Accredited Investor Securities."
(f) During the period beginning on the Closing Date and ending on the
date which is three years after the Closing Date (or such shorter period as
shall be permitted as a result of an amendment to the rules under the
Securities Act in respect thereof), all Rule 144A Securities and all Accredited
Investor Securities, and all Securities issued upon registration of transfer of
or in exchange for such Securities, shall be "Restricted Securities" and shall
be subject to the restrictions on transfer in Section 2.6 hereof; provided,
however, that the term "Restricted Securities" shall not include (i) Registered
Securities which are issued upon transfer of or in exchange for either Bearer
Securities or Registered Regulation S Securities or (ii) Registered Securities
as to which such restrictions on transfer have been terminated in accordance
with Section 2.6(i) hereof. All Restricted Securities shall bear the legend
required by Section 2.6(h) hereof.
(g) The Registered Securities, the Bearer Securities and the Regulation S
Global Security shall contain such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
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Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistent herewith, be
determined by the officer of the Company executing such Securities, as
evidenced by his execution of such Securities.
(h) The Company in issuing the Securities shall use CUSIP numbers, and
the Trustee may use such CUSIP numbers in any notice of redemption with respect
to the Securities. The Company shall obtain one CUSIP number for the Rule 144A
Securities and one for the Registered Securities that are not Restricted
Securities. In addition, the Company shall obtain an ISIN number and a Common
Code for the Regulation S Global Security, the Bearer Securities and the
Registered Regulation S Securities.
(i) In compliance with United States tax laws and regulations, Bearer
Securities may not be offered or sold during the 40-day period beginning on the
Closing Date, or at any time if part of a Manager's unsold allotment, to a
person who is within the United States or to a United States person other than
(a) foreign branches of United States financial institutions if such
institutions agree in writing to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the Code, and the regulations thereunder, (b)
United States offices of exempt distributors, or (c) United States offices of
international organizations or foreign central banks. United States tax laws
and regulations also require that Bearer Securities not be delivered within the
United States.
(j) The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the forms included in Exhibits A and
B hereto, as applicable. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the forms of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the forms
of Debentures attached as Exhibits A and B hereto shall be delivered in writing
to the Trustee. Each Security shall be dated the date of its authentication,
except that Bearer Securities shall be dated February 26, 1996.
(k) The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. Execution and Authentication.
An authorized Officer of the Company shall sign each Security and each
Coupon for the Company by manual or facsimile signature. The Company's seal
shall be impressed, affixed, imprinted or reproduced on the Securities and may
be in facsimile form.
If an Officer whose signature is on a Security or a related Coupon was an
Officer at the time of such execution but no longer holds that office at the
time the Trustee authenticates the Security, the Security and such Coupon shall
be valid nevertheless and the Company shall nevertheless be bound by the terms
of the Securities, the Coupons and this Indenture.
A Security and the related Coupons shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication on
the Security but such signature shall be conclusive evidence that the Security
has been authenticated pursuant to the terms of this Indenture.
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The Trustee shall authenticate the Securities for original issue in the
aggregate principal amount of up to U.S.$115,000,000 upon a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on
which the Securities are to be authenticated. The aggregate principal amount
of Securities outstanding at any time may not exceed U.S.$115,000,000, except
as otherwise provided herein. Upon the written order of the Company in the
form of an Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless otherwise provided in the appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
SECTION 2.3. Registrar and Paying Agent.
The Company hereby appoints The Chase Manhattan Bank, N.A., at present
having its principal corporate trust office at 4 Chase MetroTech Center, Third
Floor, Brooklyn, New York 11245 (together with such other offices as the
Trustee may designate for such purposes, the "Principal Corporate Trust
Office"), as its Trustee in respect of the Securities upon the terms and
subject to the conditions herein set forth (The Chase Manhattan Bank, N.A. and
its successor or successors as such Trustee qualified and appointed in
accordance with Section 7.8 hereof are herein called the "Trustee"). The
Trustee shall have the powers and authority granted to and conferred upon it
herein and in the Securities, and such further powers and authority, acceptable
to it, to act on behalf of the Company as the Company may hereafter grant to or
confer upon it in writing.
The Company hereby appoints the Principal Corporate Trust Office of The
Chase Manhattan Bank, N.A. in The City of New York and the London office of The
Chase Manhattan Bank, N.A. located at Woolgate House, Coleman Street, London
EC2P 2HD, England (together with such other offices as the Trustee may
designate for such purposes, the "London Office"), as its Paying Agent in
respect of the Securities upon the terms and subject to the conditions herein
set forth. The Paying Agent shall have the powers and authority granted to and
conferred upon it herein and in the Securities, and such further powers and
authority, acceptable to it, to act on behalf of the Company as the Company may
hereafter grant to or confer upon it in writing. The Company may appoint one or
more additional Paying Agents from time to time and may authorize the Paying
Agent to cooperate with one or more additional Paying Agents. As used herein,
"paying agencies" shall mean paying agencies maintained by the Company as
provided in Section 4.2 hereof.
The Company hereby appoints the Principal Corporate Trust Office of The
Chase Manhattan Bank, N.A. and the London Office of The Chase Manhattan Bank,
N.A. (together with such other offices as the Trustee may designate for such
purposes) as its Conversion Agent in respect of the Securities upon the terms
and subject to the conditions herein set forth, and the Registrar, the Paying
Agent, the Conversion Agent, the Transfer Agents (as defined in Section 4.2
hereof) and the Trustee are sometimes herein referred to severally as an
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"Agent" and, collectively, as the "Agents"). The Conversion Agent shall have
the powers and authority granted to and conferred upon it herein and in the
Securities, and such further powers and authority, acceptable to it, to act on
behalf of the Company as the Company may hereafter grant to or confer upon it
in writing. As used herein, "conversion agencies" shall mean conversion
agencies maintained by the Company as provided in Section 4.2 hereof.
The Company shall cause to be kept at the Principal Corporate Trust Office
of the Trustee a register (the register maintained in such office being herein
referred to as the "Security Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Company shall provide for the
registration of Registered Securities and of transfers of Registered
Securities. The Trustee is hereby appointed Registrar ("Registrar") for the
purpose of registering Registered Securities and transfers of Registered
Securities as herein provided. The Company may have one or more co-Registrars.
The Company shall enter into an appropriate written agency agreement with
any Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Rule 144A Global Securities.
The Company initially appoints the Trustee to act as Securities Custodian
with respect to the Rule 144A Global Securities.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, interest on or Additional Amounts with respect
to, the Securities (whether such assets have been distributed to it by the
Company or any other obligor on the Securities), and shall notify the Trustee
in writing of any Default in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any Payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by the Company to the Paying Agent,
the Paying Agent (if other than the Company or an Affiliate of the Company)
shall have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders of Registered Securities. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee on or before the third Business Day
preceding each Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee
reasonably may require of the names and addresses of Holders of Registered
Securities.
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SECTION 2.6. Transfer and Exchange; Restrictions on Transfer.
(a) Upon surrender for registration of transfer of any Registered
Security at any office or agency designated for such purpose by the Company
pursuant to Section 4.2 hereof, the Company shall execute, and the Trustee
shall authenticate, register and deliver, in the name of the designated
transferee or transferees, one or more new Registered Securities of any
authorized denominations and of a like aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture; provided,
however, that, with respect to any Registered Security that is a Restricted
Security, the Trustee shall not register the transfer of such Security unless
the conditions in Section 2.6(b) hereof shall have been satisfied. The Holder
of each Restricted Security, by such Holder's acceptance thereof, agrees to be
bound by the transfer restrictions set forth herein and in the legend on such
Restricted Security.
(b) Whenever any Restricted Security is presented or surrendered for
registration of transfer or exchange for a Registered Security registered in a
name other than that of the Holder, no registration of transfer or exchange
shall be made unless:
(i) The registered holder presenting such Restricted Security for
transfer shall have certified to the Trustee in writing that such
registered holder is transferring such Restricted Security to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
compliance with the exemption from registration under the Securities Act
provided by Rule 144A thereunder (or a successor provision);
(ii) The registered holder presenting such Restricted Security for
transfer shall have certified to the Trustee in writing that the
registered holder is transferring such Restricted Security outside the
United States in a transaction meeting the requirements of Rule 904 of
Regulation S under the Securities Act;
(iii) (A) The registered holder presenting such Restricted Security
for transfer shall have certified to the Trustee in writing that such
registered holder is transferring such Restricted Security to an
institutional "accredited investor" (within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) in a transaction not involving
any general solicitation or general advertising; and (B) a broker or
dealer registered under Section 15 of the Exchange Act shall have
certified to the Trustee in writing that: (x) each person who will become
a beneficial owner of the Restricted Security upon transfer is an
institutional "accredited investor" (as such term is defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act); (y) no general
solicitation or general advertising was made or used by such broker or
dealer in connection with the offer and sale of such Restricted Security
to such person(s); and (z) such institutional accredited investor has been
informed that the Securities have not been registered under the Securities
Act and are subject to the restrictions on transfer set forth in the
Securities and this Indenture;
(iv) The registered holder presenting such Restricted Security for
transfer shall have certified to the Trustee in writing that the
registered holder is transferring the Registered Security to the Company;
or
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(v) The registered holder presenting such Restricted Security for
transfer shall have delivered an opinion of counsel acceptable in form and
substance to the Company, that the transfer is being made pursuant to
another available exemption from, or a transaction not otherwise subject
to, the registration requirements of the Securities Act.
For purposes of this Section 2.6(b), any such certification to the Trustee
in writing shall be in the form of the Transfer Notice set forth on the reverse
of such Security. In the case of a transfer pursuant to the foregoing clauses
(ii), (iii) or (v) above, the Company may require that the registered holder
deliver an opinion of counsel, certifications or other information acceptable
to it in form and substance.
(c) Bearer Securities may, at the option of the holder thereof, be
exchanged for an equal aggregate principal amount of Registered Regulation S
Securities in denominations of $1,000 and integral multiples thereof without
Coupons and/or Bearer Securities of authorized denominations, upon surrender of
the Bearer Securities to be exchanged at any office or agency outside the
United States designated for such purpose by the Company pursuant to Section
4.2 hereof, with all unmatured Coupons and all matured Coupons in default
thereto appertaining. If such Holder is unable to produce any such unmatured
Coupon or Coupons or matured Coupon or Coupons in default, such exchange may be
effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Company in an amount equal to the face amount of such missing
Coupon or Coupons or the surrender of such missing Coupon or Coupons may be
waived by the Company if there be furnished to it and the Trustee such security
or indemnity as it may require to save it, the Trustee, the Paying Agent and
any paying agency harmless. If thereafter the Holder of such Security shall
surrender to any paying agency any such missing Coupon in respect of which such
a payment shall have been made, such Holder shall be entitled to receive the
amount of such payment from the Company; provided, however, that, except as
otherwise provided in the form of Bearer Security set forth in Exhibit A
hereto, interest represented by Coupons shall be payable only upon presentation
and surrender of those Coupons outside of the United States, its territories
and its possessions. Bearer Securities and Coupons are transferable upon
delivery.
(d) Registered Securities may, at the option of the holder thereof, be
exchanged for Registered Securities of any other authorized denominations and
of a like aggregate principal amount, upon surrender of the Registered
Securities to be exchanged at any office or agency designated for such purpose
by the Company pursuant to Section 4.2 hereof. Registered Securities shall not
be exchangeable for Bearer Securities. Whenever any Registered Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the holder making the
exchange is entitled to receive. If the Registered Security so surrendered for
exchange is a Registered Accredited Investor Security and the Holder thereof
requests in writing that such Registered Accredited Investor Security be
exchanged for an interest in the Rule 144A Global Security, such Registered
Accredited Investor Security will be exchangeable into an equal aggregate
principal amount of beneficial interests in the Rule 144A Global Security;
provided, however, that, if such Registered Accredited Investor Security is a
Restricted Security, such exchange may only be made if such Holder certifies to
the Trustee in writing that such Holder is a QIB by completing the Transfer
Notice on the reverse of such Security. Upon any exchange as provided in the
immediately preceding sentence, the Trustee shall cancel such Registered
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Accredited Investor Security and cause, or direct any custodian for the Rule
144A Global Security to cause, in accordance with the standing instructions and
procedures existing between the Depositary and any such custodian, the
aggregate principal amount of Securities represented by the Rule 144A Global
Security to be increased accordingly. If no Rule 144A Global Securities are
then outstanding, the Company shall issue and the Trustee shall authenticate a
new Rule 144A Global Security in the appropriate principal amount.
(e) Any person having a beneficial interest in a Rule 144A Global
Security may upon request exchange such beneficial interest for a Registered
Security only as provided in this paragraph. Upon receipt by the Company and
the Trustee of (i) written instructions (or such other form of instructions as
is customary) on behalf of any person having a beneficial interest in a Rule
144A Global Security and (ii) in the case of a Restricted Security, the
following additional information and documents (all of which may be submitted
by facsimile):
(A) if such beneficial interest is being transferred to the person
designated as being the beneficial owner, a certification to that effect
from such person; or
(B) if such beneficial interest is being transferred to a person
other than the person designated as being the beneficial owner, a
certification from such person that the provisions of Section 2.6(b)
hereof have been satisfied;
in which case the Trustee or any custodian for the Rule 144A Global Security,
at the direction of the Trustee shall, in accordance with the standing
instructions and procedures existing between the Depositary and such custodian,
cause the aggregate principal amount of the Rule 144A Global Security to be
reduced accordingly and, following such reduction, the Company shall execute
and the Trustee shall authenticate and deliver to the transferee a Registered
Security in the appropriate principal amount and, if such Registered Security
is a Restricted Security, including the appropriate legend. Registered
Securities issued in exchange for a beneficial interest in the Rule 144A Global
Security pursuant to this paragraph shall be registered in such names and in
such authorized denominations as the Trustee shall be instructed in writing.
The Trustee shall deliver such Registered Securities to the persons in whose
names such Securities are so registered.
(f) Notwithstanding any other provision of this Indenture (other than the
provisions set forth in Section 2.6(e) hereof), the Rule 144A Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(g) If at any time either (i) the Depositary for the Rule 144A Global
Security notifies the Company and the Company notifies the Trustee in writing
that the Depositary is unwilling or unable to continue as Depositary for the
Rule 144A Global Security and a successor Depositary for the Rule 144A Global
Security is not appointed by the Company within 90 days after delivery of such
notice, or (ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Registered Securities under
this Indenture, then the Company shall execute, and the Trustee shall
authenticate and deliver, Registered Securities in an aggregate principal
amount equal to the principal amount of the Rule 144A Global Security in
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exchange for such Rule 144A Global Security (registered in the names and
denominations specified by the Depositary).
(h) Each certificate evidencing Restricted Securities shall bear a legend
in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS,
ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT: (I) IT HAS
ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD
AS SHALL BE PERMITTED AS A RESULT OF AN AMENDMENT TO THE RULES UNDER THE
SECURITIES ACT IN RESPECT THEREOF) AFTER THE LATER OF THE DATE OF ORIGINAL
ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED
PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) IN A TRANSACTION ARRANGED BY A BROKER OR DEALER
REGISTERED UNDER THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN THE MEANING OF
SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT) THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN (II) ABOVE. IF ANY RESALE OR OTHER TRANSFER OF
THIS SECURITY IS PROPOSED TO BE MADE PURSUANT TO CLAUSE II(E) ABOVE PRIOR
TO THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD AS SHALL BE
PERMITTED AS A RESULT OF AN AMENDMENT TO THE RULES UNDER THE SECURITIES
ACT IN RESPECT THEREOF) AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF, THE
TRANSFEROR SHALL DELIVER A LETTER FROM THE TRANSFEREE CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE
FOREGOING CLAUSES (II)(D), (E) AND (F) IS SUBJECT TO THE RIGHT OF THE
ISSUER OF THIS SECURITY AND THE TRUSTEE TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM
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IN FORM AND SUBSTANCE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(i) The restrictions imposed by Section 2.6(b) upon the transferability
of any particular Restricted Security shall cease and terminate (i) when such
Restricted Security has been (x) sold pursuant to an effective registration
statement under the Securities Act or (y) transferred pursuant to Rule 144
under the Securities Act (or any successor provisions thereto), unless the
holder is an affiliate of the Company within the meaning of said Rule 144 (or
such successor provision) or (ii) upon the date which is three years (or such
shorter period as shall be permitted as a result of an amendment to the rules
under the Securities Act in respect thereof) after the later of the date of
original issue and the last date on which the Company or any Affiliate of the
Company was the owner of such Restricted Security (or any predecessor
security)(the "Resale Restriction Termination Date"). Any Restricted Security
as to which such restrictions on transfer shall have expired in accordance with
their terms or shall have terminated may, upon surrender of such Restricted
Security for exchange to the Trustee in accordance with the provisions of this
Section 2.6(i) (accompanied, in the event that such restrictions on transfer
have terminated by reason of a transfer pursuant to Rule 144 (or any successor
provision), by an opinion of counsel reasonably acceptable to the Company,
addressed to the Company and the Trustee and in form and scope satisfactory to
the Company, to the effect that the transfer of such Restricted Security has
been made in compliance with Rule 144 (or such successor provision)), be
exchanged for a new Registered Security, of like tenor and aggregate principal
amount, which shall not bear the restrictive legend required by Section 2.6(h)
hereof. The Company shall promptly inform the Trustee in writing of the
effective date of any registration statement registering the Securities under
the Securities Act.
(j) The transfer and exchange of the Rule 144A Global Security or
beneficial interest therein shall be effected through the Depositary, in
accordance with this Indenture and the procedures of the Depositary therefor,
which shall include restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act.
(k) At such time as all beneficial interests in the Rule 144A Global
Security have either been exchanged for Registered Securities, redeemed,
repurchased or cancelled, the Rule 144A Global Security shall be returned to or
retained and cancelled by the Trustee. At any time prior to such cancellation,
if any beneficial interest in the Rule 144A Global Security is exchanged for
Registered Securities, redeemed, repurchased or cancelled, the principal amount
of Securities represented by the Rule 144A Global Security shall be reduced
accordingly and an endorsement shall be made on the Rule 144A Global Security,
by the Trustee or any custodian therefor, at the direction of the Trustee, to
reflect such reduction.
(l) All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same obligations, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or exchange.
(m) Every Registered Security presented for registration of transfer or
surrendered for exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Trustee and the
Transfer Agent to which such Security is presented or surrendered and the
Registrar, duly executed by the Holder thereof or his attorney duly authorized
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in writing. All such instruments shall comply with the applicable provisions
of this Section 2.6. The registration of the transfer of a Registered Security
by the Registrar shall be deemed to be the written acknowledgment of such
transfer on behalf of the Company.
(n) No service charge shall be made for any registration of transfer or
exchange, but the Company or the Transfer Agent 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 2.7 hereof or not involving any registration
of transfer.
(o) Neither the Company nor the Trustee nor any of the offices or
agencies designated for the purposes specified in Section 4.2 hereof nor any
Transfer Agent shall be required (i) to exchange Bearer Securities for
Registered Securities during the period between the close of business on any
Interest Record Date and the opening of business on the next succeeding
Interest Payment Date, (ii) to exchange any Bearer Security (or portion
thereof) for a Registered Security if the Company shall determine and inform
the Trustee in writing that, as a result thereof, the Company may incur adverse
consequences under the federal income tax laws and regulations (including
proposed regulations) of the United States in effect or proposed at the time of
such exchange, or (iii) in the event of a redemption in part, (A) to register
the transfer or exchange of Registered Securities or to exchange any Bearer
Securities for Registered Securities during a period of 15 days immediately
preceding the date notice is given pursuant to Section 3.1 hereof and Section
3(e) of the Registered Securities and the Bearer Securities identifying the
serial numbers of any Securities to be redeemed, or (B) to register the
transfer or exchange of any Registered Security so selected for redemption in
whole or in part, except portions not being redeemed of Securities being
redeemed in part, or (C) to exchange any Bearer Security called for redemption;
provided, however, that a Bearer Security called for redemption may be
exchanged, on the terms and conditions set forth above, for a Registered
Security that is simultaneously surrendered, with written instruction for
payment on the Redemption Date, unless the Redemption Date is between the close
of business on any Interest Record Date and the close of business on the next
succeeding Interest Payment Date, in which case such exchange may only be made
prior to the Interest Record Date immediately preceding the Redemption Date.
SECTION 2.7. Exchange.
(a) At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company in
accordance with this Indenture to the Trustee for authentication together with
an Officers' Certificate of the Company directing such authentication, and the
Trustee shall thereupon authenticate and make such Securities available for
delivery upon and in accordance with the written order of the Company. No
Security shall be valid or enforceable for any purpose unless and until the
certificate of authentication thereon shall have been manually signed by a duly
authorized signatory of the Trustee and such duly executed certificate of
authentication on any Security shall be conclusive evidence that the Security
has been duly authenticated and delivered hereunder.
(b) The Regulation S Global Security, the Rule 144A Global Security and
the Registered Accredited Investor Securities will be issued upon payment to
the Company or its order in United States dollars by wire transfer to a United
States dollar account designated by the Company, at 3:00 p.m., London time, on
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the "Closing Date." Such payment will be made (1) upon authorization from the
Managers, (2) against delivery as provided in Section 2.7(c) hereof of the
amount, if any, of Rule 144A Securities and Accredited Investor Securities as
the Managers may request and as they shall direct, and (3) against the delivery
of the Regulation S Global Security for the balance of the Securities to the
Common Depositary. The Regulation S Global Security shall be held on deposit
with the Common Depositary for the accounts of the Euroclear Operator and
Cedel, for credit to the Managers' respective Securities Clearance Accounts (or
to such other accounts as NatWest Securities Limited may have specified) with
the Euroclear Operator or Cedel.
(c) On the Closing Date, the Company shall execute and deliver to (i) the
Managers, at the offices of Andrews & Kurth L.L.P., in The City of New York,
temporary Registered Accredited Investor Securities (which shall have been duly
authenticated by the Trustee and which may be in typewritten form) in respect
of the Accredited Investor Securities and (ii) the Depositary, at its office in
New York, the Rule 144A Global Security (which shall have been duly
authenticated by the Trustee and which may be in typewritten form) in respect
of the Rule 144A Securities. On or before the Exchange Date (as defined in
Section 2.7(d)), the Company will execute and deliver to the Trustee at the
Principal Corporate Trust Office, Registered Accredited Investor Securities in
the aggregate principal amount of the Registered Accredited Investor Securities
outstanding. At the request of a Holder of temporary Registered Accredited
Investor Securities, the Trustee shall deliver to such Holder Registered
Accredited Investor Securities in exchange for an equal aggregate principal
amount of temporary Registered Accredited Investor Securities.
(d) On or before the Exchange Date, the Company will execute and deliver
to the Trustee, at its office in London, definitive Registered Regulation S
Securities and Bearer Securities in the aggregate principal amount outstanding
in the Regulation S Global Security and in such proportion of Registered
Regulation S Securities to Bearer Securities as the Trustee may specify.
"Exchange Date" means the date following the expiration of the 40-day period
commencing on the Closing Date. On or after the Exchange Date, the Regulation
S Global Security may be surrendered to the Trustee at its London office to be
exchanged, as a whole or in part, for definitive Bearer Securities without
charge, and the Trustee shall authenticate and deliver, in exchange for such
Regulation S Global Security or the portions thereof to be exchanged, an equal
aggregate principal amount of definitive Bearer Securities, but only upon
presentation to the Trustee at its London Office of a certificate of the
Euroclear Operator or Cedel with respect to the Regulation S Global Security or
portions thereof being exchanged, to the effect that it has received a
certificate or certificates satisfactory to it with respect to Non-U.S. Person
beneficial ownership on the part of the Holders of the Securities accepted for
clearance through Euroclear or Cedel, as appropriate, dated no earlier than 15
days prior to the Exchange Date and signed by the person appearing in its
records as the owner of the Regulation S Global Security or portions thereof
being exchanged. Similarly, after the Exchange Date, portions of the
Regulation S Global Security may be exchanged for an equal aggregate principal
amount of definitive Registered Regulation S Securities upon presentation to
the Trustee at its office in London of a request for such exchange accompanied
by a certification of Non-U.S. beneficial ownership.
(e) The definitive Securities and Coupons shall be printed, lithographed
or engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on which
the Securities may be listed, all as determined by the Officers executing such
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Securities and Coupons, as evidenced by such execution.
(f) Bearer Securities and Registered Securities may only be issued in
exchange for interests in the Temporary Regulation S Global Security upon
receipt of certification of non-U.S. beneficial ownership and undertakings not
to resell the related security in the United States or in contravention of
restrictions on resale to U.S. Persons. Bearer Securities will be delivered
only outside the United States, its territories or its possessions.
(g) The delivery to the Trustee by the Euroclear Operator or Cedel of any
certificate referred to above may be relied upon by the Company and the Trustee
as conclusive evidence that a corresponding certificate or certificates has or
have been delivered to the Euroclear Operator or Cedel pursuant to the terms of
this Indenture.
(h) Upon any such exchange of a portion of the Regulation S Global
Security for a definitive Bearer Security or Securities or a definitive
Registered Regulation S Security or Securities, the Regulation S Global
Security shall be endorsed by the Trustee to reflect the reduction of its
principal amount by an amount equal to the aggregate principal amount of such
definitive Security or Securities. Until so exchanged in full for definitive
Securities, the Regulation S Global Security shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities
authenticated and delivered hereunder, except that neither the Holder thereof
nor the beneficial owners of the Regulation S Global Security shall be entitled
to receive payment of interest thereon or exercise conversion rights with
respect thereto.
SECTION 2.8. Replacement Securities.
If a mutilated Security or a Security with a mutilated Coupon appertaining
thereto is surrendered to the Trustee or if the Holder of a Security or Coupon
claims and submits to the Trustee an affidavit or other evidence, satisfactory
to the Trustee, to the effect that the Security or Coupon has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate and deliver, in lieu of any such lost, destroyed or wrongfully
taken Security or in exchange for the Security to which a lost, destroyed or
wrongfully taken Coupon appertains (with all appurtenant Coupons not lost,
destroyed or wrongfully taken) a replacement Security with Coupons
corresponding to the Coupons, if any, appertaining to such lost, destroyed or
wrongfully taken Security or to the Security to which such lost, destroyed or
wrongfully taken Coupon appertains, if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security or Coupon is replaced. The Company may
charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Security or Coupon.
In case any such lost, destroyed or wrongfully taken Security or Coupon
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 or Coupon; provided,
however, that principal of and any premium and interest on Bearer Securities
shall, except as otherwise provided in the Bearer Securities, be payable only
at an office or agency located outside the United States and its possessions.
Every replacement Security or Coupon is an additional obligation of the
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Company.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or Coupons.
SECTION 2.9. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee (including any Security represented by a Rule 144A
Global Security or a Regulation S Global Security) except those cancelled by
it, those delivered to it for cancellation, those reductions in the interest in
a Global Security effected by the Trustee hereunder and those described in this
Section 2.9 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security, except
as provided in Section 2.10 hereof.
If a Security is replaced pursuant to Section 2.8 hereof (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.8 hereof.
If on a Redemption Date the Paying Agent (other than the Company or an
Affiliate of the Company) holds Cash or U.S. Government Obligations sufficient
to pay all of the principal and interest due on the Securities payable on that
date in accordance with Section 3.3 hereof and payment of the Securities called
for redemption is not otherwise prohibited pursuant to Article XII hereof or
otherwise, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.10. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall
be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that the Trustee actually knows
are so owned shall be disregarded.
SECTION 2.11. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder, except as provided
in Section 2.7(h) hereof.
SECTION 2.12. Cancellation.
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The Company at any time may deliver Securities or Coupons to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities or Coupons surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or an Affiliate of the Company), and no
one else, shall cancel and, at the written direction of the Company, shall
dispose of all Securities or Coupons surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.8 hereof, the Company may not
issue new Securities or Coupons to replace Securities or Coupons that have been
paid or delivered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section 2.12, except as expressly permitted in the form of
Securities and as permitted by this Indenture.
SECTION 2.13. Payment.
(a) The Company will pay or cause to be paid to the Paying Agent the
amounts, at the times and for the purposes, set forth herein and in the text of
the Securities, and the Company hereby authorizes and directs the Paying Agent
to make payment of the principal of, premium, if any, and interest on and
Additional Amounts, if any, on the Securities from such payments.
(b) At least 15 days prior to the date on which any payment of Additional
Amounts shall be required to be made pursuant to Section 2 of the Securities,
the Company will furnish the Paying Agent, each other paying agency of the
Company and the Trustee with a certificate of one of its duly authorized
officers instructing the Paying Agent and each other paying agency of the
Company as to the amounts required (i) to be deducted or withheld for or on
account of any taxes described in Section 2 of the Securities from a payment to
be made on that date and (ii) to be paid to each holder of Securities or
Coupons as Additional Amounts pursuant to that paragraph. If the foregoing
amounts are not uniform for all Holders, then the Company's certificate shall
specify by country of residence or other factor the amounts required to be
deducted or withheld and to be paid as Additional Amounts for each Holder or
class of Holders of the Securities or Coupons. In the absence of its receipt
of any such certificate from the Company, the Paying Agent may make payment
without deduction or withholding. The Company hereby agrees to indemnify the
Paying Agent, each other paying agency of the Company and the Trustee for, and
to hold them harmless against, any loss, liability or expense reasonably
incurred without negligence or willful misconduct on their part, arising out of
or in connection with actions taken or omitted by any of them in reliance on
any certificate furnished pursuant to this Section.
(c) Interest on any Registered Security that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be
paid to the person in whose name that Security is registered at the close of
business on the Interest Record Date even if such Registered Security is
cancelled after such Interest Record Date. In case a Bearer Security is
surrendered for exchange for a Registered Security after the close of business
on any Interest Record Date and before the opening of business on the next
succeeding Interest Payment Date, the Trustee shall not be required to perform
such transfer or exchange of such Security.
(d) If a Registered Security is converted after the close of business on
an Interest Record Date and before the opening of business on the next
succeeding Interest Payment Date, the interest due on such Interest Payment
Date shall be paid on such Interest Payment Date to the person in whose name
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that Security is registered at the close of business on that Interest Record
Date.
(e) In order to provide for the payment of the principal of, premium, if
any, and interest on the Securities (and Additional Amounts, if any, with
respect thereto) as the same shall become due and payable, the Company shall
pay to the Paying Agent to accounts specified by the Paying Agent, in cash or
same day funds, the following amounts (and the Company shall give notice to the
Trustee at least one full Business Day prior to the date payment is due to the
Paying Agent as to the means of such payment), to be held and applied by the
Paying Agent as hereinafter set forth:
(i) The Company shall pay to the Paying Agent on the Business Day
immediately prior to each Interest Payment Date an amount sufficient to
pay the interest due on (and Additional Amounts, if any, on) all the
Securities outstanding on such Interest Payment Date, and the Paying Agent
shall apply the amounts so paid to it to the payment of such interest (and
Additional Amounts, if any) on such Interest Payment Date.
(ii) If the Company shall elect, or shall be required, to redeem
all or any part of the Securities in accordance with Section 3.1 hereof,
the Company will pay to the Paying Agent (other than the Company or an
Affiliate of the Company) on the Business Day immediately prior to the
Redemption Date thereof an amount sufficient (with any amount then held by
the Paying Agent and available for the purpose) to pay the Redemption
Price of the Securities called for redemption or entitled to be redeemed,
together with accrued interest thereon (and Additional Amounts, if any,
with respect thereto) to the Redemption Date fixed for redemption and not
paid pursuant to clause (e)(i) of this Section 2.13, and the Paying Agent
shall apply such amount to the payment of the Redemption Price and accrued
interest (and Additional Amounts, if any) in accordance with the terms of
Article III hereof.
(iii) On the Business Day immediately prior to the Stated Maturity
of the Securities, the Company shall pay to the Paying Agent an amount
which, together with any amounts then held by the Paying Agent, and
available for payment thereof, shall be equal to the entire amount of
principal and interest (and Additional Amounts, if any) to be due on such
maturity date on all the Securities then outstanding, and the Paying Agent
shall apply such amount to the payment of the principal of and interest on
(and Additional Amounts, if any, on) the Securities in accordance with the
terms of the Securities.
SECTION 2.14. Defaulted Interest.
Any interest on any Registered Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Interest Record Date, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may make payment of any Defaulted Interest to the Holder
of a Registered Security on a subsequent record date established by notice
given by mail by or on behalf of the Company to such Holder not less than 15
days preceding such subsequent record date, such record date to be not less
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than 10 days preceding the date of payment of such Defaulted Interest.
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner shall be deemed
reasonably practicable by the Trustee.
Any Defaulted Interest payable in respect of any Bearer Security shall be
payable pursuant to such procedures as may be satisfactory to the Trustee in
such manner that there is no discrimination between the Holders of Registered
Securities and Bearer Securities, and notice of the payment date therefor shall
be given by the Trustee, in the name and at the expense of the Company, in the
manner provided in Section 14.2 hereof.
Subject to the foregoing provisions of this Section 2.14, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
SECTION 2.15. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
If, under the circumstances described in Section 3 of the Registered
Securities and Bearer Securities, the Company shall elect or be required to
redeem the outstanding Securities, the following provisions shall be
applicable:
(a) Except in the case of redemption pursuant to Section 3(d) of the
Registered Securities and the Bearer Securities (in which case notice shall be
given by the Company as provided in subsection (c) of this Section 3.1), the
Company shall, at least 75 days (or such shorter period as shall be reasonably
acceptable to the Trustee) before the date designated for such redemption, give
written notice to the Agents of its election to redeem the outstanding
Securities on the Redemption Date specified in such notice and state in such
notice that the conditions precedent to such redemption have occurred and
describe them, and shall request the Trustee to arrange for publication and
mailing of the notice specified in clause (b) below.
(b) In the case the Company shall give notice to the Agents of its
election to redeem the Securities, the Trustee shall cause to be given to
Holders on behalf of and at the expense of the Company a notice of redemption
in accordance with Section 14.2 hereof. The Trustee shall send a copy of such
notice of redemption to the Company, the Paying Agent (if different from the
Trustee) and each other paying agency of the Company. In the case of a
redemption in whole, notice will be given once not more than 60 nor less than
30 days prior to the Redemption Date. In the case of a partial redemption,
notice will be given twice, the first such notice to be given not more than 60
nor less than 45 days prior to the Redemption Date and the second such notice
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to be given not more than 45 and not less than 30 days prior to the Redemption
Date. The Trustee shall notify the Company promptly of the portions of
outstanding Securities to be called for redemption as determined pursuant to
Section 3(a) of the Registered Securities and Bearer Securities.
(c) Under the circumstances described in Section 3(d) of the Registered
Securities and Bearer Securities concerning the redemption of outstanding
Securities at the option of the Holders thereof, the following provisions shall
be applicable:
(i) The Company shall give notice to the Trustee of the occurrence
of a Change of Control immediately upon the occurrence of such Change of
Control or, if later, immediately upon learning of the occurrence of such
Change of Control (provided, that the Company shall be deemed to have
knowledge of any information contained in any Statement on Schedule 13D or
13G filed with the Commission). Such notice shall state:
A. The Holder Redemption Date in respect of such Change of
Control;
B. The Redemption Price as set forth in Section 3(d) of the
Registered Securities and Bearer Securities;
C. The place or places of payment of the Registered Securities
and Bearer Securities; and
D. Such other information as the Company shall deem advisable.
(ii) The Trustee shall cause to be given to the Holders on behalf
of the Company a notice of entitlement to redeem in accordance with the
provisions of Section 14.2 hereof. Such notice shall be given on behalf
and at the expense of the Company and shall be given not later than 30
days after the later of the Exchange Date, the date of the occurrence of a
Change of Control or the date of receipt of notice by the Trustee from the
Company of such Change of Control (the date on which such notice is given
by the Trustee shall be the "Change of Control Notice Date").
(iii) Upon the deposit of any of the Registered Securities or
Bearer Securities with the agency designated by the Company as the place
for payment of the Registered Securities and Bearer Securities together
with a duly signed and completed Redemption Notice in the form set forth
on the reverse of the Bearer Securities and Registered Securities, all in
accordance with the provisions of Section 3 of the Registered Securities
and Bearer Securities, the Holder of such Registered Security and Bearer
Security shall be entitled to receive a non-transferable receipt
evidencing such deposit.
(iv) The Trustee shall notify the Company on each Business Day in
the five Business Days prior to the Holder Redemption Date for outstanding
Securities to be redeemed under this Section 3.1(c) of the amount required
to redeem such Securities.
(d) Notices relating to the redemption of Securities whether at the
option of the Company or the Holder thereof shall specify: the Redemption Date
or the Holder Redemption Date, as the case may be; the Redemption Price; the
place or places of payment; that payment will be made upon presentation and
surrender of the Securities to be redeemed, together, in the case of a Bearer
Security, with all appurtenant Coupons, if any, maturing subsequent to the
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Redemption Date; that interest accrued to the Redemption Date will be paid as
specified in such notice; that on and after said date interest thereon will
cease to accrue; that the Holder will have the right to convert such Holder's
Securities until the close of business on the fifth day (or if such day is not
a Business Day, the next succeeding Business Day) preceding the related
Redemption Date or Holder Redemption Date, as the case may be; and such other
information as the Company may wish to include. In the case of a redemption by
the Company at the option of the Holder of a Security, the notices given by the
Trustee informing a Holder of such Holder's entitlement to redeem shall also
specify that a Holder electing redemption will be entitled to revoke its
election by delivering a written notice of such revocation, together with the
Holder's nontransferable receipt for such Security, to the agency designated by
the Company as the place for the payment of the Securities to be so redeemed
not later than the Holder Redemption Date in the case of a redemption pursuant
to Section 3(d) of the Registered Securities and Bearer Securities. In the
case of a redemption in part at the option of the Company, notices shall
specify the aggregate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities outstanding after such partial
redemption. The first notice shall specify the last date on which exchanges or
transfers of Securities may be made (in accordance with Section 2.6(o) hereof),
and the second notice shall specify the serial numbers of the Securities and
the portions thereof called for redemption. In the case of a redemption in
whole or in part by the Company, notices shall specify the date the conversion
privilege expires in accordance with Section 4(a) of the Registered Securities
and Bearer Securities. Such notices shall also state that the conditions
precedent, if any, to such redemption have occurred and, in the case of a
redemption pursuant to Section 3(d) of the Registered Securities and Bearer
Securities, the last day for surrender of the Securities being redeemed.
SECTION 3.2. Effect of Notice of Redemption.
Once notice of redemption is made in accordance with Section 3.1 hereof,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest and
Additional Amounts, if any, to the Redemption Date. Upon surrender to the
Trustee or Paying Agent, such Securities called for redemption shall be paid at
the Redemption Price, including accrued and unpaid interest and Additional
Amounts, if any, to the Redemption Date; provided that if the Redemption Date
is after a regular Interest Record Date and on or prior to the corresponding
Interest Payment Date, the accrued interest to the Redemption Date and
Additional Amounts, if any, shall be payable on the Redemption Date to the
Holder of the redeemed Securities registered on the relevant Interest Record
Date; and provided, further, that if a Redemption Date is not a Business Day,
payment shall be made on the next succeeding Business Day and no interest or
Additional Amounts shall accrue for the period from such Redemption Date to
such succeeding Business Day.
SECTION 3.3. Deposit of Redemption Price.
On the Business Day immediately prior to the Redemption Date, the Company
shall deposit with the Paying Agent (other than the Company or an Affiliate of
the Company) Cash sufficient to pay the Redemption Price of, including accrued
and unpaid interest on, and Additional Amounts with respect to, all Securities
to be redeemed on such Redemption Date (other than Securities or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any Cash so deposited which is not required for that
purpose upon the written request of the Company.
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If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not prohibited under Article XII hereof or otherwise, interest
and Additional Amounts on the Securities to be redeemed will cease to accrue on
the applicable Redemption Date, whether or not such Securities are presented
for payment. Notwithstanding anything herein to the contrary, if any Security
surrendered for redemption in the manner provided in the Securities shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest and Additional Amounts shall
continue to accrue and be paid from the Redemption Date until such payment is
made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 hereof and the Security.
SECTION 3.4. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder,
without service charge to the Holder, a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
The Company shall punctually pay the principal of, premium, if any,
interest on, and Additional Amounts, if any, with respect to, the Securities on
the dates and in the manner provided in the Securities, as applicable. An
installment of principal of, premium, if any, interest on, or Additional
Amounts, if any, with respect to, the Securities shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds for the benefit of the Holders on that date
Cash deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
(a) So long as any of the Registered Securities remain outstanding or
until monies for the payment of all principal of, premium, if any, and interest
on (and Additional Amounts with respect to) all outstanding Securities shall
have been made available at the office of the Paying Agent and shall have been
returned to the Company as provided in Section 8.2 hereof, the Company will
maintain in The City of New York, an office or agency where the Registered
Securities may be presented or surrendered for payment, an office or agency
where the Securities may be surrendered for conversion as provided in this
Indenture and an office or agency where notices and demands to or upon the
Company with respect to the Registered Securities or this Indenture may be
served, in each case which office or agency shall be a bank or trust company
organized, in good standing and doing business under the laws of the United
States of America or of any State of the United States of America. So long as
any Bearer Securities remain outstanding or until monies for the payment of all
principal of, premium, if any, and interest on (and Additional Amounts with
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respect to) all outstanding Bearer Securities shall have been made available at
the office of the Paying Agent and shall have been returned to the Company as
provided in Section 8.2 hereof, the Company will maintain, in at least one city
in Western Europe, which shall be Luxembourg so long as the Securities are
listed on the Luxembourg Stock Exchange, an office or agency where Bearer
Securities may be surrendered for payment or conversion pursuant to Section 2.6
hereof and where notices and demands to or upon the Company in respect of the
Bearer Securities of that series or of this Indenture may be served. The
Company now intends to maintain additional agencies (subject to applicable laws
and regulations) where Bearer Securities and Coupons may be surrendered for
payment, where Registered Securities may be surrendered for payment and where
Securities may be surrendered for conversion in London, England, and during
such period to keep the Agents advised of the names and locations of such
agencies. Unless the Company shall otherwise notify each of the Agents in
writing, the sole such paying agencies and conversion agencies shall be the
agencies specified in the Securities.
(b) So long as there shall be Securities outstanding or until monies for
the payment of all principal of, premium, if any, and interest on (and
Additional Amounts with respect to) all outstanding Securities shall have been
made available at the office of the Paying Agent and shall have been returned
to the Company as provided in Section 8.2 hereof, the Company shall maintain a
Security Registrar and additional transfer agencies (each, a "Transfer Agent"
and, collectively, the "Transfer Agents") (i) where Registered Securities may
be surrendered for registration of transfer or for exchange for Registered
Securities in The City of New York and (ii) in at least one city in Western
Europe, which shall be Luxembourg so long as the Securities are listed on the
Luxembourg Stock Exchange, where Registered Securities may be surrendered for
purposes of such transfer or exchange, and where Bearer Securities may be
delivered in exchange for Bearer Securities or for Registered Securities.
Consistent with applicable laws and regulations, including the provisions of
the federal income tax laws of the United States, such agencies may be the same
agencies as or different agencies from those maintained by the Company pursuant
to Section 4.2(a). The Company hereby appoints the London Office of The Chase
Manhattan Bank, N.A. and Chase Manhattan Bank Luxembourg S.A., 5 Rue Plaetis,
L-2338 Luxembourg, as Transfer Agents for such transfers and exchanges. The
registration of transfer or exchange of Registered Securities shall only be
made by the Trustee in The City of New York.
(c) The Company will give to the Trustee written notice of the locations
of such offices or agencies and of any change in the locations thereof. If at
any time the Company shall fail to maintain any such offices or agencies or
shall fail to give such notice of the location or of any change in the
locations thereof, presentations, surrenders, notices and demands in respect of
Registered Securities may be made or served at the principal corporate trust
office of the Trustee in The City of New York and in respect of Bearer
Securities may be made or served at the principal office of the Trustee in
London, England at which at any particular time its corporate trust business
shall be administered.
SECTION 4.3. Corporate Existence.
Subject to Article V hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or other existence of each of its Significant
Subsidiaries in accordance with the respective organizational documents of each
of them and the rights (charter and statutory) and corporate franchises of the
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Company and each of its Significant Subsidiaries; provided, however, that the
Company shall not be required to preserve, with respect to itself, any right or
franchise, and with respect to any of its Significant Subsidiaries, any such
existence, right or franchise, if (a) the Board of Directors of the Company
shall reasonably determine (evidenced by a Board Resolution certified by the
Secretary of the Company and delivered to the Trustee) that the preservation
thereof is no longer desirable in the conduct of the business of such entity
and (b) the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 4.4. Payment of Taxes and Other Claims.
Except with respect to immaterial items, the Company shall, and shall
cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon the Company or any of
its Subsidiaries or any of their respective properties and assets and (ii) all
lawful claims, whether for labor, materials, supplies, services or anything
else, which have become due and payable and which by law have or may become a
Lien upon the property and assets of the Company or any of its Subsidiaries;
provided, however, that neither the Company nor any Subsidiary shall be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been established in accordance with GAAP.
SECTION 4.5. Maintenance of Properties and Insurance.
The Company shall cause all material properties used or useful to the
conduct of its business and the business of each of its Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable
wear and tear excepted) and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in their reasonable judgment may be necessary, so
that the business carried on in connection therewith may be properly conducted
at all times; provided, however, that nothing in this Section 4.5 shall prevent
the Company or any Subsidiary from discontinuing any operation or maintenance
of any of such properties, or disposing of any of them, if such discontinuance
or disposal is (a), in the reasonable judgment of the Board of Directors of the
Company (evidenced by a Board Resolution certified by the Secretary of the
Company and delivered to the Trustee), desirable in the conduct of the business
of such entity and (b) not disadvantageous in any material respect to the
Holders.
The Company shall provide, or cause to be provided, for itself and each of
its Subsidiaries, insurance (including appropriate self-insurance) against loss
or damage of the kinds that, in the reasonable, good faith opinion of the
Company is adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with (except for
self-insurance) reputable insurers or with the government of the United States
of America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the reasonable, good
faith opinion of the Company and adequate and appropriate for the conduct of
the business of the Company and such Subsidiaries in a prudent manner for
entities similarly situated in the industry, unless failure to provide such
insurance (together with all other such failures) would not have a material
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adverse effect on the financial condition or results of operations of the
Company or such Subsidiary.
SECTION 4.6. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee within 120 days after the
end of its fiscal year an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of its activities and the
activities of its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining
whether the Company has kept, observed, performed and fulfilled its obligations
under this Indenture and further stating, as to each such Officer signing such
certificate, whether or not the signer knows of any failure by the Company or
any Subsidiary of the Company to comply with any conditions or covenants in
this Indenture and, if such signor does know of such a failure to comply, the
certificate shall describe such failure with particularity. The Officers'
Certificate shall also notify the Trustee should the relevant fiscal year end
on any date other than the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, promptly upon becoming aware of any Default, Event of
Default or fact which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, an Officers' Certificate specifying such
Default, Event of Default or fact and what action the Company is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to have
knowledge of any Default, any Event of Default or any such fact unless one of
its Trust Officers receives written notice thereof from the Company or any of
the Holders.
SECTION 4.7. Reports.
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder identified to the Company, and to prospective
purchasers of Securities identified to the Company by NatWest Securities
Limited, within 15 days after it is or would have been required to file such
with the Commission, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission if the Company was subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission and, in each case, together with a management's discussion and
analysis of financial condition and results of operations which would be so
required.
SECTION 4.8. Limitation on Status as Investment Company.
Neither the Company nor any of its Subsidiaries shall become an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
SECTION 4.9. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
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take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium of, interest on, or Additional Amounts
with respect to, the Securities as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
SECTION 4.10. Rule 144A Information Requirement.
The Company shall furnish to the Holders or beneficial holders of the
Securities or the underlying Common Stock and prospective purchasers of
Securities or the underlying Common Stock designated by the Holders of
Securities or the underlying Common Stock, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until such time as the Securities are no longer "restricted securities" within
the meaning of Rule 144 under the Securities Act.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
(a) The Company shall not, directly or indirectly, consolidate with or
merge with or into another Person or sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether in
a single transaction or a series of related transactions, to another Person or
group of affiliated Persons, unless (i) either (A) in the case of a merger or
consolidation, the Company is the surviving entity or (B) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Securities and the Indenture; (ii) no Default or Event of
Default shall exist or shall occur immediately before or after giving effect on
a pro forma basis to such transaction; and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and, if a supplemental indenture is
required, such supplemental indenture comply with the Indenture and that all
conditions precedent relating to such transactions have been satisfied.
(b) For purposes of clause (a) of this Section 5.1, the sale, lease,
conveyance, assignment, transfer, or other disposition of all or substantially
all of the properties and assets of one or more Subsidiaries of the Company,
which properties and assets, if held by the Company instead of such
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
SECTION 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any sale, lease, conveyance or
transfer of all or substantially all of the assets of the Company in accordance
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with the foregoing, the successor corporation formed by such consolidation or
into which the Company is merged or to which such sale, lease, conveyance or
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named therein as the Company, and
when a successor corporation duly assumes all of the obligations of the Company
pursuant hereto and pursuant to the Securities, the predecessor (except in the
case of a lease) shall be released from such obligations (except with respect
to any obligations that arise from or as a result of such transaction).
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
caused voluntarily or involuntarily or effected, without limitation, 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):
(a) the failure by the Company to pay any installment of interest
or Additional Amounts (as described in Section 2 of the Securities) with
respect to any of the Securities as and when due and payable and the
continuance of any such failure for a period of 30 days after the date
when due;
(b) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Securities when and as the same
becomes due and payable at maturity or upon redemption, by acceleration or
otherwise;
(c) the failure by the Company to perform any conversion of the
Securities required under this Indenture and the continuance of such
failure for a period of 60 days;
(d) the failure by the Company duly to perform or observe any
other term, covenant or agreement contained in any of the Securities or in
this Indenture for a period of 60 days after the date on which written
notice of such failure, requiring the Company to remedy the same and
stating that such notice is a "Notice of Default" hereunder, shall first
have been given to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of
the Securities at the time outstanding; provided, however, that, in the
event the Company shall within the aforesaid period of 60 days commence
legal action in a court of competent jurisdiction seeking a determination
that the Company had not failed to duly perform or observe the term or
terms, covenant or covenants or agreement or agreements specified in the
aforesaid notice, such failure shall not be an Event of Default unless the
same continues for a period of 10 days after the date of any final
determination to the effect that the Company had failed to duly perform or
observe one or more of such terms, covenants or agreements;
(e) the entry, by a court having jurisdiction in the premises, of
a decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
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applicable bankruptcy, insolvency, reorganization or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
such subsidiary or for any substantial part of the property of either of
them or ordering the winding-up or liquidation of the affairs of its and
such decree or order shall remain unstayed and in effect for a period of
60 consecutive days;
(f) the commencement by the Company or a Significant Subsidiary of
the Company of a voluntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or its consent to the entry of an order for relief in
an involuntary case under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or such subsidiary or
any substantial part of its property, or its making of any general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts as they become due;
(g) the Company shall default in the payment of the principal of,
premium, if any, or interest when due on any Indebtedness of the Company
or any of its Significant Subsidiaries that extends beyond any applicable
grace period with respect thereto, or an acceleration so that the same
shall be or become due and payable prior to the date on which the same
would otherwise have become due and payable of any Indebtedness of the
Company or any of its Significant Subsidiaries with an aggregate principal
balance in excess of U.S. $10,000,000, and such failure to pay shall not
have been remedied or cured by the Company or such Significant Subsidiary
or waived by the holders of such Indebtedness; or
(h) the entry, by a court having jurisdiction over the Company or
any Significant Subsidiary of the Company of a final judgment, decree or
order against any of them in an amount in excess of U.S. $2,000,000 at any
one time and that is not satisfied, stayed, bonded or discharged within 60
days.
Notwithstanding the 60-day period and notice requirement contained in
Section 6.1(d) above, with respect to a default under Section 3(d) of the
Securities the 60-day period referred to in Section 6.1(d) shall be deemed to
have begun as of the date the Change of Control notice is required to be sent
in the event that the Company has not complied with the provisions of Section 3
of the Securities and the Trustee or Holders of at least 25% in principal
amount of the outstanding Securities thereafter give the Notice of Default
referred to in Section 6.1(d) to the Company and, if applicable, the Trustee.
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.
If an Event of Default occurs and is continuing, then within five Business
Days after the Company becomes aware of such Event of Default the Company will
provide written notice to the Trustee describing such Event of Default and the
date on which it occurred. The Trustee will give notice of such Event of
Default to the Holders of the Securities within 90 days after its receipt of
written notice thereof from the Company. If an Event of Default occurs and is
continuing, unless the principal of all of the Securities shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of then outstanding Securities, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all of the principal of the Securities,
including in each case accrued interest thereon and Additional Amounts, if any,
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with respect thereto, to be due and payable immediately. If an Event of
Default specified in Section 6.1(e) or (f) relating to the Company or any
SignificantSubsidiary occurs, all principal, accrued interest thereon and
Additional Amounts, if any, with respect thereto will be immediately due and
payable on all outstanding Securities without any declaration or other act on
the part of the Trustee or the Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities,
by written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(a) the Company has paid or deposited with the Trustee Cash sufficient to
pay:
(1) all overdue interest on, and Additional Amounts, if any, with
respect to, all Securities;
(2) the principal of (and premium, if any, applicable to) any
Securities which would then be due otherwise than by such
declaration of acceleration, and interest thereon at the rate
borne by the Securities;
(3) to the extent that payment of such interest is lawful,
interest upon overdue interest and Additional Amounts, if any,
at the rate borne by the Securities; and
(4) all sums paid or advanced by the Trustee hereunder and the
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(b) all Events of Default, other than the non-payment of the principal
of, premium, if any, interest on and Additional Amounts, if any, with
respect to Securities that have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section
6.12 hereof, including, if applicable, any Event of Default relating
to the covenants contained in Section 3(d) of the Registered
Securities and the Bearer Securities.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall
be effective against any Holder for any Event of Default or Default with
respect to any covenant or provision which cannot be modified or amended
without the consent of the Holder of each outstanding Security affected
thereby, unless all such affected Holders agree, in writing, to waive such
Event of Default or other event. No such waiver shall cure or waive any
subsequent Default or Event of Default or impair any right consequent thereon.
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if an Event of Default in payment of principal,
premium, interest or Additional Amounts specified in Section 6.1(a) or (b)
occurs and is continuing, the Company shall, 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, premium (if any), interest,
Additional Amounts and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue principal (and premium, if any),
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Additional Amounts and on any overdue interest, at the rate borne by the
Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of, the Trustee, its
agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, interest or Additional
Amounts) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including:
(1) to file and prove a claim for the whole amount of principal (and
premium, if any), interest and Additional Amounts owing and unpaid in respect
of the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agent and counsel) and of the Holders allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make
such payments to the Trustee and, in the event that the Trustee shall consent
to themaking of such payments directly to the Holders, to pay to the Trustee
any amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7 hereof.
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
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vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 6.6. Priorities.
Any money collected by the Trustee pursuant to this Article VI shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium (if
any), interest or Additional Amounts, 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 Trustee in payment of all amounts due pursuant to Section
7.7 hereof;
SECOND: To the holders of Senior Indebtedness of the Company to the
extent provided in Article XII hereof;
THIRD: To the Holders in payment of the amounts then due and unpaid for
principal of, premium (if any), interest on and Additional Amounts with respect
to, the Securities in respect or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to
the amounts due and payable on such Securities for principal, premium (if any),
interest and Additional Amounts, respectively; and
FOURTH: To whosoever may be lawfully entitled thereto, the remainder, if
any.
The Trustee may fix a record date and payment date for any payment by it
to Holders pursuant to this Section.
SECTION 6.7. Limitation on Suits. No Holder of any Security shall have any
right to order or direct the Trustee 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; (b) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder; (c) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred or reasonably probable to be incurred in compliance with such
request; (d) the Trustee for 60 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
then outstanding Securities; it being understood and intended that no one or
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more Holders shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or prejudice
the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium,
Interest and Additional Amounts.
Notwithstanding any other provision of this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and premium (if any), interest on and Additional
Amounts with respect to, such Security when due (including, in the case of
redemption, the Redemption Price on the applicable Redemption Date) and to
institute suit for the enforcement of any such payment after such respective
dates, and such rights shall not be impaired without the consent of such
Holder.
SECTION 6.9. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in Section 2.8 hereof, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any Security to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event
of Default. Every right and remedy given by this ArticleVI 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 6.11. Control by Holders.
The Holder or Holders of no less than a majority in aggregate principal
amount of then outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred upon the Trustee, provided,
that (1) such direction shall not be in conflict with any rule of law or with
this Indenture, (2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such direction
or would subject the Trustee to any liability, and (3) the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.12. Waiver of Past Default.
Subject to Section 6.8 hereof, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Securities may, on
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behalf of all Holders, prior to the declaration of acceleration of the maturity
of the Securities, waive any past default hereunder and its consequences,
except a default (A) in the payment of the principal of, premium, if any,
interest on, or Additional Amounts with respect to, any Security not yet cured
as specified in Section 6.1(a) or (b), or (B) in respect of a covenant or
provision hereof which, under Article IX hereof, cannot be modified or amended
without the consent of the Holder of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 6.13 shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in aggregate principal amount of then outstanding Securities, or to
any suit instituted by any Holder for enforcement of the payment of principal
of, premium (if any), interest on or Additional Amounts with respect to, any
Security on or after the Stated Maturity of such Security (including, in the
case of redemption, on or after the Redemption Date).SECTION 6.14. 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 case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 6.15. Enforcement of Rights of Conversion by Holders.
Anything in this Indenture to the contrary notwithstanding, the Holder of
any Security, without reference to and without the consent of either the
Trustee or the Holder of any other Security, in his own behalf and for his own
benefit may enforce, and may institute and maintain any proceedings suitable to
enforce, his right to convert his Security into Common Stock as provided in
Article XIII.
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ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed.
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture
which are adverse to the Trustee.
(2) In the absence of willful misconduct on its part, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph (c) does not limit the effect of paragraph (b)
of this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.11 hereof.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the
Holders or in the exercise of any of its rights or powers if it shall have
reasonable grounds forbelieving that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
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(f) The Trustee shall not be liable for interest on any assets received
by it except as the Trustee may agree in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to the
extent required by law.
SECTION 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 14.4 and 14.5 hereof, if applicable. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or the written advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, 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.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company. (h) The Trustee shall have no duty to
inquire as to the performance of the Company's covenants in Article IV hereof.
In addition, the Trustee shall not be deemed to have knowledge of any Default
or Event of Default except (i) any Event of Default occurring pursuant to
Section 6.1(a) or (b), or (ii) any Default or Event of Default of which a Trust
Officer of the Trustee shall have received written notification from the
Company or any Holder or obtained actual knowledge.
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, any of its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11 hereof.
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SECTION 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities and it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement in the Securities, other than the Trustee's certificate of
authentication, or the use or application of any funds received by a Paying
Agent other than the Trustee.
SECTION 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall give to Securityholders in
accordance with Section 14.2 notice of the uncured Default or Event of Default
within 90 days after such Default or Event of Default occurs. Except in the
case of a Default or an Event of Default in payment of principal (or premium,
if any) of, interest on or Additional Amounts with respect to, any Security
(including the payment of the Redemption Price on the Redemption Date), the
Trustee may withhold the notice if and so long as a Trust Officer in good faith
determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
Within 60 days after each June 30 beginning with the June 30 following the
date of this Indenture, the Trustee shall, if required by Section 313(a) of the
TIA, transmit to the Holders a brief report dated as of such June 30 that
complies with Section 313(a) of the TIA. The Trustee also shall comply with
Section 313(b) and 313(c) of the TIA. The Company shall promptly notify the
Trustee in writing if the Securities become listed on any stock exchange or
automatic quotation system. A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the Commission
and each stock exchange, if any, on which the Securities are listed. Reports
pursuant to this Section 7.6 shall be transmitted by mail: (1) to all holders
of Registered Securities as the names and addresses of such Holders appear in
the Security Register; and (2) toother Holders of Securities as have, within
the two years preceding such transmission, filed their names and addresses with
the Trustee for such purpose.
SECTION 7.7. Compensation and Indemnity.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents,
accountants, experts and counsel.
The Company agrees to indemnify the Trustee and each of its officers,
directors, attorneys-in-fact and agents for, and hold it harmless against, any
claim, demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or willful misconduct on its part,
arising out of or in connection with the administration of this trust and its
rights or duties hereunder including the reasonable costs and expenses of
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defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's expense in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided, that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense and
in the Trustee's sole reasonable determination there is no conflict of interest
between the Company and the Trustee in connection with such defense. The
Company need not pay for any settlement made without its written consent. The
Company need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct. To secure the Company's payment obligations in
this Section 7.7, the Trustee shall have a lien prior to the Securities on all
assets held or collected by the Trustee, in its capacity as Trustee, except
assets held in trust prior to any Event of Default to pay principal and
premium, if any, of or interest on, or Additional Amounts with respect to,
particular Securities. Without limiting any of the rights available to the
Trustee under applicable law, when the Trustee incurs expenses or renders
services after an Event of Default specified in Section 6.1(e) or (f) hereof
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VIII of this
Indenture and any rejection or termination of this Indenture under any
Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The Holder
or Holders of a majority in principal amount of then outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, custodian, or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder
or Holders of a majority in principal amount of then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that and
provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the lien provided in Section
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7.7, the resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. a successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holder or Holders of at least 10% in principal amount of then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder who
has been a bonafide holder of a Security for at least 6 months may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.SECTION 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of Section
310(a)(1), (2) and (5) of the TIA. The Trustee shall have a combined capital
and surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with Section 310(b) of
the TIA, subject to the penultimate paragraph thereof.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with Section 311(a) of the TIA, excluding any
creditor relationship listed in Section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the TIA to the
extent indicated.
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. Satisfaction and Discharge of Indenture.
If (a) the Company shall deliver to the Trustee for cancellation all
Securities theretofore authenticated other than (1) any Securities which shall
have been lost, destroyed or wrongfully taken and which shall have been
replaced or paid as provided in Section 2.08 or (2) any Securities for the
payment of the principal 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 8.2, and not
theretofore cancelled, or (b) all the Securities not theretofore cancelled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption, and the Company shall deposit
with the Trustee, in trust, funds (other than funds repaid by the Trustee to
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the Company in accordance with Section 8.2) sufficient to pay at maturity or
upon redemption all of such Securities (other than any Securities which shall
have been lost, destroyed or wrongfully taken and which shall have been
replaced or paid as provided in Section 2.08) not theretofore cancelled or
delivered to the Trustee for cancellation, including principal of and premium,
if any, and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if in either case the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company, then this Indenture shall cease to be of further effect (except as to
rights of registration of transfer and exchange of Securities and rights to
receive payments thereon and the other rights of the holders of Securities, as
beneficiaries hereof with respect to the amounts, if any, so deposited with the
Trustee, all of which shall survive, and except that the Company's obligations
under this Article, Sections 6.15 and 7.7 and Article XIII shall survive until
the Securities are no longer outstanding), and the Trustee, on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel
complying with Sections 14.4 and 14.5 and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses theretofore and thereafter reasonably and
properly incurred by the Trustee in connection with this Indenture or the
Securities.
SECTION 8.2. Repayment to the Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, for the payment of the principal of, premium, if any, interest on
or Additional Amounts with respect to any Security and remaining unclaimed for
two years after such principal, premium, if any, interest or Additional Amounts
has become due and payable shall be paid to the Company on its request; and the
Holder of such Security shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes: (1) to cure any ambiguity, defect,
or inconsistency, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided, that the Company has delivered to the
Trustee an Opinion of Counsel stating that such action pursuant to this clause
(1) does not adversely affect the interests of any Holder; (2) to create
additional covenants of the Company for the benefit of the Holders, or to
surrender any right or power herein conferred upon the Company or to make any
other change that does not adversely affect the rights of any Holder, provided,
that the Company has delivered to the Trustee an Opinion of Counsel stating
that such change pursuant to this clause (2) does not adversely affect the
rights of any Holder; (3) to provide for collateral for or guarantors of the
Securities; (4) to evidence the succession of another Person to the Company and
the assumption by any such successor of the obligations of the Company herein
and in the Securities in accordance with Article V; (5) to comply with the TIA;
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or (6) to comply with Section 13.6.
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent of
Holders.
Subject to Section 6.8 and the last sentence of this paragraph, with the
consent (evidenced as provided in Section 10.2 hereof) of the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolutions, and the Trustee may
amend or supplement this Indenture or the Securities or 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 the Securities or of modifying in any manner the rights of the
Holders under this Indenture or the Securities. Subject to Section 6.8 and the
last sentence of this paragraph, the Holder or Holders of not less than a
majority in aggregate principal amount of then outstanding Securities may, in
writing, waive compliance by the Company with any provision of this Indenture
or the Securities. Notwithstanding any of the above, however, no such
amendment, supplemental indenture or waiver shall, without the consent of the
Holder of each outstanding Security affected thereby: (1) change the Stated
Maturity of any Security or reduce the principal amount thereof or the rate (or
extend the time for payment) of interest thereon or any premium payable upon
the redemption thereof or Additional Amounts with respect thereto, or change
the place of payment where, or the coin or currency in which, any Security or
any premium or the interest thereon or Additional Amounts with respect thereto
is payable, or impair the right to institute suit for the enforcement of any
such payment or the conversion of any Security on or after the due date thereof
(including, in the case of redemption, on or after the Redemption Date), or
reduce the Redemption Price, or alter redemption or Change in Control
provisions in a manner adverse to the Holders; (2) reduce the percentage in
principal amount of the outstanding Securities, the consent ofwhose Holders is
required for any such amendment, supplemental indenture or waiver provided for
in the Indenture; (3) modify any of the provisions of Article XII hereof in a
manner adverse to the Holders; (4) adversely affect the right of such Holder to
convert Securities; or (5) modify any of the waiver provisions, except to
increase any required percentage or to provide that certain other provisions of
the Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company shall give to the Holders in accordance with Section
14.2 a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver. After an amendment, supplement or waiver under this
Section 9.2 becomes effective, it shall bind each Holder. In connection with
any amendment, supplement or waiver under this Article IX, the Company may, but
shall not be obligated to, offer to any Holder who consents to such amendment,
supplement or waiver, or (at the option of the Company) to all Holders,
consideration for consent to such amendment, supplement or waiver.
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SECTION 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the Company as the Person to whom consents
should be sent if such revocation is received by the Company or such Person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities
have consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver. The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver, which record date shall be the date so
fixed by the Company notwithstanding the provisions of the TIA. If a record
date is fixed, then notwithstanding the last sentence of the immediately
preceding paragraph, those Persons who were Holders at such record date, and
only those Persons (or their duly designated proxies), shall be entitled to
revoke any consent previously given, whether or not such Persons continue tobe
Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder; provided, that any such waiver shall not impair or affect
the right of any Holder to receive payment of principal and premium of and
interest on and Additional Amounts with respect to a Security, on or after the
respective dates set for such amounts to become due and payable expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates without the consent of such Holder.
SECTION 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee or
require the Holder to put an appropriate notation on the Security. The Trustee
may place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise. The Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
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pursuant to this Article IX is authorized or permitted by this Indenture.
ARTICLE X
MEETINGS
SECTION 10.1. Meetings and Votes of Holders.
(a) A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Section 10.1 for any of the following purposes:
(i) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any Default
hereunder and its consequences, or to take any other action authorized to be
taken by Holders of Securities pursuant to Article IX hereof; or (ii) to take
any other action authorized to be taken by or on behalf of the Holders of any
specified aggregate principal amount of the Securities under any other
provision of this Indenture, the Registered Securities and Bearer Securities or
under applicable law.
(b) Meetings of Holders of Securities may be held at such place or places
in The City of New York or London as the Trustee or, in case of its failure to
act, the Company or the Holders calling the meeting shall from time to time
determine.
(c) The Trustee may at any time call a meeting of Holders of Securities
to be held at such time and at such place in any of the locations designated in
Section 10.1(b) hereof as the Trustee shall determine. Notice of every meeting
of Holders shall be made as specified in Section 14.2 hereof, except that such
notice shall set forth the time and the place of such meeting, in general terms
the action proposed to be taken at such meeting and a general description of
regulations applicable to such meeting and shall be published at least three
times in the publications specified in such Section 14.2, the first publication
to be not less than 21 nor more than 180 days prior to the date fixed for the
meeting.
(d) In case at any time the Company or the Holders of at least 25% in
aggregate principal amount of the Securities shall have requested the Trustee
to call a meeting of the Holders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have given the first notice of such meeting within 21 days
after receipt of such request or shall not thereafter proceed to cause the
meeting to be held as provided herein, then the Company or the Holders of
Securities in the amount above specified may determine the time and the place
in either of the locations designated in Section 10.1(b) hereof for such
meeting and may call such meeting to take any action authorized in Section
10.1(a) hereof by giving notice thereof as provided in Section 10.1(c) hereof.
(e) To be entitled to vote at any meeting of Holders of Securities, a
person shall be (i) a Holder of one or more Securities, or (ii) a person
appointed by an instrument in writing as proxy for a Holder or Holders of
Securities by such Holder or Holders, which proxy need not be a Holder of
Securities. The only persons who shall be entitled to be present or to speak
at any meeting of Holders shall be the persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of the Company and its counsel. (f) The persons
entitled to vote a majority in principal amount of the outstanding Securities
shall constitute a quorum for the transaction of all business specified in
Section 10.1(a) hereof. No business shall be transacted in the absence of a
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quorum unless a quorum is represented when the meeting is called to order. In
the absence of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting shall, if convened at the request of the Holders of
Securities (as provided in Section 10.1(d) hereof), be dissolved. In any other
case the meeting shall be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting (except
pursuant to Section 10.1(j)) shall be given as provided in Section 10.1(c)
hereof except that such notice need be published only once but must be given
not less than five days prior to the date on which the meeting is scheduled to
be reconvened. Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum the persons entitled to vote 25% in principal
amount of the Securities shall constitute a quorum for the taking of any action
set forth in the notice of the original meeting. Notice of the reconvening of
an adjourned meeting shall state expressly the percentage of the aggregate
principal amount of the Securities that shall constitute a quorum. At a
meeting or an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid, any resolution and all matters (except as limited by
Section 6.8 and the last sentence of the first paragraph of Section 9.2 hereof)
shall be effectively passed and decided if passed or decided by the persons
entitled to vote a majority in principal amount of the Securities represented
and voting at such meeting, provided that such amount shall be not less than
25% in principal amount of the Securities outstanding. Any Holder of a
Security who has executed an instrument in writing appointing a person as his
proxy shall be deemed to be present for the purposes of determining a quorum
and be deemed to have voted; provided, however, that such Holder shall be
considered as present or voting only with respect to the matters covered by
such instrument in writing. Any resolution passed or decision taken at any
meeting of the Holders of Securities duly held in accordance with this Section
10.1 shall be binding on all the Holders of Securities whether or not present
or represented at the meeting.
(g) Notwithstanding any other provision of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting
of Holders of Securities in regard to proof of the holding of Securities and of
the appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate. Except as otherwise
permitted or required by any such regulations, the holding of Bearer Securities
shall be proved by the production of the Bearer Securities or by a certificate
executed, as depositary, by, and the appointment of any proxy shall be proved
by having the signature of the person executing the proxy witnessed or
guaranteed by, in each case, any trust company, bank or banker satisfactory to
the Trustee. Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine without the
proof specified herein or other proof. The holding of Registered Securities
shall be proved by the registry books maintained in accordance with Section 2.3
hereof or by a certificate or certificates of the Trustee in its capacity as
the Company's agent for the maintenance of such books.
(h) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by the Holders of Securities as provided in Section 10.1(d) hereof,
in which case the Company or the Holders calling the meeting, as the case may
be, shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the
Holders of a majority in principal amount of the Securities represented at the
meeting and entitled to vote.
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(i) At any meeting each Holder or proxy shall be entitled to one vote for
each U.S.$1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote, except as a Holder or proxy.
(j) Any meeting of Holders of Securities duly called pursuant to Section
10.1(c) or 10.1(d) hereof at which a quorum is present may be adjourned from
time to time by vote of the Holders (or proxies for the Holders) of a majority
in principal amount of the Securities represented at the meeting and entitled
to vote; and the meeting may be held as so adjourned without further notice.
(k) The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy
and the serial number or numbers of the Securities held or represented by them.
The permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record, at least in
duplicate, of the proceedings of each meeting of Holders of Securities shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was published as provided in Section 10.1(c) or 10.1(d) hereof and, if
applicable, Section 10.1(f) hereof. Each copy shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting, and one
such copy shall be delivered to the Company and another to the Trustee to be
preserved by the Trustee, the copy delivered to the Trustee to have attached
thereto the ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
SECTION 10.2. Action by Holders.
Subject to Section 14.6, whenever in this Indenture it is provided that
the Holders of a specified percentage in aggregate principal amount of the
Securities may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action)
the fact that at the time of taking any such action the Holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by Holders in person or
by agent or proxy appointed inwriting, or (b) by the record of Holders voting
in favor thereof at any meeting of such Holders duly called and held in
accordance with the provisions of Section 10.1 hereof, or (c) by a combination
of such instrument or instruments and any such record of such a meeting of
Holders.
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ARTICLE XI
AGENTS
SECTION 11.1.Offices, Resignation, Successors, Etc. of Agents; Paying,
Conversion and Transfer Agencies.
(a) Each of the Agents may at any time resign as such Agent by giving
written notice to the Company of such intention on its part, specifying the
date on which its desired resignation shall become effective; provided,
however, that such date shall never be less than 90 days after receipt of such
notice by the Company unless the Company agrees to accept less notice. Each of
the Agents hereunder may be removed at any time by the filing with it of any
instrument in writing signed on behalf of the Company and specifying such
removal and the date when it is intended to become effective. Such resignation
or removal shall take effect upon the date of the appointment by the Company,
as hereinafter provided, of a successor Conversion Agent, Transfer Agent or
Paying Agent, as the case may be, and the acceptance of such appointment by
such successor Agent. Upon its resignation or removal, each of the Agents
shall be entitled to the payment by the Company of its compensation for the
services rendered hereunder and to the reimbursement of all reasonable
out-of-pocket expenses incurred in connection with the services rendered
hereunder by such Agent.
(b) In case at any time any of the Agents shall resign, or shall be
removed, or shall be incapable of acting, or shall file a voluntary petition as
a debtor under Chapter 7 or 11 of Title 11 of the United States Code or have an
order for relief entered against it as a debtor under Chapter 7 or 11 of Title
11 of the United States Code or make an assignment for the benefit of its
creditors or consent to the appointment of a receiver of all or any substantial
part of its property, or shall admit in writing its inability to pay or meet
its debts as they mature, or if an order of any court shall be entered
approving any petition filed by or against any of the Agents under any
legislation similar to the provisions of Title 11 of the United States Code, or
if a receiver of it or of all or any substantial part of its property shall be
appointed, or if any public officer shall take charge or control of it or of
its property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Agent, qualified as aforesaid, shall be appointed by
the Company by an instrument in writing. Upon the appointment as aforesaid of
a successor Agent and acceptance by it of such appointment, the Agent so
superseded shall cease to be such Agent hereunder. If no successor Agent shall
have been so appointed by the Company and shall have accepted appointment as
hereinafter provided, any Holder of a Security, on behalf of itself and all
others similarly situated, or any Agent may petition any court of competent
jurisdiction for the appointment of a successor Agent and shall promptly notify
the Company of such action.
(c) Any successor Conversion Agent, Transfer Agent or Paying Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to the Company an instrument accepting such appointment hereunder, and
thereupon such successor Agent, without any further act, deed or conveyance,
shall become vested with all the authority, rights, powers, trusts, immunities,
duties and obligations of such predecessor with like effect as if originally
named as such Agent hereunder, and such predecessor, upon payment of its
charges and disbursements then unpaid, shall thereupon become obligated to
transfer, deliver and pay over, and such successor Agent shallbe entitled to
receive, all monies, securities or other property on deposit with or held by
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such predecessor, as such Agent hereunder and any such predecessor removed
pursuant to the second sentence of Section 11.1(a) shall be entitled to
repayment of all costs associated with the transfer and delivery thereof.
(d) Any corporation or bank into which any of the Agents hereunder may be
merged or converted, or any corporation or bank with which such Agent may be
consolidated, or any corporation or bank resulting from any merger, conversion
or consolidation to which such Agent shall be a party, or any corporation or
bank to which such Agent shall sell or otherwise transfer all or substantially
all the assets and business of such Agent, shall be the successor to such Agent
under this Indenture without the execution or filing of any document or any
further act on the part of any of the parties hereto.
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Indebtedness.
The Company and each Holder, by its acceptance of Securities, agree that
(a) the payment of the principal of and interest on, or Additional Amounts with
respect to, the Securities and (b) any other payment in respect of the
Securities, including on account of the acquisition or redemption of the
Securities by the Company (including, without limitation, pursuant to Section
3(d) of the Registered Securities and the Bearer Securities) is subordinated,
to the extent and in the manner provided in this Article XII, to the prior
payment in full of all Senior Indebtedness of the Company, and all other
Obligations in respect thereof, whether outstanding at the date of this
Indenture or thereafter created, incurred, assumed or guaranteed, and that
these subordination provisions are for the benefit of the holders of Senior
Indebtedness.
This Article XII shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder
and any one or more of them may enforce such provisions.
To the extent any provision of this Article XII conflicts or is
inconsistent with any other provision of this Indenture, the provisions of this
Article XII shall govern and supersede such inconsistent or conflicting
provision.
SECTION 12.2. No Payment on Securities in Certain Circumstances.
(a) No payment may be made by the Company on account of the principal of,
premium, if any, interest on, or Additional Amounts with respect to, the
Securities, or to acquire any of the Securities (including redemptions of
Securities at the option of the Holder) for cash or property (other than Junior
Securities), or on account of the redemption provisions of the Securities, (i)
upon the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness and all other
Obligations in respect thereof are first paid in full (or such payment is duly
provided for), or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on, or any other Obligation in respect of, any
Senior Indebtedness of the Company when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise (a
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"Payment Default"), unless and until such Payment Default has been cured or
waived by the holders of such Senior Indebtedness or otherwise has ceased to
exist.
(b) Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of any Senior Indebtedness or their
representative immediately to accelerate its maturity and (ii) written notice
of such event of default given to the Company and the Trustee by the requisite
holders of such Senior Indebtedness or their representative (a "Payment
Notice"), then, unless and until such event of default has been cured or waived
by the requisite holders of suchSenior Indebtedness or otherwise has ceased to
exist, no payment (by set-off or otherwise) may be made by or on behalf of the
Company on account of the principal of, premium, if any, interest on, or
Additional Amounts with respect to, the Securities, or to acquire or repurchase
any of the Securities for cash or property, or on account of the redemption
provisions of the Securities, in any such case other than payments made with
Junior Securities of the Company. Notwithstanding the foregoing, unless (I)
the Senior Indebtedness in respect of which such event of default exists has
been declared due and payable in its entirety within the Payment Blockage
Period, and (II) such declaration has not been rescinded or waived by the
requisite holders of such Senior Indebtedness, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume, subject to this Article XII, all other
payments as and when due on the Securities. Any number of Payment Notices may
be given; provided, however, that (A) not more than one Payment Notice shall be
given within a period of any 360 consecutive days, and (B) no default that
existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Senior Indebtedness) shall be made the basis for the commencement of
any other Payment Blockage Period.
(c) In furtherance of the provisions of Section 12.1, in the event that,
notwithstanding the foregoing provisions of this Section 12.2, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders or any Paying Agent at a time when such
payment or distribution is prohibited by the provisions of this Section 12.2,
then such payment or distribution shall be received and held in trust by the
Trustee or such Holders or Paying Agent (or, if the Company or any Affiliate of
the Company is acting as its own Paying Agent, money for any such payment or
distribution shall be segregated or held in trust) for the benefit of the
holders of Senior Indebtedness of the Company, and shall be paid or delivered
by the Trustee or such Holders or such Paying Agent, as the case may be, to the
holders of Senior Indebtedness of the Company remaining unpaid or unprovided
for or their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness of the Company may have been issued, ratably according to
the aggregate amounts remaining unpaid on account of the Senior Indebtedness of
the Company held or represented by each, for application to the payment of all
Senior Indebtedness of the Company in full after giving effect to any
concurrent payment and distribution to the holders of such Senior Indebtedness,
but only to the extent that as to any holder of such Senior Indebtedness, as
promptly as practical following receipt by such holder of written notice from
the Trustee to the holders of such Senior Indebtedness that such prohibited
payment has been received by the Trustee, Holder(s) or Paying Agent (or has
been segregated as provided above), such holder (or a representative therefor)
notifies the Trustee of the amounts then due and owing on such Senior
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Indebtedness, if any, held by such holder and only the amounts specified in
such notices to the Trustee shall be paid to the holders of such Senior
Indebtedness.
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company shall first be
entitled to receive payments in full (or have such payment duly provided for)
before the Holders are entitled to receive any payment on account of the
principal of, premium, if any, interest on, and Additional Amounts with respect
to, the Securities (other than Junior Securities);
(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by set-off or otherwise), except for the provisions of this
Article XII, shall be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of Senior
Indebtedness of the Company or their representative to the extent necessary to
make payment in full of all such Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than Junior Securities), shall be received
by the Trustee or the Holders or any Paying Agent (or, if the Company or any
Affiliate of the Company is acting as its own Paying Agent, money for any such
payment or distribution shall be segregated or held in trust) on account of the
principal of, premium, if any, interest on, or Additional Amounts with respect
to, the Securities before all Senior Indebtedness of the Company is paid in
full, such payment or distribution shall be received and held in trust by the
Trustee or such Holder or Paying Agent (or, if the Company or any Affiliate of
the Company is acting as its own Paying Agent, money for any such payment or
distribution shall be segregated or held in trust) for the benefit of the
holders of such Senior Indebtedness, or their respective representative, or the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness of the Company may have been issued,
ratably according to the respective amounts of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment as provided herein
of all such Senior Indebtedness remaining unpaid after giving effect to all
concurrent payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness, but only to the extent that as to any
holder of such Senior Indebtedness, as promptly as practical following receipt
by such holder of written notice from the Trustee to the holders of such Senior
Indebtedness that such prohibited payment has been received by the Trustee,
Holder(s) or Paying Agent (or has been segregated as provided above), such
holder (or a representative therefor) notifies the Trustee of the amounts then
due and owing on such Senior Indebtedness, if any, held by such holder and only
the amounts specified in such notices to the Trustee shall be paid to the
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holders of such Senior Indebtedness.
SECTION 12.4. Securityholders to Be
Subrogated to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness of the Company
as provided herein, the Holders of Securities shall be subrogated to the rights
of the holders of such Senior Indebtedness to receive payments or distributions
of assets of the Company applicable to the Senior Indebtedness until all
amounts owing on the Securities shall be paid in full, and for the purpose of
such subrogation no such payments or distributions to the holders of such
Senior Indebtedness by the Company, or by or on behalf of the Holders by virtue
of this Article XII, which otherwise would have been made to the Holders shall,
as between the Company and the Holders, be deemed to be payment by the Company
on account of such Senior Indebtedness, it being understood that the provisions
of this Article XII are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of such Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article XII shall have been
applied, pursuant to the provisions of this Article XII, to the payment of
amounts payable under Senior Indebtedness of the Company, then the Holders
shall be entitled to receive from the holders of such Senior Indebtedness any
payments or distributions received by such holders of Senior Indebtedness in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Senior Indebtedness in full.
SECTION 12.5. Obligations of the Company Unconditional.
Nothing contained in this Article XII or elsewhere in this Indenture or in
the Securities is intended to or shall impair as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any,
interest on, and Additional Amounts with respect to, the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XII, of the
holders of Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy. Notwithstanding
anything to the contrary in this Article XII or elsewhere in this Indenture or
in the Securities, upon any distribution of assets of the Company referred to
in this Article XII, the Trustee, subject to the provisions of Sections 7.1 and
7.2, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the 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 XII so long as such court has been apprised of the
provisions of, or the order, decree or certificate makes reference to, the
provisions of this Article XII. The Trustee shall be entitled to rely on the
delivery to it of a written notice bya person representing himself to be a
holder of Senior Indebtedness (or a trustee or representative on behalf of such
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holder) to establish that such a notice has been given by a holder of Senior
Indebtedness (or a trustee or representative on behalf of such holder). In the
event that the Trustee determines, in good faith, that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XII, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, as to the extent to which such person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such person under this Article XII, and if such evidence is not
furnished, the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment. Nothing
in this Article XII shall apply to the claims of, or payments to, the Trustee
under or pursuant to Section 7.7.
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited in Absence of
Notice.
The Trustee or any Paying Agent (other than the Company acting as its own
Paying Agent) shall not at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to or by the
Trustee or such Paying Agent unless and until a Trust Officer of the Trustee or
such Paying Agent (other than the Company acting as its own Paying Agent), as
the case may be, shall have received, no later than one Business Day prior to
such payment, written notice thereof from the Company or from one or more
holders of Senior Indebtedness or from any representative therefor and, prior
to the receipt of any such written notice, the Trustee, subject to the
provisions of Sections 7.1 and 7.2, and such Paying Agent shall be entitled in
all respects conclusively to assume that no such fact exists.
SECTION 12.7. Application by Trustee of Assets Deposited with It.
Any deposit of assets with the Trustee or the Agent (whether or not in
trust) for the payment of principal of or interest on, or Additional Amounts
with respect to, any Securities shall be subject to the provisions of Sections
12.1, 12.2, 12.3 and 12.4; provided that, if prior to one Business Day
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including, without limitation, the
payment of either principal of or interest on any Security) the Trustee or a
Paying Agent shall not have received with respect to such assets the written
notice provided for in Section 12.6, then the Trustee or such Paying Agent
shall have full power and authority to receive such assets and to apply the
same to the purpose for which they were received, and shall not be affected by
any notice to the contrary which may be received by it on or after such date.
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article XII 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, byany such
holder, or by any noncompliance by the Company with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with. The holders of Senior Indebtedness may extend,
renew, modify or amend the terms of the Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
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with the Company, all without affecting the liabilities and obligations of the
parties to this Indenture or the Holders.
SECTION 12.9. Securityholders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article XII and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee its attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors of
the Company), the making of a timely filing of a claim for the unpaid balance
of its Securities in the form required in said proceedings and cause said claim
to be approved. If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Senior
Indebtedness or their representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Securities. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Senior Indebtedness
or their representative to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of any Securityholder in any
such proceeding.
SECTION 12.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article XII in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 12.11. Article XII Not to Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if any,
interest on, or Additional Amounts with respect to, the Securities by reason of
any provision of this Article XII shall not be construed as preventing the
occurrence of a Default or an Event of Default under Section 6.1 or in any way
prevent the Holders or the Trustee from exercising any right or remedy
hereunder or at law or in equity other than the right to receive payment on the
Securities in accordance with the terms of this Article XII.
SECTION 12.12. No
Fiduciary Duty of Trustee to Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness, and shall not be liable to any such holders (other than
for its willful misconduct or negligence) if it shall in good faith mistakenly
pay over or distribute to the Holders of Securities or the Company or any other
Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article XII or otherwise.
Nothing in this Section 12.12 shall affect the obligation of any other such
Person to hold such payment for the benefit of, and to pay such payment over
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to, the holders of Senior Indebtedness or their representative in accordance
with the provisions hereof.
ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1. Conversion Privilege.
Subject to and upon compliance with the provisions of this Article XIII,
at the option of the Holder thereof, any outstanding Registered Security or
Bearer Security or, in the case of any Registered Security or Bearer Security
of a denomination other than $1,000, any portion of the principal amount
thereof which is $1,000 or an integral multiple of $1,000, may be converted on
or after the Exchange Date and prior to the Stated Maturity thereof, at the
principal amount thereof, or of such portion thereof, into fully paid and
nonassessable shares of Common Stock ("Conversion Shares") as set forth in the
Registered Securities and Bearer Securities. The right to convert Securities
called for redemption or delivered for repurchase will terminate at the close
of business on the fifth day next preceding the Redemption Date (or if such
date is not a Business Day, on the next succeeding Business Day) and will be
lost if not exercised prior to that time. The price at which shares of Common
Stock shall be delivered upon conversion (herein called the "Conversion Price")
shall be initially $42.00 per share of Common Stock. The Conversion Price
shall be adjusted in certain instances as provided in paragraphs (c)(i), (ii),
(iii), (iv), (v) and (vi) of Section 4 of the Registered Securities and Bearer
Securities.
SECTION 13.2. Exercise of Conversion Privilege.
(a) In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, together with all
unmatured Coupons (except that any Bearer Security called for redemption on
March 15, 1999 need not be delivered with the Coupon that matures on that
date), if any, and any matured Coupons in default appertaining thereto, if any,
at the office of the Conversion Agent or any office or agency of the Company
maintained for that purpose pursuant to Section 4.2 hereof, accompanied by
written notice, in substantially the form set forth in the Registered
Securities and the Bearer Securities, to the Company, at such office or agency
that the Holder elects to convert such Security or, if less than the entire
principal amount of a Registered Security or Bearer Security of a denomination
other than $1,000 is to be converted, the portion thereof to be converted.
Upon presentment for conversion of any Securities pursuant to this Section
13.2, the Conversion Agent shall immediately on that day notify the Company,
the Trustee and the transfer agent with respect to the Common Stock
(initially, First Interstate Bank of California) of such presentment. Such
notice to the Company shall identify the aggregate principal amount of
Securities to be converted and the number of shares of Common Stock to be
issued in connection with such conversion. If less than the full principal
amount of the Security or Securities presented for conversion is requested to
be converted or may be converted, such notice to the Company shall also specify
the amount, if any, of cash to be distributed to the presenter thereof or the
aggregate principal amount of the Security or Securities to remain outstanding
upon conversion. No payment or adjustment shall be made upon any conversion on
account of any dividends on the Common Stock issued upon conversion. If a
Registered Security is converted after the close of business on an Interest
Record Date and before the opening of business on the next succeeding Interest
Payment Date, the interest due on such Interest Payment Date shall be paid on
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such InterestPayment Date to the person in whose name that Security is
registered at the close of business on that Interest Record Date. Except as
otherwise provided in this paragraph, no payment or adjustment shall be made
upon any conversion on account of any interest accrued on the Securities
surrendered for conversion or on account of any dividends or distributions on
the Conversion Shares issued upon conversion. Registered Securities
surrendered for conversion during the period after the close of business on any
Interest Record Date next preceding any Interest Payment Date to the close of
business on such Interest Payment Date shall (except in the case of Registered
Securities or portions thereof which are called for redemption on March 15,
1999) be accompanied by payment of an amount equal to the interest payable on
such Interest Payment Date on the principal amount being surrendered for
conversion. Upon receipt of such notice, the Company shall take all necessary
actions in connection with the issuance, execution, authentication and delivery
to the Conversion Agent of the requisite number of shares of Common Stock
together with any amounts or replacement Securities representing any
unconverted portion of the Security or Securities presented for conversion, and
to cause the transfer agent with respect to the Common Stock to register the
issuance of the same in the name of the presenter of such Security or
Securities (or its nominee), whereupon the Conversion Agent shall deliver to
the presenter of such Security or Securities such shares of Common Stock,
amounts, if any, and replacement Securities, if any, and concurrently shall
cancel the Security or Securities presented.
(b) Securities shall be deemed to have been converted immediately prior
to the close of business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Securities as Holders shall cease (except for the
right to receive the related Conversion Shares), and the person or persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall cause to be issued or delivered at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable or
deliverable upon conversion, together with payment, in lieu of any fraction of
a share, as provided below.
(c) In the case of any Registered Security or Bearer Security of a
denomination other than $1,000 that is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Conversion Agent, and the Conversion Agent shall deliver to the
Holder thereof, in each case at the expense of the Company, a new Security or
Securities of any authorized kind or denomination as requested by such Holder,
in aggregate principal amount equal to the unconverted portion of the principal
amount of such Security.
SECTION 13.3. Fractional Interests.
No fractional shares of Common Stock shall be issued or delivered upon
conversion of Securities. If more than one Security shall be surrendered for
conversion at one time by the same Holder, the number of full shares which
shall be issuable or deliverable upon conversion thereof shall be computed on
the basis of the aggregate principal amount of the Securities (or, in the case
of Registered Securities or Bearer Securities of a denomination other than
$1,000, specified portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwisebe issuable or deliverable upon
conversion of any Security or Securities (or, in the case of Registered
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Securities or Bearer Securities of a denomination other than $1,000, specified
portions thereof), the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Closing Price per share
of Common Stock at the close of business on the day preceding the day of
conversion.
SECTION 13.4. Adjustment of Conversion Price.
Whenever the Conversion Price is adjusted as provided in the Registered
Securities and Bearer Securities:
(a) the Company shall compute the adjusted Conversion Price in
accordance with the terms of the Registered Securities and
Bearer Securities and shall prepare a certificate signed by
the President, any Vice President or the Treasurer of the
Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be
filed with the Trustee and the Conversion Agent and at each
office or agency maintained for the purpose of conversion of
Securities pursuant to Section 4.2 hereof; and
(b) a notice stating that the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall
forthwith be required, and, as soon as practicable after it is
required, the Company shall promptly cause a notice setting
forth the adjusted Conversion Price to be given to the Holders
of the Securities as provided in Section 14.2 hereof.
SECTION 13.5. Notice of Certain Events.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in
cash out of its retained earnings (excluding dividends payable
in stock for which adjustment is made pursuant to the terms of
the Registered Securities and Bearer Securities);
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
other rights;
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding
shares of Common Stock), or 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 sale or
transfer of all or substantially all of the assets of the
Company;
(d) of the involuntary dissolution, liquidation or winding up of
the Company; or
(e) the Company proposes to take any other action which would
require an adjustment of the Conversion Price pursuant to the
Registered Securities and Bearer Securities;
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then the Company shall cause to be filed with the Conversion Agent and at each
office or agency maintained for the purpose of conversion of Securities a
notice setting forth the adjusted Conversion Price and shall cause notice to be
given as provided in Section 14.2 hereof except that notice need be given to
the Holders once at least 20 days (or 10 days in any case specified in clause
(a) or (b) above) prior to the applicable record date hereinafter specified,
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants is to be determined, or (y) the
date on which a reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for the securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up. The failure to give
notice required by this Section 13.5 or any defect therein shall not affect the
legality or validity of any dividend, distribution, rights, warrants,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, or the vote on any such action.
SECTION 13.6. Continuation of Conversion Privilege in Case of
Reclassification, Change, Merger, Consolidation or Sale of
Assets.
(a) In case of any consolidation with, or merger of the Company into, any
other corporation, or in case of any merger of another corporation into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), or in case of any sale or transfer of all or substantially all of
the assets of the Company, the corporation formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture to the
Indenture providing that the Holder of each Registered Security and Bearer
Security shall have the right during the period such Security shall be
convertible as specified in the Registered Securities and Bearer Securities to
convert such Security only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by
a holder of the number of shares of Common Stock of the Company into which such
Security might have been converted immediately prior to such consolidation,
merger, sale or transfer assuming such holder of Common Stock failed to
exercise any rights of election as to the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, sale or
transfer, and assuming, if such consolidation, merger, sale or transfer is
prior to the period such Security shall be convertible, that the Securities
were convertible at such time at the initial Conversion Price as adjusted
pursuant to the terms of the Registered Securities and Bearer Securities. Such
amendment shall provide for adjustments which, for events subsequent to
theeffective date of such amendment, shall be as nearly equivalent as may be
practicable to the adjustments provided for in the Registered Securities and
the Bearer Securities. The above provisions of this Section 13.6(a) shall
similarly apply to successive consolidations, mergers, sales or transfers.
(b) Any Common Stock issued upon conversion of a Restricted Security
("Restricted Common Stock") at any time prior to the date which is three years
(or such shorter period as shall be permitted as a result of an amendment to
the rules under the Securities Act in respect thereof) after the Closing Date
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when a registration statement in respect of such Common Stock is not effective
under the Securities Act shall be subject to the restrictions on transfer set
forth in Section 2.6 hereof to the same extent as the Restricted Securities
which were so converted. All shares of Restricted Common Stock shall bear the
legend and transfer requirements set forth on the form of Registered Security
set forth as Exhibit A hereto.
SECTION 13.7. Taxes on Conversion.
The Company will pay any and all documentary, stamp or similar taxes in
respect of the issue or delivery of shares of Common Stock on conversion of
Securities pursuant thereto; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that of the Holder of the Securities to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax or has established,
to the satisfaction of the Company, that such tax has been paid. The Company
extends no protection with respect to any other taxes imposed in connection
with conversion of Securities.
SECTION 13.8. Company to Provide Stock.
The Company shall reserve, free from pre-emptive rights, out of its
authorized but unissued shares, sufficient shares to provide for the conversion
of the Securities from time to time as such Securities are presented for
conversion, provided, that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of Securities by delivery of repurchased shares of Common Stock
which are held in the treasury of the Company.
If any shares of Common Stock to be reserved for the purpose of conversion
of Securities hereunder require registration with or approval of any
governmental authority under any federal or state law before such shares may be
validly issued or delivered upon conversion, then the Company covenants that it
will in good faith and as expeditiously as possible use its best efforts to
secure such registration or approval, as the case may be, provided, however,
that nothing in this Section 13.8 shall be deemed to limit in any way the
obligations of the Company provided in this Article XIII.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, the
Company will take all corporate action which may, in the Opinion of Counsel, be
necessary in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock at such adjusted Conversion Price.The
Company covenants that all shares of Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and non-assessable by
the Company and free of preemptive rights.
SECTION 13.9. Disclaimer of Responsibility for Certain Matters.
Neither the Trustee, any agent of the Trustee, the Conversion Agent nor
any agency appointed by the Company shall at any time be under any duty or
responsibility to any Holder of Securities to determine whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to
the certificate referred to in Section 13.4 hereof, or with respect to the
nature or extent of any such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be
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employed, in making the same. Neither the Trustee, any agent of the Trustee,
the Conversion Agent nor any agency appointed by the Company shall be
accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock, or of any securities or property (including cash),
which may at any time be issued or delivered upon the conversion of any
Security; and neither the Trustee nor the Conversion Agent or any agency
appointed by the Company makes any representation with respect thereto.
Neither the Trustee, any agent of the Trustee, the Conversion Agent nor any
agency appointed by the Company shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common
Stock or stock certificates or other securities or property (including cash)
upon the surrender of any Security for the purpose of conversion or, subject to
Article VIII hereof, to comply with any of the covenants of the Company
contained in this Article XIII.
SECTION 13.10. Return of Funds Deposited for Redemption of Converted
Securities.
Any funds which at any time shall have been deposited by the Company or on
its behalf with the Trustee or any other Paying Agent for the purpose of paying
the principal of and interest on, or Additional Amounts with respect to, any of
the Securities and which shall not be required for such purposes because of the
conversion of such Securities, as provided in this Article XIII, shall after
such conversion be repaid to the Company by the Trustee or such other Paying
Agent.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 14.2. Notices.
All notices hereunder shall be deemed to have been given when deposited in
the mail as first class mail, registered or certified, return receipt
requested, postage prepaid, addressed to any party hereto as follows:
The Company Aames Financial Corporation
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attn: Chief Financial Officer
(with a copy to the attention of the General Counsel at the
same address)
The Trustee The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
3rd Floor, Institutional Trust
Brooklyn, New York 11245
Attn: Institutional Trust Administration
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The Paying Agents: The Chase Manhattan Bank, N.A.
Woolgate House
Coleman Street
London EC2P 2HD
ENGLAND
Attn: Corporate Trust Administration
Chase Manhattan Bank Luxembourg, S.A.
5 Rue Plaetis
L-2338 Luxembourg
Attn:
or at any other address of which any of the foregoing shall have notified the
others in writing.
Notices to Holders of the Securities will be given by publication in an
Authorized Newspaper in The City of New York and in London and, for so long as
the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg, or,
if publication in either London or Luxembourg is not practical,in an Authorized
Newspaper in Europe. In addition, notices to Holders of Registered Securities
will be given by first-class mail to the addresses of such Holders as they
appear in the register maintained by the Trustee on the fifteenth day prior to
such mailing. Such notices will be deemed to have been given on the date of
such publication or mailing or, if published in such newspapers on different
dates, on the date of the first such publication. The Trustee shall promptly
furnish to the Company, the Paying Agent and to each other paying agency of the
Company a copy of each notice so published or mailed.
SECTION 14.3. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to Section 312(b) of the TIA with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of Section 312(c) of the TIA.
SECTION 14.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form reasonably satisfactory to the
Trustee) stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel (in form reasonably satisfactory to the
Trustee) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 14.5. Statements Required in Certificate or Opinion.
Each certificate or opinion delivered by or on behalf of the Company with
respect to compliance with a condition or covenant provided for in this
Indenture shall include:
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(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such Person,
such condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 14.7. Legal Holidays.
In any case where the date of maturity of the principal of or interest on
(or Additional Amounts, if any, with respect to) the Securities or the date
fixed for redemption of any Security or the last day on which a Security may be
converted shall be at any place of payment (or such other act) a day other than
a Business Day, then payment of principal or interest (or Additional Amounts,
if any), or presentation for conversion, need not be made on such date at such
place but may be made on the next succeeding Business Day at such place of
payment (or such other act), with the same force and effect as if made on the
date of maturity or the date fixed for redemption or such last day on which a
Security may be converted, and no interest shall accrue for the period after
such date.
SECTION 14.8. Taxes.
The Company will pay all stamp taxes and other similar duties, if any,
that may be imposed by the United States of America or the United Kingdom, or
any state or political subdivision thereof or taxing authority therein, with
respect to the execution or delivery of this Indenture, or the issuance of the
Regulation S Global Security, or the exchange from time to time of the
Regulation S Global Security for Registered Securities or Bearer Securities, or
with respect to the issuance or delivery of shares of Common Stock on
conversion of Securities; provided, however, that the Company shall not be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Common Stock in a name other
than that of the holder of the Security or Securities to be converted, and no
such issuance or delivery shall be made unless and until the person requesting
such issuance has paid to the Company the amount of any such tax or duty or has
established to the satisfaction of the Company that such tax or duty has been
paid; and further provided, that the Company shall not be required to pay any
tax or duty that may be payable in respect of any accrued interest paid in
connection with the conversion of the Securities.
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SECTION 14.9. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITYOF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION.
SECTION 14.10. Agent for Service of Process.
As long as any of the Securities or Coupons remain outstanding, the
Company will at all times have an authorized agent in The City of New York,
upon whom process may be served in any legal action or proceeding arising out
of or relating to this Indenture or any Security or any Coupons appertaining
thereto. Service of process upon such agent and written notice of such service
mailed or delivered to the Company shall to the extent permitted by law be
deemed in every respect effective service of process upon the Company in any
such legal action or proceeding. The Company hereby appoints the Trustee as
its agent for such purpose, and covenants and agrees that service of process in
any legal action or proceeding may be made upon it at the office of the Trustee
at 4 Chase MetroTech Center, 3rd Floor, Institutional Trust Administration,
Brooklyn, New York 11245, U.S.A., Attention: Corporate Trust Department (or
such other address in The City of New York, as may be the Principal Corporate
Trust Office of the Trustee in The City of New York), unless and until the
Company shall designate another agent for such purpose by written notice to the
Trustee. If the Trustee receives any such service of process, it shall
promptly notify the Company of such service.
SECTION 14.11. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 14.12. No Recourse Against Others.
No direct or indirect partner, employee, stockholder, director or officer,
as such, past, present or future of the Company or any successor corporation,
shall have any personal liability in respect of the obligations of the Company
under the Securities or this Indenture by reason of his, her or its status as
such partner, stockholder, employee, director or officer. Each Securityholder
by acceptinga Security waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Securities.
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SECTION 14.13. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 14.14. Duplicate Originals.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 14.15. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 14.16. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and the Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 14.17. Qualification of Indenture.
The Company shall qualify this Indenture under the TIA in accordance with
the terms and conditions of the Registration Rights Agreement and shall pay all
reasonable costs and expenses (including attorneys' fees for the Company, the
Trustee and the Managers) incurred in connection therewith, including, but not
limited to, costs and expenses of qualification of the Indenture and the
Securities and printing this Indenture and the Securities. The Trustee shall
be entitled to receive from the Company any such Officers' Certificates,
Opinions of Counsel or other documentation as it may reasonably request in
connection with any such qualification of this Indenture under the TIA.
SECTION 14.18. Registration Rights.
Certain Holders of the Securities are entitled to certain registration
rights with respect to such Securities pursuant to, and subject to the terms
of, the Registration Rights Agreement.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
AAMES FINANCIAL CORPORATION,
a Delaware corporation
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[Seal] By:
-------------------------------------------
Name:
Title:
Attest:
THE CHASE MANHATTAN BANK, N.A., as Trustee
[Seal] By:
-------------------------------------------
Name:
Title:
Attest:
EXHIBIT A
(FORM OF FACE OF REGISTERED SECURITY)
[Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (55
Water Street, New York, New York) ("DTC"), to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or
such other entity as may be requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]
[THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT:
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(I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO
THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD AS SHALL BE
PERMITTED AS A RESULT OF AN AMENDMENT TO THE RULES UNDER THE
SECURITIES ACT IN RESPECT THEREOF) AFTER THE LATER OF THE DATE OF
ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT
(A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A,
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT,
(E) IN A TRANSACTION ARRANGED BY A BROKER OR DEALER REGISTERED
UNDER THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING THIS SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND
(III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET
FORTH IN (II) ABOVE. IF ANY RESALE OR OTHER TRANSFER OF THIS
SECURITY IS PROPOSED TO BE MADE PURSUANT TO CLAUSE II(E) ABOVE
PRIOR TO THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD AS
SHALL BE PERMITTED AS A RESULT OF AN AMENDMENT TO THE RULES UNDER
THE SECURITIES ACT IN RESPECT THEREOF) AFTER THE DATE OF ORIGINAL
ISSUANCE HEREOF, THE TRANSFEROR SHALL DELIVER A LETTER FROM THE
TRANSFEREE CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY. ANY
OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES
(II)(D), (E) AND (F) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS
SECURITY AND THE TRUSTEE TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN
FORM AND SUBSTANCE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
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AAMES FINANCIAL CORPORATION
(Incorporated in the State of Delaware)
5 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
CUSIP No.
U.S.$
Aames Financial Corporation, a corporation duly incorporated and existing
under the laws of the State of Delaware (the "Company"), for value received,
hereby promises to pay to _______________________, or registered assigns, the
principal sum of _____________ United States dollars on March 15, 2006 upon
presentation and surrender hereof and to pay interest thereon, from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for (or from February 26, 1996 if no interest has been paid or
duly provided for in respect of this Security), semiannually in arrears on
March 15 and September 15 in each year (each an "Interest Payment Date"),
commencing September 15, 1996, at the rate of 5 1/2% per annum until the
principal hereof is paid or made available for payment. Interest hereon shall
be calculated on the basis of a 360-day year comprised of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture (as defined on the
reverse hereof), be paid to the person in whose name this Security is
registered at the close of business on the Interest Record Date for such
interest payment, which shall be March 1 or September 1 (whether or not a
Business Day) next preceding such Interest Payment Date. To the extent lawful,
the Company shall pay interest on overdue principal and overdue installments of
interest at the rate borne by this Security, compounded semi-annually. Except
as otherwise provided in the Indenture, any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Interest Record Date and, together with Defaulted Interest relating
thereto, may be paid at any time in any lawful manner, all as more fully
provided in the Indenture. Payment of interest on this Security shall be made
by United States dollar check drawn on a bank in The City of New York and
mailed to the person entitled thereto at his address as it shall appear in the
Security Register, or (if arrangements satisfactory to the Company and the
Trustee (as defined on the reverse hereof) are made) by wire transfer to a
United States dollar account maintained by the payee with a bank in The City of
New York; provided, however, that if such mailing is not possible and no such
application shall have been made, payment of interest shall be made at the
Principal Corporate Trust Office of the Trustee (as defined in the Indenture
referred to below), or such other office or agency of the Company as may be
designated for such purpose in The City of New York, in United States currency.
Reference is hereby made to the further provisions of this Security set
forth under Terms and Conditions of the Securities on the reverse hereof, which
further provisions shall for all purposes have the same effect as if set forth
at this place.
This Security shall not become valid or enforceable for any purpose unless
and until the certificate of authentication hereon shall have been manually
signed by a duly authorized officer of the Trustee. IN WITNESS WHEREOF, the
Company has caused this Security to be duly executed in its corporate name and
under its corporate seal by the manual or facsimile signature of a duly
authorized signatory.
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AAMES FINANCIAL CORPORATION
Dated:
By:
-------------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
-------------------------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By:
----------------------------------------------------
Authorized Officer
Dated:
(FORM OF FACE OF BEARER SECURITY)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
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AAMES FINANCIAL CORPORATION
(Incorporated in the State of Delaware)
5 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
No. B U.S.$
Aames Financial Corporation, a corporation duly incorporated and existing under
the laws of the State of Delaware (the "Company"), for value received, hereby
promises to pay to bearer upon presentation and surrender of this Security the
principal sum of ______________________________ United States dollars on March
15, 2006 upon presentation and surrender hereof and to pay interest thereon,
from February 26, 1996, semiannually in arrears on March 15 and September 15 in
each year (each an "Interest Payment Date"), commencing September 15, 1996, at
the rate of 5 1/2% per annum until the principal hereof is paid or made
available for payment. Interest hereon shall be calculated on the basis of a
360-day year comprised of twelve 30-day months. To the extent lawful, the
Company shall pay interest on overdue principal and overdue installments of
interest of the rate borne by this Security, compounded semi-annually.
Payments in respect of this Security shall be made by United States dollar
check, subject to any laws or regulations applicable thereto and to the right
of the Company (limited as provided in the Indenture (as defined on the reverse
hereof)) to terminate the appointment of any paying agency, at the London
office of The Chase Manhattan Bank, N.A. located at Woolgate House, Coleman
Street, London EC2P 2HD, England, or Chase Manhattan Bank Luxembourg S.A., 5
Rue Plaetis, L-2338 Luxembourg, or at such other offices or agencies outside
the United States of America, its territories or its possessions as the Company
may designate, by United States dollar check drawn on a bank in The City of New
York, or (if arrangements satisfactory to the Company and the Trustee (as
defined on the reverse hereof) are made) by wire transfer to a United States
dollar account maintained by the Holder at a bank outside the United States,
its territories and its possessions. Interest on this Security shall be paid
only at an office or agency located outside the United States, its territories
or its possessions and, in the case of interest due on or before maturity, only
upon presentation and surrender at such an office or agency of the interest
coupons hereto attached as they severally mature. No payment on this Security
or any coupon will be made at the Principal Corporate Trust Office of the
Trustee (as defined in the Indenture referred to below) or any other paying
agency maintained by the Company in the United States, nor will any payment be
made by transfer to an account in, or by mail to an address in, the United
States, except as may be permitted by United States tax laws and regulations in
effect at the time of such payment without detriment to the Company.
Notwithstanding the foregoing, payment of this Security and coupons may be made
at the office of the Trustee in The City of New York if full payment at all
paying agencies outside the United States is illegal or effectively precluded
by exchange controls or other similar restrictions. Reference is hereby made
to the further provisions of this Security set forth under Terms and Conditions
of the Securities on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Neither this Security nor any of the coupons attached hereto shall become
valid or enforceable for any purpose unless and until the certificate of
authentication hereon shall have been manually signed by a duly authorized
officer of the Trustee.
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IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed in its corporate name and under its corporate seal by the manual or
facsimile signature of a duly authorized officer and coupons bearing the
facsimile signature of a duly authorized signatory to be annexed hereto.
AAMES FINANCIAL CORPORATION
Dated:
By:
-------------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By:
-----------------------------------------------
Authorized Officer
Dated:
(FORM OF FACE OF COUPON ON BEARER SECURITIES)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
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AAMES FINANCIAL CORPORATION
(Incorporated in the State of Delaware)
5 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
No. U.S.$ Due
Unless the Bearer Security to which this coupon appertains shall have been
called for redemption prior to the due date hereof (unless such date of
redemption is March 15, 1999) and payment thereof duly provided for or shall
have been converted, Aames Financial Corporation (herein called the "Company")
shall, subject to and in accordance with the terms and conditions of the Bearer
Security and the Indenture dated as of February 26, 1996 between the Company
and The Chase Manhattan Bank, N.A., as Trustee, pay to the bearer, on the date
set forth herein upon surrender hereof, the amount shown hereon (together with
any Additional Amounts in respect hereof which the Company may be required to
pay according to the terms of said Bearer Security) at the paying agencies set
out on the reverse hereof or at such other places outside the United States of
America, its territories and its possessions as the Company may determine from
time to time, by United States dollar check drawn on a bank in The City of New
York, or (if arrangements satisfactory to the Company and the Trustee are made)
wire transfer to a United States dollar account maintained by the bearer at a
bank outside the United States of America, its territories and its possessions,
being one-half year's interest then payable on said Bearer Security.
AAMES FINANCIAL CORPORATION
By:
------------------------------------------
Name:
Title:
Attest:
[Reverse of Coupon]
The Chase Manhattan Bank, N.A. Chase Manhattan Bank Luxembourg S.A.
Woolgate House 5 Rue Plaetis
Coleman Street L-2338 Luxembourg
London EC2P 2HD
ENGLAND
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(FORM OF REVERSE OF REGISTERED AND BEARER SECURITIES)
Terms and Conditions of the Securities
1. General.
(a) This Security is one of a duly authorized issue of securities of the
Company designated as its 5 1/2% Convertible Subordinated Debentures due 2006
(herein called the "Securities"), limited in aggregate principal amount to
U.S.$115,000,000. The Company issued the Securities under an Indenture, dated
as of February 26, 1996 (the "Indenture"), between the Company and The Chase
Manhattan Bank, N.A., as trustee (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the United States Trust Indenture Act of 1939, as
amended, as in effect on the date of the Indenture. The Securities are subject
to all such terms, and Holders of Securities are referred to the Indenture and
said Act for a statement of them. The Securities are general unsecured
obligations of the Company.
(b) The Securities are issuable as bearer securities (the "Bearer
Securities"), with interest Coupons attached, in the denominations of
U.S.$1,000 and U.S.$10,000, and as registered securities (the "Registered
Securities"), without coupons, in denominations of U.S.$1,000 and integral
multiples thereof. The Registered Securities, and transfers thereof, shall be
registered as provided in the Indenture. The holder of any Bearer Security or
any Coupon and the registered holder of a Registered Security shall (to the
fullest extent permitted by applicable law) be treated at all times, by all
persons and for all purposes, except as provided in the Indenture, as the
absolute owner of such Security or Coupon, as the case may be, regardless of
any notice of ownership, theft or loss or of any writing thereon.
2. Additional Amounts.
The Company will pay, as additional interest ("Additional Amounts"), to
the Holder of this Security or of any Coupon appertaining hereto who is a
United States Alien (as defined below) such amounts as may be necessary in
order that every net payment of the principal of and premium, if any, and
interest on this Security and any cash payments made in lieu of issuing shares
of Common Stock upon conversion of this Security, after withholding for or on
account of any present or future tax, assessment or other governmental charge
imposed upon or as a result of such payment by the United States or any
political subdivision or taxing authority thereof or therein, will not be less
than the interest provided herein or any Coupon appertaining hereto to be then
due and payable; provided, however, that the foregoing obligation to pay
Additional Amounts shall not apply to any one or more of the following:
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(a) any tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member or
stockholder of, or a person holding a powerover, such Holder, if such Holder is
an estate, trust, partnership or corporation) and the United States, including,
without limitation, such Holder (or such fiduciary, settlor, beneficiary,
member, stockholder or person holding a power) being or having been a citizen
or resident or treated as a resident thereof or being or having been engaged in
a trade or business therein or being or having been present therein or having
or having had a permanent establishment therein, (ii) such Holder's present or
former status as a personal holding company, foreign personal holding company,
passive foreign investment company, foreign private foundation or other foreign
tax-exempt entity or controlled foreign corporation for United States federal
income tax purposes or a corporation which accumulates earnings to avoid United
States federal income tax, or (iii) such Holder's status as a bank extending
credit pursuant to a loan agreement entered into in the ordinary course of
business;
(b) any tax, assessment or other governmental charge which would not have
been so imposed but for the presentation by the Holder of this Security or any
Coupon appertaining hereto for payment on a date more than 10 days after the
date on which such payment became due and payable or on the date on which
payment thereof is duly provided, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer or personal or
intangible property tax or any similar tax, assessment or other governmental
charge;
(d) any tax, assessment or other governmental charge which would not have
been imposed but for the failure to comply with certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or present or former connection with the United States of
the Holder or beneficial owner of this Security or any related Coupon if such
compliance is required by statute, regulation or ruling of the United States or
any political subdivision or taxing authority thereof or therein as a
precondition to relief or exemption from such tax, assessment or other
governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of and
premium, if any, or interest on this Security;
(f) any tax, assessment or other governmental charge imposed on interest
received by a person holding, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote; or
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(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of and premium, if
any, or interest on any Security or interest on any Coupon appertaining thereto
if such payment can be made without such withholding by any other paying agent;
nor shall Additional Amounts be paid with respect to any payment of the
principal of or premium, if any, or interest on this Security (or cash in lieu
of issuance of shares of Common Stock upon conversion) to a person other than
the sole beneficial owner of such payment or that is a partnership or fiduciary
to the extent such beneficial owner, member of such partnership or beneficiary
or settlorwith respect to such fiduciary would not have been entitled to the
payment of Additional Amounts had such beneficial owner, member, beneficiary or
settlor been the holder of this Security or any Coupon appertaining hereto.
The term "United States Alien" means any person who, for United States federal
income tax purposes, is (i) a foreign corporation, (ii) a foreign partnership
one or more of the members of which are, for United States federal income tax
purposes, foreign corporations, non-resident alien individuals or non-resident
alien fiduciaries of a foreign estate or trust, (iii) a non-resident alien
individual or (iv) a non-resident alien fiduciary of a foreign estate or trust,
and the term "United States" means the United States of America (including the
several States and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction. Except as specifically provided
herein and in the Indenture, the Company shall not be required to make any
payment with respect to any tax, assessment or other governmental charge
imposed by any government or any political subdivision or taxing authority
thereof or therein. Whenever any Additional Amounts are to be paid on the
Securities, the Company will give notice to the Trustee, the Paying Agent and
any paying agency of the Company, all as provided in the Indenture.
3. Redemption.
(a) The Company, at its option, may redeem the Securities, in whole or in
part (but if in part, in aggregate principal amounts of no less than $1,000),
at any time or times on and after March 15, 1999, upon notice as hereinafter
prescribed, at a redemption price equal to 103% of their principal amount if
redeemed during the 12-month period commencing March 15, 1999, 102% of their
principal amount if redeemed during the 12-month period commencing March 15,
2000, 101% of their principal amount if redeemed during the 12-month period
commencing March 15, 2001, and 100% of their principal amount if redeemed on or
after March 15, 2002, in each case together with accrued and unpaid interest to
the date fixed for redemption. If fewer than all of the then outstanding
Securities are to be redeemed, the Securities to be redeemed will be selected
by the Trustee not more than 75 days prior to the date fixed for redemption, by
such method as the Trustee shall deem fair and appropriate. Provisions of this
Security that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be called for
redemption.
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(b) If, at any time, the Company shall determine that as a result of any
change in or amendment to the laws (or any regulations or rulings promulgated
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, or any amendment to or change
in an official application or interpretation of such laws, regulations or
rulings which change or amendment becomes effective on or after February 26,
1996 the Company has or will become obligated to pay to the holder of any
Security or Coupon Additional Amounts and such obligation cannot be avoided by
the Company taking reasonable measures available to it, then the Company may,
at its election exercised at any time when such conditions continue to exist,
redeem such Securities as a whole but not in part, upon notice as hereinafter
prescribed, at a redemption price equal to 100% of the principal amount,
together with accrued interest, if any, to the date fixed for redemption;
provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to pay such
Additional Amounts were a payment in respect of such Securities then due; and
provided further, that at thetime such notice is given, such obligation to pay
such Additional Amounts remains in effect. Prior to any redemption of the
Securities pursuant to the preceding paragraph, the Company shall provide the
Trustee with one or more certificates (signed by the President or any Vice
President and the Treasurer or the Secretary) of the Company on which the
Trustee may conclusively rely to the effect that the Company is entitled to
redeem such Securities pursuant to such paragraph and that the conditions
precedent to the right of the Company to redeem such Securities pursuant to
such paragraph have occurred and a written Opinion of Counsel (who may be an
employee of the Company) stating that all legal conditions precedent to the
right of the Company to redeem such Securities pursuant to such paragraph have
occurred.
(c) The Company shall, except as set forth in the next succeeding
paragraph, redeem the Bearer Securities as a whole but not in part, upon notice
as hereinafter prescribed, at 100% of their principal amount, together with
interest accrued and unpaid to the date fixed for redemption, less applicable
withholding taxes, if any, plus any applicable Additional Amounts payable,
after the Company determines, based on a written Opinion of Counsel, that any
certification, identification or information reporting requirement of any
present or future United States law or regulation with regard to the
nationality, residence or identity of a beneficial owner of a Bearer Security
or a Coupon appertaining thereto who is a United States Alien would be
applicable to a payment of principal of or interest on a Bearer Security or a
Coupon appertaining thereto made outside the United States by the Company or a
paying agent (other than a requirement (i) which would not be applicable to a
payment made by the Company or any one of its paying agents (A) directly to the
beneficial owner or (B) to a custodian, nominee or other agent of the
beneficial owner, or (ii) which could be satisfied by the Holder, custodian,
nominee or other agent certifying that the beneficial owner is a United States
Alien, provided, however, in each case referred to in clauses (i)(B) and (ii)
payment by such custodian, nominee or agent of the beneficial owner is not
otherwise subject to any requirement referred to in this sentence). The
Company shall make such determination and will notify the Trustee thereof in
writing as soon as practicable, stating in the notice the effective date of
such certification, identification, or information reporting requirement and
the dates within which the redemption shall occur, and the Trustee shall give
prompt notice thereof in accordance with the Indenture. The Company shall
determine the Redemption Date by notice to the Trustee at least 75 days before
the Redemption Date, unless shorter notice is acceptable to the Trustee. Such
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<PAGE>
redemption of the Securities must take place on such date, not later than one
year after the publication of the initial notice of the Company's determination
of the existence of such certification, identification or information reporting
requirement. The Company shall not so redeem the Bearer Securities, however,
if the Company shall, based on a subsequent event, determine, based on a
written Opinion of Counsel (who shall not be an employee of the Company), not
less than 30 days prior to the date fixed for redemption, that no such payment
would be subject to any requirement described above, in which case the Company
shall notify the Trustee, which shall give prompt notice of that determination
in accordance with the Indenture and any earlier redemption notice shall
thereupon be revoked and of no further effect.
Notwithstanding the preceding paragraph, if and so long as the
certification, identification or information reporting requirement referred to
in the preceding paragraph would be fully satisfied by payment of United States
withholding, backup withholding or similar taxes, the Company mayelect, prior
to the giving of the notice of redemption, to have the provisions of this
paragraph apply in lieu of the provisions of the preceding paragraph. In that
event, the Company will pay such Additional Amounts (without regard to Section
2 hereof) as are necessary in order that, following the effective date of such
requirements, every net payment made outside the United States by the Company
or a paying agent of the principal of and interest on a Bearer Security or a
Coupon appertaining thereto to a Holder who is a United States Alien (without
regard to a certification, identification or information reporting requirement
as to the nationality, residence or identity of such Holder), after deduction
for United States withholding, backup withholding or similar taxes (other than
withholding, backup withholding or similar taxes (i) which would not be
applicable in the circumstances referred to in the parenthetical clauses of the
first sentence of the next preceding paragraph or (ii) are imposed as a result
of presentation of such Bearer Security or Coupon for payment more than 10 days
after the date on which such payment becomes due and payable or on which
payment thereof is duly provided for, whichever is later), will not be less
than the amount provided in the Bearer Security or the Coupon to be then due
and payable. If the Company elects to pay such Additional Amounts and as long
as it is obligated to pay such Additional Amounts, the Company may subsequently
redeem the Bearer Securities, at any time, in whole but not in part, upon not
more than 60 days nor less than 30 days notice, given as hereinafter
prescribed, at 100% of their principal amount, plus accrued interest to the
date fixed for redemption and Additional Amounts, if any.
(d) If there shall occur a Change of Control (as defined in the
Indenture) with respect to the Company, then the Holder of this Security shall
have the right, at such Holder's option, exercised in accordance with this
Section 3(d), to require the Company to purchase this Security, in whole but
not in part, on the Holder Redemption Date at a Redemption Price equal to 100%
of the principal amount, together with accrued interest to the Holder
Redemption Date.
Notwithstanding the fact that a Security is called for redemption by the
Company otherwise than pursuant to this Section 3(d), each Holder of a Security
desiring to exercise the option for redemption set forth in this Section 3(d)
shall, as a condition to such redemption, on or before the close of business on
the fifth Business Day prior to the Holder Redemption Date, surrender the
Security to be redeemed (together with all unmatured Coupons, if applicable),
in whole but not in part, together with the Redemption Notice hereon duly
executed at the place or places specified in the notice required by Section
3(e) and otherwise comply with the provisions of Section 3(f). A Holder of a
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Security who has tendered a Redemption Notice (i) will be entitled to revoke
its election by delivering a written notice of such revocation together with
the Holder's non-transferable receipt for such Security to the office or agency
of the Company designated as the place for the payment of the Securities to be
so redeemed on or before the Holder Redemption Date and (ii) will retain the
right to convert its Securities into shares of Common Stock of the Company on
or before the close of business on the fifth day (or if such day is not a
Business Day, on the next succeeding Business Day) next preceding the Holder
Redemption Date. In connection with any repurchase of Securities pursuant to
this Section 3(d), the Company will comply with any applicable rules and
regulations promulgated by the U.S. Securities and Exchange Commission and
nothing herein, including the time periods in which redemption is to occur,
shall require the Company to take action which violates such applicable rules
and regulations.
(e) Notice of any redemption or notice in connection with a Change of
Control will be given in accordance with Section 3.1 of the Indenture.
(f) If (i) notice of redemption has been given in the manner set forth in
Section 3.1 of the Indenture with respect to Securities to be redeemed at the
option of the Company, or (ii) notice of redemption has been given by the
Holder of a Security to be redeemed pursuant to Section 3(d) hereof, the
Securities so to be redeemed shall become due and payable on the applicable
Redemption Date specified in such notice and upon presentation and surrender of
the Securities at the place or places specified in the notice given by the
Company with respect to such redemption, together in the case of Bearer
Securities with all appurtenant Coupons, if any, maturing subsequent to the
Redemption Date, the Securities shall be paid and redeemed by the Company, at
the places and in the manner and currency herein specified and at the
Redemption Price together with accrued interest, if any, to the Redemption
Date; provided, however, that interest due in respect of Coupons maturing on or
prior to the Redemption Date shall be payable only upon the presentation and
surrender of such Coupons (at an office or agency located outside of the United
States of America). If any Bearer Security surrendered for redemption shall
not be accompanied by all appurtenant Coupons maturing after the Redemption
Date, such Security may be paid after deducting from the amount otherwise
payable an amount equal to the face amount of all such missing Coupons, or the
surrender of such missing Coupon or Coupons may be waived by the Company and
the Trustee if they are furnished with such security or indemnity as they may
require to save each of them and each other paying agency of the Company
harmless. From and after the Redemption Date, if monies for the redemption of
Securities shall have been available at the principal corporate trust office of
the Trustee for redemption on the Redemption Date, the Securities shall cease
to bear interest, the Coupons for interest appertaining to Bearer Securities
maturing subsequent to the Redemption Date shall be void, and the only right of
the holders of such Securities shall be to receive payment of the Redemption
Price together with accrued interest to the Redemption Date. If monies for the
redemption of the Securities are not made available by the Company for payment
until after the Redemption Date, the Securities shall not cease to bear
interest until such monies have been so made available.
4. Conversion.
(a) Subject to and upon compliance with the provisions of the Indenture,
a holder of Securities is entitled, at its option, at any time on and after the
Exchange Date and prior to the close of business on March 15, 2006 to convert
such Security (or any portion of the principal amount thereof which is
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U.S.$1,000 or an integral multiple thereof), at the principal amount thereof,
or of such portion, into fully paid and nonassessable shares ("Conversion
Shares") of common stock, par value $0.001 per share ("Common Stock"), of the
Company (calculated as to each conversion to the nearest 1/1000 of a share) at
a Conversion Price equal to U.S.$42.00 aggregate principal amount of Securities
for each Conversion Share (the "Conversion Price") (or at the current adjusted
Conversion Price if an adjustment has been made as provided herein) by
surrender of the Security, together with (i) if a Bearer Security, all
unmatured Coupons (except that any Bearer Security called for redemption on
March 15, 1999 need not be delivered with the Coupon that matures on that date)
and any matured Coupons in default appertaining thereto, or (ii) if a
Registered Security (if so required by the Company or the Trustee), instruments
of transfer in form satisfactory to the Company and the Trustee, duly executed
by the registered holder or by his duly authorized attorney, and, in either
case, (iii) the Conversion Notice hereon duly executed (x) at the Principal
Corporate Trust Office of the Trustee, or at such other office or agency of the
Company as may be designated by it for such purpose in The City of New York, or
(y) subject to any laws or regulations applicable thereto and subject to the
right of the Company to terminate the appointment of any such conversion
agency, at the London office of The Chase Manhattan Bank, N.A. located a 4
Chase MetroTech Center, 3rd Floor, Institutional Trust Administration,
Brooklyn, New York 11245, and Chase Manhattan Bank Luxembourg S.A., 5 Rue
Plaetis, L-2338 Luxembourg, or at such other offices or agencies as the Company
may designate; provided, however, that if any Security or a portion thereof is
called for redemption by the Company, or the holder thereof elects to have such
Security redeemed in whole by the Company pursuant to Section 3(d) hereof, then
in respect of such Security (or, in the case of partial redemption by the
Company, such portion thereof) the right to convert such Security (or, in the
case of partial redemption by the Company, such portion thereof) shall expire
(unless the Company defaults in making the payment due upon redemption) at the
close of business on the fifth day (or if such date is not a Business Day, on
the next succeeding Business Day) next preceding the Redemption Date or the
Holder Redemption Date (unless in the latter case the holder shall have first
revoked his redemption election in accordance with Section 3(d) hereof).
(b) In the case of any Registered Security which is converted after any
Interest Record Date and on or prior to the next succeeding Interest Payment
Date, interest that is payable on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such
interest shall be paid to the person in whose name that Registered Security is
registered at the close of business on such Interest Record Date. Except as
otherwise provided in the immediately preceding sentence and in the
parenthetical clause in Section 4(a)(i) above, no payment or adjustment shall
be made upon any conversion on account of any interest accrued on the
Securities surrendered for conversion or on account of any dividends or
distributions on the Conversion Shares issued upon conversion. Registered
Securities surrendered for conversion during the period after the close of
business on any Interest Record Date next preceding any Interest Payment Date
to the close of business on such Interest Payment Date shall (except in the
case of Registered Securities or portions thereof which are called for
redemption on March 15, 1999) be accompanied by payment of an amount equal to
the interest payable on such Interest Payment Date on the principal amount
being surrendered for conversion. No fractions of shares or scrip representing
fractions of shares will be issued or delivered on conversion, but instead of
any fractional interest the Company shall pay a cash adjustment as provided in
the Indenture.
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(c) (i) In case at any time the Company shall pay or make a stock
dividend or other distribution on any class of capital stock of the
Company in shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced so that the same shall equal the price
determined by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares of Common Stock constituting such dividend or other
distribution, such adjustment to become effective immediately after the
opening of business on the day following the date fixed for such
determination; and in the event that such dividend or other distribution
is not so made, or is made in part, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect (i) if
such record date has not been fixed or (ii) based on the actual number of
shares actually issued, as the case may be.
(ii) In case at any time the Company shall (A) subdivide its
outstanding shares of Common Stock into a greater number of shares, (B)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (C) issue by reclassification of its shares of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation) any shares of
capital stock, the Conversion Price in effect at the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the holder of any Security surrendered for conversion
after such time shall be entitled to receive the aggregate number and kind
of shares which, if such Security had been converted immediately prior to
such time, he would have owned upon such conversion and been entitled to
receive upon such subdivision, combination or reclassification. Such
adjustment shall become effective immediately after the effective date of
such subdivision, combination or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
(iii) In case at any time the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase Common Stock (or
securities convertible into Common Stock) at a price per share less than
the Current Market Price per share of Common Stock on such record date,
the Conversion Price in effect at the opening of business on the day
following such record date shall be reduced so that the same shall equal
the price determined by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date plus the number
of shares of Common Stock (or its equivalent) which the aggregate of the
offering price of the total number of shares so offered for subscription
or purchase would purchase at such Current Market Price per share of
Common Stock and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on such record date plus the
number of shares of Common Stock (or its equivalent) so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following such record date;
provided, however, that no adjustment to the Conversion Price shall be
made pursuant to this Section 4(c)(iii) if the holders of Securities
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receive, or are entitled to receive upon conversion or otherwise, the same
rights, options or warrants as are issued to the holders of Common Stock,
on the same terms and conditions as such rights, options or warrants are
so issued to the holders of Common Stock. Such reduction shall be made
successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, or are issued in part,
or are issued but all or part of which expire unexercised, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect (i) if such record date had not been fixed or (ii) based on
the actual number of rights, options or warrants actually issued, as the
case may be.
(iv) In case at any time the Company shall fix a record date for
the making of a distribution, by dividend or otherwise, to all holders of
its shares of Common Stock, of evidences of its indebtedness or assets
(including securities, but excluding (x) any dividend or distribution
referred to in paragraph (i) of this subsection (c) and any rights,
options or warrants referred to in paragraph (iii) of this subsection (c),
and (y) any dividend, return of capital or distribution paid in cash out
of the retained earnings of the Company and regular quarterly dividends
consistent with past practice ), then in each such case the Conversion
Price in effect after such record date shall be determined by multiplying
the Conversion Price in effect immediately prior to such record date by a
fraction, of which the numerator shall be the total number of outstanding
shares of Common Stock multiplied by the Current Market Price per share of
Common Stock on such record date, less the fair market value (as
determined by a Board Resolution, whose determination shall be conclusive
and described in a statement filed with the Trustee) of the portion of the
assets or evidences of indebtedness so to be distributed, and of which the
denominator shall be the total number of outstanding shares of Common
Stock multiplied by such Current Market Price per share of Common Stock.
Such adjustment shall be made successively whenever such a record date is
fixed and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution; and in
the event that such distribution is not so made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such record date has not been fixed.
(v) The Company may make such downward adjustments in the
Conversion Price, in addition to those required by paragraphs (i), (ii),
(iii) and (iv) of this section, as it considers to be advisable in order
that any event treated for United States federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients.
(vi) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
U.S. $0.25 in such Conversion Price; provided, however, that any
adjustment which by reason of this paragraph (vi) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this subsection (c) shall be made to
the nearest cent or to the nearest 1/1000 of a share, as the case may be.
(d) Whenever the Conversion Price is adjusted and in the event of certain
other corporate actions, as herein provided, the Company shall give notice, all
as provided in the Indenture.
(e) The Company shall use its reasonable best efforts to cause all
registrations with, and to obtain any approvals by, any governmental authority
under any federal or state law of the United States that may be required before
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the Conversion Shares (or other securities issuable upon conversion of the
Securities) may be lawfully issued or transferred and delivered
5. Transfer and Exchange of Securities.
(a) Title to Bearer Securities and Coupons shall pass by delivery. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of Registered Securities is registrable on the Security Register
upon surrender of a Registered Security for registration of transfer at the
office or agency of the Trustee in The City of New York, or, subject to
applicable laws and regulations, at the office of the paying agency in
Luxembourg, 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 thereof or his attorney duly authorized in writing, and
thereupon one or more new Registered Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
(b) As provided in the Indenture and subject to certain limitations
therein set forth, Bearer Securities (with all unmatured Coupons appertaining
thereto) are exchangeable at, subject to applicable laws and regulations, the
offices of the paying agencies in London and Luxembourg or as designated by the
Company for such purpose pursuant to the Indenture, for an equal aggregate
principal amount of Registered Securities and/or Bearer Securities of
authorized denominations, and Registered Securities are exchangeable at the
principal corporate trust office of the Trustee in The City of New York or,
subject to applicable laws and regulations, the offices of the paying agencies
in London and Luxembourg or as designated by the Company for such purpose
pursuant to the Indenture, for an equal aggregate principal amount of
Registered Securities of authorized denominations as requested by the Holder
surrendering the same. Registered Securities will not be exchangeable for
Bearer Securities. The Company shall not be required (i) to exchange Bearer
Securities for Registered Securities during the period between the close of
business on any Interest Record Date and the opening of business on the next
succeeding Interest Payment Date, (ii) to exchange any Bearer Security (or
portion thereof) for a Registered Security if the Company shall determine and
inform the Trustee in writing that, as a result thereof, the Company may incur
adverse consequences under the federal income tax laws and regulations
(including proposed regulations) of the United States in effect or proposed at
the time of such exchange, or (iii) in the event of a redemption in part, (A)
to register the transfer of Registered Securities or to exchange Bearer
Securities for Registered Securities during a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the
Securities called for such redemption; (B) to register the transfer of or
exchange any such Registered Securities, or portion thereof, called for
redemption; or (C) to exchange any such Bearer Securities called for
redemption; provided, however, that a Bearer Security called for redemption may
be exchanged for a Registered Security which is simultaneously surrendered,
with written instruction for payment on the Redemption Date, unless the
Redemption Date is during the period between the close of business on any
Interest Record Date and the close of business on the next succeeding Interest
Payment Date, in which case such exchange may only be made prior to the close
of business on the Interest Record Date immediately preceding the Redemption
Date. The Company also shall not be required to exchange Securities if, as a
result thereof, the Company would incur adverse consequences under United
States federal income tax laws in effect at the time of such exchange. In the
event of redemption or conversion of a Registered Security in part only, a new
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<PAGE>
Registered Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the holder thereof.
(c) The costs and expenses of effecting any exchange or registration of
transfer pursuant to the foregoing provisions, except for the expenses of
delivery (if any) by other than regular mail and except, if the Company shall
so require, the payment of a sum sufficient to cover any tax or other
governmental charge or insurance charges that may be imposed in relation
thereto, will be borne by the Company.
(d) The Company has initially appointed the Trustee as registrar,
transfer agent, paying agent and conversion agent acting through the Trustee's
principal corporate trust office in The City of New York and its agents in
London. The Company has also initially appointed Chase Manhattan Bank
Luxembourg S.A. as a transfer agent, paying agent and conversion agent. The
Company may at any time terminate the appointment of the registrar and such
agents and appoint additional or other registrars and agents or approve any
change in an office through which the registrar or any agent acts; provided
that, until all of the Securities have been delivered to the Trustee for
cancellation, or monies sufficient to pay the Securities have been made
available for payment and either paid or returned to the Company as provided in
the Securities and the Indenture, the Company will maintain a paying agent and
a conversion agent (i) in The City of New York in the United States for the
payment of the principal and interest on Registered Securities and for the
surrender of Securities for conversion or redemption and (ii) in a European
city that, so long as the Securities are listed on the Luxembourg Stock
Exchange and such exchange shall so require, shall be Luxembourg, for the
payment of the principal and interest on Securities and for the surrender of
Securities for conversion or redemption.
6. Meetings of Holders.
A meeting of Holders of Securities may be called at any time and from time
to time in the manner and for the purposes set forth in the Indenture. The
Trustee may at any time call a meeting of Holders of the Securities to be held
at such time and at such place in any of such designated locations as the
Trustee shall determine. Notice of every meeting of Holders shall be made as
specified in the Indenture.
7. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented, and any existing Default or Event of Default or
compliance with any provision may be waived, with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Securities to, among other things,
cure any ambiguity, defect or inconsistency, or make any other change that does
not adversely affect the rights of any Holder of a Security.
8. Subordination.
Payment of principal, premium, if any, interest on and Additional Amounts
with respect to the Securities is subordinated, in the manner and to the extent
set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness.
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9. Successors.
Except as otherwise provided in the Indenture, when a successor assumes
all the obligations of its predecessor under the Securities and the Indenture,
the predecessor will be released from those obligations.
10. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
in which events all principal, accrued interest and Additional Amounts, if any,
with respect to the Securities will be immediately due and payable without any
declaration or other act on the part of the Trustee or the Holders), then in
every such case, unless the principal of all of the Securities shall have
already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of Securities then outstanding may declare all the
Securities to be due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal, interest or Additional Amounts), if it
determines that withholding notice is in their interest.
11. No Recourse Against Others.
No stockholder, director, officer or employee, as such, past, present or
future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Securities or
the Indenture by reason of his, her or its status as such stockholder,
director, officer or employee. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
12. Non-Business Days.
In any case where the date of maturity of the principal of or interest on
(or Additional Amounts, if any, with respect thereto) the Securities or the
date fixed for redemption of any Security shall be at any place of payment a
day other than a Business Day, then payment of principal or interest (or
Additional Amounts, if any) need not be made on such date at such place but may
be made on the next succeeding Business Day at such place of payment, with the
same force and effectas if made on the date of maturity or the date fixed for
redemption, and no interest shall accrue for the period after such date.
13. Notices.
All notices to the Holders of Securities will be published on a Business
Day in Authorized Newspapers in The City of New York and in London, and, as
long as the Securities are listed on the Luxembourg Stock Exchange, in an
Authorized Newspaper in Luxembourg or, if either publication in London or
Luxembourg is not practical, in an Authorized Newspaper in Western Europe.
Notices shall be deemed to have been given on the date of publication as
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<PAGE>
aforesaid or, if published on different dates, on the date of the first such
publication. A copy of each notice will be mailed by the Trustee, on behalf of
and at the expense of the Company, by first-class mail to each holder of a
Registered Security at the registered address of such holder as the same shall
appear in the Security Register on the day fifteen days prior to such mailing.
The Trustee shall promptly furnish to the Company, the Paying Agent and to each
other paying agency of the Company a copy of each notice so published or
mailed.
14. Governing Law.
(a) The Indenture, this Security and any coupons appertaining hereto
shall be governed by and construed in accordance with the laws of the State of
New York, United States of America, without regard to principles of conflicts
of laws.
(b) The Company has appointed the Trustee as its agent upon whom process
may be served in any legal action or proceeding relating to or arising out of
this Security, the Indenture or any Coupon appertaining hereto.
15. Authentication.
This Security and any Coupon appertaining thereto shall not become valid
or obligatory for any purpose until the certificate of authentication hereon
shall have been duly signed by the Trustee or an authenticating agent acting
under the Indenture.
16. Warranty of the Issuer.
Subject to Section 15 hereof, the Company hereby certifies and warrants
that all acts, conditions and things required to be done and performed and to
have happened precedent to the creation and issuance of this Security and any
Coupons appertaining thereto, and to constitute the same legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
have been done and performed and have happened in due and strict compliance
with all applicable laws.
17. Status as United States Real Property Holding Corporation. To the best of
its knowledge, as of the date of the issuance of this Security, the Company is
not a "United States real property holding corporation" as defined in Section
897(c)(2) of the United States Internal Revenue Code of 1986, as amended (the
"Code"). A non-United States person disposing of this Security may request
from the Company a statement as to whether this Security constitutes a "United
States real property interest" (as defined in Code Section 897(c)(1)) as of the
date of disposition. It may be necessary to obtain a statement that this
Security does not constitute a "United States real property interest" prior to
the time that a tax return would otherwise be required to be filed with the
United States Internal Revenue Service with respect to such disposition in
order to avoid a withholding tax on such disposition. If, at any time while
this Security is outstanding, the Company determines that it is at such time a
"United States real property holding corporation", it shall provide notice of
such determination in accordance with the provisions of Section 13 hereof. The
Holder of this Security can contact the Company at 3731 Wilshire Boulevard,
10th Floor, Los Angeles, California 90010 to obtain information as to the
United States income tax consequences of the classification of the Company as a
"United States real property holding corporation."
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<PAGE>
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
19. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
20. Additional Rights of Holders of Restricted Securities.
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Restricted Securities shall have all the rights set forth
in the Registration Rights Agreement.
21. Accounting Terms.
All accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
applied in the United States.
22. Descriptive Headings. The descriptive headings appearing herein are for
convenience of reference only and shall not alter, limit or define the
provisions hereof. The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement.
Request may be made to:
Aames Financial Corporation
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attention: Secretary
TRANSFER NOTICE FOR VALUE RECEIVED, the undersigned Holder hereby sell(s),
assign(s) and transfer(s) unto ___________________________ whose taxpayer
identification number is ________________ and whose address including
postal/ZIP code is ____________ ____________________________________________the
within Security and all rights thereunder, hereby irrevocably constituting and
appointing __________________________________________
_______________________________________attorney-in-fact to transfer said
Security on the books of the Company with full power of substitution in the
premises. Only if a Restricted Security: In connection with the transfer of
this Security, the undersigned certifies that (check one):
. (a) This Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the United States Securities
Act of 1933, as amended (the "Securities Act")) in compliance with
the exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
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<PAGE>
. (b) This Security is being transferred in an Offshore Transaction (as
defined in Regulation S under the Securities Act) in compliance with
the exemption from registration under the Securities Act provided by
Regulation S thereunder.
. (c) This Security is being transferred in a transaction arranged by a
broker or dealer registered under the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to an
institutional "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) in a transaction
not involving any general solicitation or general advertising and in
connection with which transfer the Company has received, if it has so
requested, an opinion of counsel (satisfactory to it in form and
substance) to the effect that the transfer is being made pursuant to
an exemption from the registration requirements of the Securities
Act.
. (d) This Security is being transferred to Aames Financial Corporation.
. (e) In connection with a transfer, other than those above, as to which
the Company has received an opinion of counsel (satisfactory to it in
form and substance) to the effect that the transfer is being made
pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.
. (f) This Security is being exchanged for a beneficial interest in the
Rule 144A Global Security and the undersigned is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act).
Dated: Name:
By:
---------------------------------------
Name:
Title:
NOTICE: The signature of the Holder to this assignment must correspond with the
name as written upon the face of the within instrument in every particular,
without enlargement or any change whatsoever.
SIGNATURE GUARANTEED
TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED: The
undersigned represents and warrants that (i) it is a broker or dealer
registered under Section 15 of the Exchange Act, (ii) each person which will
become a beneficial owner of this Security upon transfer is an institutional
investor which is an "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act); (iii) no general
solicitation or general advertising was made or used by it in connection with
the offer and sale of this Security to such person(s); and (iv) each such
person has been notified that this Security has not been registered under the
Securities Act and is subject to the restrictions on transfer of the Security
set forth herein and in the Indenture.
Dated: _________________ By: ______________________________
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<PAGE>
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE
OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE
CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE
HEREOF AND IN THE INDENTURE SHALL HAVE BEEN SATISFIED.
CONVERSION NOTICE
If (i) Registered Security of denomination U.S. $1,000 or (ii) Bearer
Security of denomination U.S. $1,000:
The undersigned holder of this Security hereby irrevocably exercises the
option to convert this Security into shares of Common Stock of Aames Financial
Corporation in accordance with the terms of this Security and directs that such
shares be registered in the name of and delivered, together with a check in
payment for any fractional share, to the undersigned unless a different name
has been indicated below. If shares are to be registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated: _____________
-------------------------------------------
Signature
MUST BE MEDALLION GUARANTEED IF STOCK IS TO BE
ISSUED IN A NAME OTHER THAN THE REGISTERED HOLDER
OF THE SECURITY
If shares are to be registered in the name of and delivered to a person
other than the holder, please print such person's name and address and, if this
is a Restricted Security, complete Transfer Notice:
-----------------------------------------
HOLDER
Please print name and address of holder:
CONVERSION NOTICE
If (i) Registered Security of denomination greater than U.S. $1,000 or
(ii) Bearer Security of denomination U.S. $10,000:
The undersigned holder of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is U.S. $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
Aames Financial Corporation in accordance with the terms of this Security, and
directs that such shares, together with a check in payment for any fractional
share and any Securities representing any unconverted principal amount hereof,
be delivered to and be registered (if a Registered Security) in the name of the
undersigned unless a different name has been indicated below. If shares or
Securities are to be registered in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
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<PAGE>
Dated: ________________
-------------------------------------------
Signature
MUST BE MEDALLION GUARANTEED IF THE STOCK IS
TO BE ISSUED IN A NAME OTHER THAN THE
REGISTERED HOLDER OF THE SECURITY
If shares or Securities are to be If only a portion of the
registered in the name of a Person other Securities in the name of
than the holder, please print such ______________________ is to be
person's name and address and, if this converted, please indicate:
is a Restricted Security, complete
Transfer Notice:
1. Principal Amount to be
Security, complete Transfer
Notice: converted: U.S.$
2. Kind, amount and denomination
of Securities representing
unconverted principal amount
to be issued:
Bearer-U.S.$
Denominations: U.S.$ (U.S.
$1,000 or $10,000)
Registered-U.S.$
Denominations: U.S.$
REDEMPTION NOTICE UNDER SECTION 3(d)
The undersigned holder of this Security hereby requests and instructs the
Company to redeem this Security in accordance with the terms of Section 3(d) of
this Security and directs that a check in payment of the redemption amount be
delivered to the undersigned unless a different name has been indicated below.
The undersigned understands that this request can be revoked by delivering
written notice to the Paying Agent on or before the Holder Redemption Date,
together with the undersigned's non-transferable receipt for such Security.
Dated:
-------------------------------------------
Signature
MUST BE MEDALLION GUARANTEED IF CHECK IS TO
BE MADE PAYABLE TO A NAME OTHER THAN THE
REGISTERED HOLDER OF THE SECURITY
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<PAGE>
If a check in payment of the redemption amount is to
be delivered to a person other than the holder, please
print such person's name and address:
-----------------------------------
HOLDER
Please print name and address of holder:
[SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES
The following exchanges of a part of this Rule 144A Global Security for
Registered Accredited Investor Securities have been made:
Amount of Amount of Principal Signature
Decrease in Increase in Amount of of
Principal Principal This Global Authorized
Amount Amount Security Officer of
of this of this Following Trustee or
Date of Global Global Such Decrease Security
Exchange Security Security or Increase Registrar
--------- ---------- ---------- ------------- ----------
EXHIBIT B
(FORM OF REGULATION S GLOBAL SECURITY)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF
AMERICA (INCLUDING THE STATES AND THE DISTRICT OF COLUMBIA), ITS TERRITORIES,
ITS POSSESSIONS AND OTHER AREAS SUBJECT TO ITS JURISDICTION (THE "UNITED
STATES") OR TO ANY CITIZEN, NATIONAL OR RESIDENT OF THE UNITED STATES OR TO ANY
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF, OR TO ANY
ESTATE OR TRUST THE INCOME OF WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME
TAXATION REGARDLESS OF ITS SOURCE OR TO ANY OTHER PERSON DEEMED A U.S. PERSON
UNDER REGULATION S UNDER THE SECURITIES ACT ("UNITED STATES PERSONS"), EXCEPT
TO CERTAIN INSTITUTIONAL INVESTORS IN THE UNITED STATES IN TRANSACTIONS NOT
REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT. ANY UNITED STATES PERSON
WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED
STATES FEDERAL INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS
AMENDED. THIS SECURITY IS A TEMPORARY GLOBAL SECURITY, WITHOUT COUPONS,
EXCHANGEABLE FOR DEFINITIVE BEARER SECURITIES WITH INTEREST COUPONS OR
REGISTERED SECURITIES WITHOUT INTEREST COUPONS. THE RIGHTS ATTACHING TO THIS
GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS GLOBAL SECURITY SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON EXCEPT PURSUANT TO THE
PROVISIONS HEREOF.
97
<PAGE>
AAMES FINANCIAL CORPORATION
(Incorporated in the State of Delaware)
5 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
TEMPORARY GLOBAL DEBENTURE
Aames Financial Corporation, a corporation duly incorporated and existing
under the laws of the State of Delaware (the "Company"), for value received,
hereby promises to pay to bearer upon presentation and surrender of this Global
Security the principal sum of $_________________ United States Dollars on March
15, 2006 and to pay interest thereon, from February 26, 1996 semiannually in
arrears on March 15 and September 15 in each year, commencing September 15,
1996, at the rate of 5 1/2% per annum, until the principal hereof is paid or
made available for payment; provided, however, that interest on this Global
Security shall be payable only after the issuance of the definitive Securities
for which this Global Security is exchangeable and, in the case of definitive
Securities in bearer form, only upon presentation and surrender (at an office
or agency outside the United States, its territories and its possessions,
except as otherwise provided in the Indenture referred to below) of the
interest coupons thereto attached as they severally mature. This Global
Security is one of a duly authorized issue of Securities of the Company
designated as specified in the title hereof, issued and to be issued under the
Indenture dated as of February 26, 1996 (the "Indenture") between the Company
and The Chase Manhattan Bank, N.A., as Trustee (the "Trustee," which term
includes any successor trustee under the Indenture). This Global Security is a
temporary Security and is exchangeable in whole or from time to time in part
without charge upon request of the holder hereof for definitive Securities in
bearer form, with interest coupons attached, or in registered form, without
coupons, of authorized denominations, (a) not earlier than 40 days after the
date hereof and (b) as promptly as practicable following presentation of each
certification called for in the Indenture for such purpose, that the beneficial
owner or owners of this Global Security (or, if such exchange is only for a
part of this Global Security, of such part) are not United States persons or
other Persons who have purchased such Security for resale to United States
persons. Definitive Securities in bearer form to be delivered in exchange for
any part of this Global Security shall be delivered only outside of the United
States, its territories and its possessions. Upon any exchange of a part of
this Global Security for definitive Securities, the portion of the principal
amount hereof so exchanged shall be endorsed by the Trustee or its agent on the
Schedule of Exchanges hereto, and the principal amount hereof shall be reduced
for all purposes by the amount so exchanged. Until exchanged in full for
definitive Securities, this Global Security shall in all respects be entitled
to the same benefits under, and subject to the same terms and conditions of,
the Indenture as definitive Securities authenticated and delivered thereunder,
except that neither the holder hereof nor the beneficial owners of this Global
Security shall be entitled to receive payment of interest hereon or to convert
this Global Security into shares of Common Stock of the Company or any other
security, cash or other property.
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<PAGE>
THIS GLOBAL SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Global Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. Unless the
certificate of authentication hereon has been manually executed by an
authorized signatory of the Trustee, this Global Security shall not be entitled
to any benefit under the Indenture or valid or obligatory for any purpose.
IN WITNESS, WHEREOF, the Company has caused this Global Security to be
duly executed in its corporate name by its duly authorized signatory under its
corporate seal.
Dated: February 26, 1996 AAMES FINANCIAL CORPORATION
By:
---------------------------------
Name: _________________________________
Title: _________________________________
[Corporate Seal]
Attest:
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By:
--------------------------------------------------
Name:
Title:
100
EXHIBIT 10.30
EXECUTION COPY
AIRCRAFT LEASE AGREEMENT
Dated as of March 8, 1996
between
C.I.T. LEASING CORPORATION
LESSOR
------
and
OXFORD AVIATION CORPORATION, INC.
LESSEE
------
covering
One Gulfstream Model 1159A Aircraft, Serial Number 428 and Associated Engines
U.S. Registration Number N760G
<PAGE>
AIRCRAFT LEASE AGREEMENT
As from time to time amended, this AIRCRAFT LEASE AGREEMENT dated as
of March 8, 1996 (this "LEASE"), between C.I.T. Leasing Corporation, a Delaware
corporation, together with its successors and permitted assigns, ("LESSOR"),
and Oxford Aviation Corporation, Inc., a California corporation, together with
its successors and permitted assigns, ("LESSEE"), having its principal place of
business at 3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010.
WHEREAS, Lessor desires to purchase from Seller one Gulfstream Model
1159-A aircraft and simultaneously with such purchase, Lessee desires to lease
from Lessor and Lessor is willing to lease to Lessee such aircraft on the terms
and conditions set forth in this Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, Lessor and Lessee hereby agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined:
"ACCEPTANCE DATE" means on or about March 12, 1996 and the date on
which all conditions precedent set forth in Section 21 hereof have been
satisfied, or waived in writing by Lessor, and Lessee has unconditionally
accepted the Aircraft for lease under this Lease.
"AERONAUTICAL BILL OF SALE" shall mean the bill of sale for the
Aircraft on AC Form 8050-2 (for Aircraft registered in the United States) or
such other form as may be acceptable to the FAA for recordation of Lessor's
ownership interest in the Aircraft executed by Seller in favor of Lessor and
dated the Acceptance Date.
"AERONAUTICS AUTHORITY" means, as the context requires, the United
States Department of Transportation, the FAA and/or the Administrator of the
FAA, or any person, governmental department, bureau, commission or agency
succeeding to the functions of any of the foregoing.
"AFFILIATE" with respect to a specified Person shall mean any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled by" have meanings correlative to
the foregoing.
"AIRCRAFT" means the Airframe together with (a) the Engines, whether
or not installed on the Aircraft, (b) all Parts or components thereof, (c)
spare parts or ancillary equipment or devices acquired pursuant to the Purchase
Agreement and furnished with the Aircraft under this Lease, (d) all Aircraft
Documents, (e) all substitutions, replacements and renewals of any and all
thereof, and (f) all capital improvements which may be made to, installed on or
<PAGE>
incorporated into the Aircraft, including but not limited to, those required
pursuant to any Airworthiness Directive.
"AIRCRAFT COST" shall mean the amount set forth in Exhibit B.
"Aircraft Cost" without further reference to an Airframe or an Engine, shall
mean, unless otherwise expressly provided, the Aircraft Cost of the Aircraft.
"AIRCRAFT DOCUMENTS" shall mean the items delivered by Seller to
Lessee and in possession of Lessee on the Acceptance Date and all other records
and documentation pertaining to the Airframe, Engines and Parts delivered with
the Aircraft or generated during the Basic Term, all of which shall be
maintained in the English language, and such other items which may be acquired
or prepared by Lessee relating to its use, operation and maintenance of the
Aircraft during the term of this Lease.
"AIRFRAME" means (i) the airframe described in Schedule A attached
hereto and made a part hereof and any airframe which may from time to time be
substituted or be a replacement for the airframe, and (ii) any and all
avionics, appliances, Parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (except the Engines or
engines) attached to or installed on such airframe for so long as title thereto
shall be vested in Lessor in accordance with this Lease.
"AIRWORTHINESS DIRECTIVE" shall mean any Airworthiness Directive
issued by the FAA and applicable to aircraft, engines and appliances and Parts
of the same type as the Aircraft, the Engines and the Parts.
"ASSIGNMENT OF WARRANTIES" shall mean the Assignment of Warranties
dated as of March 8, 1996 by and among the Lessor, the Lessee and the Seller.
"BASIC RENT" shall have the meaning given to such term in Section 3.1
hereof and Exhibit C hereto.
"BASIC TERM" for the Aircraft means (i) the Initial Term and (ii) any
applicable renewal terms pursuant to Section 3 unless this Lease is sooner
terminated pursuant to the provisions hereof.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which banking institutions in Los Angeles, California are authorized by law
to close.
"CASUALTY LOSS VALUE" shall mean the amounts set forth in Exhibit D
hereto.
"CERTIFICATE OF ACCEPTANCE" means the Certificate of Acceptance
substantially in the form attached hereto as Exhibit A, to be executed by
Lessee for the purpose of acknowledging acceptance of the Aircraft.
"CHARTER" shall mean Lessee, from time to time will transport
passengers for revenue on an hourly or on a per flight basis under FAR Part
135.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITMENT FEE" shall have the meaning set forth in Section 34(b)
hereof.
<PAGE>
"DEFAULT" shall mean any event or condition which, with the lapse of
time or the giving of notice or both, would constitute an Event of Default.
"DEFAULT RATE" shall mean interest at the rate per annum equal to
eighteen percent (18%), subject to the maximum rate permitted by Law.
"DEPOSIT" shall mean the amount set forth in Exhibit G hereto.
"ENGINE" means (i) each of the two engines, installed on the Airframe
on the Acceptance Date as described in Schedule A attached hereto and made a
part hereof, whether or not from time to time thereafter no longer installed on
the Airframe or installed on any other airframe or any other aircraft; and (ii)
any other engine which may from time to time be substituted or be a replacement
for an Engine in accordance with this Lease.
"EVENT OF DEFAULT" means any of the events referred to in Section 22
hereof.
"EVENT OF LOSS" with respect to the Aircraft or the Airframe or any
Engine means any of the following events: (i) loss of the Aircraft or the
Airframe or any Engine or of the use thereof due to theft or disappearance for
a period in excess of 45 days, during the Basic Term, or existing at the
expiration or earlier termination of the Basic Term, (ii) destruction, damage
beyond repair, or rendition of the Aircraft or the Airframe or any Engine
permanently unfit for normal use for any reason whatsoever, or (iii) the
condemnation, confiscation, seizure, or requisition of use or title to the
Aircraft or the Airframe or any Engine by any Governmental Authority under the
power of eminent domain or otherwise for any period in excess of forty-five
(45) days or existing at the expiration or earlier termination of the Basic
Term. An Event of Loss with respect to any Engine shall not, without loss of
the Airframe, be deemed an Event of Loss with respect to the Aircraft.
"EXPIRATION DATE" shall mean the last day of the Basic Term of this
Lease or such other date on which the Basic Term of this Lease may be
terminated pursuant to the terms hereof.
"FAA" shall mean, as the context requires, the United States Federal
Aviation Administration and/or the Administrator of the United States Federal
Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing.
"FORCE MAJEURE" shall mean any event not occasioned by the fault or
negligence of a party hereto and due to or arising from any cause beyond such
party's reasonable control including, without limitation, (i) acts of the
public enemy, civil war, insurrection or riots, or quarantine restrictions,
strikes, lockouts, or labor stoppages and/or (ii) fires, floods, explosions,
earthquakes or epidemics.
"GOVERNMENTAL AUTHORITY" shall mean and include (a) the FAA; (b) any
national government, or political subdivision thereof or local jurisdiction
therein; (c) any board, commission, department, division, organ,
instrumentality, court, or agency of any entity described in (b) above, however
constituted; and (d) any association, organization, or institution of which any
entity described in (b) or (c) above is a member or to whose jurisdiction any
such entity is subject or in whose activities any such entity is a participant
<PAGE>
but only (except for purposes of defining Law below) to the extent that any of
the preceding clauses (a), (b), (c) and (d) hereof have jurisdiction over the
Aircraft or its operations.
"GUARANTOR" shall mean Aames Financial Corporation, together with its
successors and permitted assigns.
"GUARANTY" shall mean the Guaranty Agreement dated as of March 8,
1996 between Guarantor and Lessor, as may be amended in writing from time to
time, and as executed concurrently with the execution of this Lease.
"IMPROVEMENT" has the meaning given to such term in Section 11
hereof.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 18
hereof.
"INITIAL TERM" for the Aircraft means the one hundred twenty (120)
monthly periods from and including the Acceptance Date to and including the day
immediately preceding the tenth anniversary date of the Acceptance Date.
"LAW" shall mean and include (a) any statute, decree, constitution,
regulation, order, judgment or other directive of any Governmental Authority;
(b) any treaty, pact, compact or other agreement to which any Governmental
Authority is a party; (c) any judicial or administrative interpretation or
application of any Law described in (a) or (b) above; and (d) any amendment or
revision of any Law described in (a), (b) or (c) above.
"LESSEE DOCUMENTS" means this Lease, the Purchase Agreement, the Tax
Indemnity Agreement, the Guaranty and the Purchase Agreement Assignment and
each other document executed by Lessee pursuant to this Lease or the
transactions contemplated hereby.
"LESSEE FURNISHED EQUIPMENT" shall mean the Parts set forth in
Appendix I to the Certificate of Acceptance.
"LESSEE PERSON" shall mean Lessee or other user or Person in
possession of the Aircraft, the Airframe, or any Engine, and any Affiliate,
successor or assign of any of the foregoing (other than Lessor or any
Affiliate, successor or assign of Lessor).
"LESSOR LIEN" means any Lien on the Airframe, any Engine or any Part,
equipment or appliance arising as a result of (i) claims against or affecting
Lessor or any of its Affiliates that are not related to the transactions
contemplated by the Lessee Documents, (ii) any act or omission of Lessor or any
of its Affiliates that is not related to the transactions contemplated by the
Lessee Documents or which is in violation of the terms hereof or (iii) Taxes
(including claims therefor) or other claims imposed on Lessor or any of its
Affiliates (including the consolidated group of taxpayers of which Lessor is
part) for which Lessee is not obligated to indemnify Lessor or such Affiliate
hereunder.
"LIENS" means liens, mortgages, encumbrances, pledges, charges and
security interests of any kind.
"MAINTENANCE PROGRAM" shall mean the Manufacturer's approved
maintenance program (as approved by the FAA and Lessor) as in effect from time
<PAGE>
to time for the Aircraft encompassing scheduled maintenance, conditioned
monitored maintenance and on-condition maintenance of the Airframe, Engines and
Parts of the Aircraft. Upon request by Lessor, a copy of such Maintenance
Program shall be provided to Lessor.
"MANUFACTURER" shall mean Gulfstream Aerospace Corporation together
with its successors and assigns.
"OPERATIVE DOCUMENTS" means the Lessee Documents, the Aeronautical
Bill of Sale, the Warranty Bill of Sale, and such other documents delivered in
connection with this Lease and the Purchase Agreement and the transactions
contemplated hereby and thereby.
"PARTS" means any and all appliances, components, parts, instruments,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature (other than Engines or engines and landing gear and temporary
replacement parts as provided in Section 11 hereof), which may from time to
time be incorporated or installed in or attached to the Airframe or any Engine
and spare parts delivered pursuant to the Purchase Agreement.
"PERMITTED LIEN" means a Lien permitted by the provisions of Section
14 hereof.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee(s) of a trust,
unincorporated organization, or government or Governmental Authority, agency or
political subdivision thereof.
"PROCESS AGENT" shall have the meaning set forth in Section 29
hereof.
"PURCHASE AGREEMENT" shall mean the Aircraft Purchase Agreement dated
as of March 7, 1996 between Seller, as seller and Lessee, as purchaser.
"PURCHASE AGREEMENT ASSIGNMENT" shall mean that certain Purchase
Agreement Assignment to be entered into by Lessee and Lessor, and in form and
substance substantially similar to Exhibit F hereto.
"PURCHASE OPTION DATE" shall have the meaning set forth in Section
8(a) hereof.
"RENT" shall mean Basic Rent and Supplemental Payments.
"RENT PAYMENT DATE" means the first day in each of the Rental
Periods.
"RENTAL PERIOD" means each of the consecutive monthly periods
throughout the Basic Term as in effect under this Lease, the first such period
commencing on and including the Acceptance Date and ending on the day
immediately preceding the date which is one month after the Acceptance Date,
and each of the remaining monthly periods commencing on and including the same
day as the Acceptance Date in each such month and ending on the day immediately
preceding the same day as the Acceptance Date in the next succeeding month.
"REPLACEMENT" has the meaning given to such term in Section 11
hereof.
<PAGE>
"REQUIRED ALTERATION" has the meaning given to such term in Section
11 hereof.
"SELLER" shall mean Marbro International together with its successors
and assigns.
"SUPPLEMENTAL PAYMENTS" means all amounts, liabilities and
obligations which Lessee assumes or agrees to pay hereunder to Lessor or
others, including, without limitation, payments of Casualty Loss Value,
Termination Value and indemnities, but excluding Basic Rent.
"TAX" has the meaning given to such term in Section 17 hereof.
"TAX INDEMNITEE" shall mean and include Lessor and any Affiliate
thereof and any of their respective officers, directors, successors, assigns,
agents and servants.
"TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement
dated as of March 8, 1996 between Lessor and Lessee.
"TAXING AUTHORITY" shall mean any federal, state or local government,
political subdivision, or taxing authority in the United States of America, any
government or taxing authority of or in any country or other taxing
jurisdiction outside the United States of America, or any international taxing
authority.
"TERMINATION VALUE" shall mean those amounts determined in accordance
with and as set forth in Exhibit E.
"WARRANTY BILL OF SALE" shall mean the Warranty Bill of Sale relating
to the Aircraft dated the Acceptance Date by Seller in favor of Lessor.
2. AGREEMENT FOR PURCHASE AND LEASE OF AIRCRAFT. (a) Subject to,
and upon all of the terms and conditions of this Lease, Lessor hereby agrees to
purchase from Seller the Aircraft on the Acceptance Date. Lessee shall give
Lessor at least one (1) Business Day's prior notice of the Acceptance Date.
The portion of the purchase price payable by Lessor to (i) Seller for the
Aircraft shall be payable by Lessor to Seller by wire transfer of immediately
available funds to Union Bank, 1666 San Miguel Drive, Newport Beach, California
92660, ABA Number 122000496 for credit to Account Number 4540114272 in an
amount equal to the excess of (x) the Aircraft Cost over (y) the Deposit
representing (a) the amount paid by Lessee as purchaser, to Seller under the
Purchase Agreement and (b) the cost of the Lessee Furnished Equipment, and (ii)
to Lessee shall be payable by Lessor by wire transfer of immediately available
funds to Union Bank, 445 South Figueroa Street, Los Angeles, California 90071,
ABA Number 122000496 for credit to Account Number 21006-59371 or to an account
to be specified in writing by Lessee in an amount equal to the Deposit. Lessor
agrees that simultaneously with the purchase of the Aircraft, it shall lease to
Lessee and Lessee hereby agrees to lease from Lessor the Aircraft for the Basic
Term hereof, which leasing shall be evidenced by the execution and delivery of
the Certificate of Acceptance by Lessee. Upon delivery of the Certificate of
Acceptance by Lessee to Lessor, Lessee confirms to Lessor that Lessee has
irrevocably accepted the Aircraft for all purposes hereof.
<PAGE>
(b) The Acceptance Date shall not extend beyond March 12, 1996
unless mutually agreed to by Lessor and Lessee.
3. TERM. The Basic Term for the Aircraft shall commence on the
Acceptance Date, and, unless sooner terminated in accordance with the
provisions of this Lease, shall end on the last day of the Basic Term. Lessee
may upon written notice no later than one hundred eighty (180) days prior to
the end of the Initial Term or each applicable renewal term thereafter request
to extend the Basic Term for an additional one year period. Such renewal is
subject to Lessor's consent which consent shall be at Lessor's sole discretion.
The Basic Rent for any applicable renewal term shall be the fair market rental
value of the Aircraft.
4. RETURN OF AIRCRAFT.
(a) RETURN. Unless Lessee shall have elected to purchase the
Aircraft pursuant to Section 8 hereof or the Aircraft shall have suffered an
Event of Loss, Lessee will, upon the Expiration Date, at its own expense,
return the Aircraft equipped with two (2) Engines duly installed thereon by
delivering the same to Lessor at any airport in the continental United States
as designated by Lessor. At the time of such return (i) all Airworthiness
Directives and Manufacturer's mandatory service bulletins relating to the
Aircraft shall have been performed, (ii) the Aircraft shall be owned by Lessor,
free and clear of all Liens (other than any Lessor Lien), and shall be duly
registered with the FAA, (iii) each fuel and oil tank shall contain the same
quantity of fuel and oil as was contained in the fuel and oil tanks when the
Aircraft was delivered to Lessee on the Acceptance Date, or in the case of any
differences in any such quantities, an appropriate adjustment shall be made by
payment at the then current market price of fuel or oil, as the case may be,
and (iv) the Aircraft shall be in the condition required by Section 4 (c)
hereof. Until the Aircraft is returned to Lessor as provided in this Section 4
(a), all of the provisions of this Lease with respect thereto shall continue
in full force and effect and Lessee shall pay all the costs and expenses in
connection with or incidental to the return of the Aircraft, including without
limitation Basic Rent for the Aircraft as provided in Section 5 hereof.
(b) MANUALS. Upon the return of the Aircraft, in accordance
with this Section 4, Lessee shall deliver to Lessor all logs, manuals and data,
and all inspection, modification and overhaul records required to be maintained
with respect thereto under applicable rules and regulations of the FAA and any
other Governmental Authority having jurisdiction. In the event logs are
missing or incomplete for operations during the Basic Term, Lessor shall have
the right to cause the logs to be reconstructed at the expense of Lessee.
(c) CONDITION. At the time of such return: (i) the Aircraft
shall have had any distinctive marking of Lessee removed in a workmanlike
manner at the expense of Lessee; (ii) the Aircraft shall be fully equipped and
have installed thereon the Engines and any and all Parts as were installed or
incorporated in or attached to the Aircraft as of the Acceptance Date (or such
replacements therefor permitted by or required pursuant to the terms hereof);
(iii) the Aircraft shall be duly certified as an airworthy aircraft by the FAA
and be returned with a valid certificate of airworthiness issued under 14
C.F.R. Part 91, or its equivalent; (iv) the Aircraft shall be in the condition
and repair required to be maintained by Section 7 hereof, free of all corrosion
<PAGE>
and free and clear of all Liens and the rights of any third parties; (v) Lessee
shall deliver to Lessor all relevant logs, manuals and data and all inspection,
modification and overhaul records required to be maintained with respect to the
Aircraft and Engines under applicable rules and regulations of the FAA and any
other Governmental Authority having jurisdiction; and (vi) Lessee shall return
the aircraft on a Gulfstream Computerized Maintenance Program (CMP) fully paid
up to the return date with all transfer fees, if any, to be paid by the Lessee.
At the time of such return, (i) Lessee shall have completed within
thirty (30) days prior to the return, the next required 18-month inspection, or
portion thereof not previously completed, on the Airframe if such inspection is
due within the next ninety (90) days, and if not in compliance with the Rolls
Royce Spey Model MK 511-8 Engine recommended maintenance program for the
Engines, the next anticipated periodic inspection on each Engine and (ii) the
Aircraft with all material component parts shall have one half or more of the
available operating hours and/or, as applicable, one half or more of the stated
calendar time and cycles remaining as stated in the Code of Federal Regulations
applicable to the FAA, and Manufacturer approved Maintenance Program under the
auspices of FAR 91.409(f)(iii) at time of return.
In the event that any of such Engines or such Aircraft does not meet
the conditions set forth in the immediately preceding paragraph, Lessee shall
pay Lessor an amount equal to the sum of (i) for each Engine, the product of:
the then current estimated cost of the next midlife inspection (including in
such estimated cost, all required replacement of Life Limited Components (as
such term is defined in the Manufacturer's maintenance manual for the Aircraft
and as specified by Rolls Royce for the Engines as Group A and Group B items))
multiplied by the fraction wherein the numerator shall be the remainder (zero
(0) if negative) of (A) the actual number of hours of operation since the
previous midlife inspection, minus (B) fifty percent (50%) of total operating
hours anticipated between midlife inspections, and the denominator shall be the
total operating hours anticipated between midlife inspections, plus (ii) for
each Engine, the product of: the then current estimated cost of the next
anticipated major overhaul (including in such estimated cost, all required
replacement of Life Limited Components and as specified by Rolls Royce for the
Engines as Group A and Group B items) multiplied by the fraction wherein the
numerator shall be the remainder (zero (0) if negative) of (A) the actual
number of hours of operation since the previous major overhaul minus (B) fifty
percent (50%) of the total operating hours anticipated between major overhauls
and the denominator shall be the total operating hours anticipated between
major overhauls, plus (iii) the product of: the current estimated cost of the
next scheduled major Airframe and pressure vessel inspection (including in such
estimated cost, all required replacement of Life Limited Components) multiplied
by the fraction wherein the numerator shall be the remainder (zero (0) if
negative) of (A) the actual number of respective operating hours or months of
operation since the previous major Airframe and pressure vessel inspection,
minus (B) fifty percent (50%) of the respective total operating hours or months
of operation allowable between scheduled major Airframe and pressure vessel
inspection, and the denominator shall be the respective total operating hours
or months of operation allowable between scheduled major Airframe and pressure
vessel inspections. All of the foregoing shall be considered Supplemental
Payments and shall be due upon presentation to Lessee of an invoice setting
forth in reasonable detail the calculation of such amounts due including the
names of all sources used for the required cost estimates. Unless both Lessor
and Lessee agree to alternative source(s), the manufacturer of the Engines
shall be used as the source for all cost and Engine midlife and overhaul
<PAGE>
estimates. Prior to the return of the Aircraft to Lessor, a ground evaluation
and acceptance flight shall, if requested by Lessor, be conducted by Lessor or
Lessor's designee and Lessee retaining operational control of the Aircraft
during the acceptance flight, in accordance with procedures of the Manufacturer
of the Aircraft designed for this purpose in order to determine whether or not
the Aircraft is in the condition required by this Lease. All reasonable costs
and expenses of any ground evaluation and acceptance flight shall be borne
solely by Lessee.
(d) OVERHAUL. Immediately prior to the return of the Aircraft
at the expiration or termination of the Lease, Lessee, upon written request of
Lessor received at least thirty (30) days in advance of the expiration or
termination date, will arrange for the Airframe and each Engine to be inspected
and/or overhauled. Such inspection and/or overhaul should be of the type
customarily performed by a corporate operator similar to Lessor with similar
airframes and engines and, except to the extent Lessee has agreed to bear such
costs pursuant to paragraph (c) of this Section 4, Lessor shall pay the actual
costs in connection with such inspections and/or overhaul.
(e) CONDITION OF INTERIOR AND AIRFRAME EXTERIOR. Lessee agrees
that on the return of the Aircraft, the interior and exterior shall be in all
respects clean and free of all items of personal property not belonging to
Lessor (subject to ordinary wear, tear and use of the Aircraft). Lessor shall
have the right to inspect the Aircraft upon or subsequent to the expiration of
the Basic Term, and to require that Lessee take, at Lessee's expense, all steps
necessary to comply with the requirements of this Section 4(e).
(f) INJUNCTIVE RELIEF. The provisions of this Section 4 are of
the essence of this Lease, and upon application to any court of equity having
jurisdiction in the premises, Lessor shall be entitled to a decree against
Lessee requiring specific performance of the covenants of Lessee set forth in
this Section 4. For the avoidance of doubt, nothing in this Section 4(f) shall
be deemed a waiver by Lessee of its right to defend or object to any claim.
(g) SURVIVAL. The provisions of Section 4(a) through (f)
hereof and all of the obligations of Lessee thereunder shall survive the
expiration or earlier termination of this Lease, the Basic Term, and the return
of the Aircraft.
5. RENT.
(a) RENT. Lessee covenants and agrees to pay to Lessor the
Basic Rent as set forth in Exhibit C hereto throughout the Basic Term, payable
in consecutive installments on each Rent Payment Date during the Basic Term of
this Lease. Each payment of Basic Rent shall be allocable to use of the
Aircraft during the Rental Period that begins on the date such payment is due.
(b) SUPPLEMENTAL PAYMENTS. Lessee also agrees to pay to Lessor
or to whosoever shall be entitled thereto all Supplemental Payments promptly as
the same shall become due and owing, and in the event of any failure on the
part of Lessee so to pay any such Supplemental Payment hereunder Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Rent. Lessee also shall pay to Lessor
or to whosoever may be entitled thereto, on demand, as Supplemental Payment to
the extent permitted by applicable Law, interest at the Default Rate (i) on any
part of any installment of Basic Rent not paid when due for any period for
<PAGE>
which the same shall be overdue and (ii) on any payment of Supplemental
Payments (excluding interest at the Default Rate payable under clause (i)
above) not paid when due until the same shall be paid.
(c) METHOD OF PAYMENT. If the date that any payment of Basic
Rent is due is not a Business Day the payment of Basic Rent otherwise payable
on such date shall be payable on the next succeeding Business Day (unless that
day falls in the next calendar month, in which case such payment shall be made
on the first preceding day that is a Business Day). All payments of Rent
required to be made by Lessee to Lessor hereunder shall be made in same day
funds in lawful money of the United States, and shall be paid by Lessee by
12:00 noon (Pacific time) to the account at the place of payment set forth on
Schedule B attached hereto (or such other account at such other location as
Lessor may designate in writing to Lessee for such purpose). Time is of the
essence in connection with the payment of Rent.
6. NET LEASE. This Lease is a net lease and Lessee acknowledges
and agrees that Lessee's obligations hereunder, including, without limitation,
its obligations to pay all Rent payable hereunder, shall be absolute and
unconditional under any and all circumstances and shall be paid without notice
or demand and without any abatement, reduction, diminution, setoff,
withholding, defense, counterclaim or recoupment whatsoever, including, without
limitation, any abatement, reduction, diminution, setoff, withholding, defense,
counterclaim or recoupment due or alleged to be due to, or by reason of, any
past, present or future claims which Lessee may have against Lessor, Seller,
Manufacturer of the Aircraft or manufacturer of any Part, unit or component
thereof, or any other Person for any reason whatsoever; nor, except as
otherwise expressly provided herein, shall this Lease terminate, or the
obligations of Lessee be otherwise affected, by reason of any defect in the
Aircraft or any Part, unit or component thereof, the condition, design,
operation or fitness for use thereof, any damage to, or any loss or destruction
of, the Aircraft or any Part, unit or component thereof, any Liens or rights of
others with respect to the Aircraft or any Part, unit or component thereof, any
prohibition or interruption of or other restriction against Lessee's use,
operation or possession of the Aircraft or any Part, unit or component thereof
for any reason whatsoever, or any interference with such use, operation or
possession by any Person or entity, or by reason of any failure by Lessor to
perform any of its obligations herein contained, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of Lessor, or of
Lessee to any other Person, or by reason of any insolvency, bankruptcy or
similar proceedings by or against Lessor, or Lessee, or for any other reason
whatsoever, whether similar or dissimilar to any of the foregoing, any present
or future law to the contrary notwithstanding; it being the intention of the
parties hereto that the Rent payable by Lessee hereunder shall continue to be
payable in all events and in the manner and at the times herein provided,
without notice or demand, unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Lease. Lessee hereby
waives, to the extent permitted by applicable Law, any and all rights which he
may now have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, cancel, quit or surrender this Lease except
in accordance with the express terms hereof. Without limiting any of Lessee's
rights under the next sentence, each payment of Basic Rent made by Lessee to
Lessor shall be final and Lessee will not seek to recover any part of such
payment from Lessor for any reason whatsoever, except for gross negligence or
manifest error. Nothing in this Section shall be construed to prevent Lessee,
after complying with this Section 6, from pursuing any claim he may have
<PAGE>
against Lessor or any other Person in such court of law or otherwise as Lessee
may deem appropriate.
7. LESSOR'S TITLE. Title to the Aircraft shall at all times remain
in Lessor and at no time during the Basic Term shall title become vested in
Lessee. Lessee shall acquire no right, title or interest in or to the
Aircraft, except the right to use and purchase the same pursuant to the terms
of this Lease.
8. PURCHASE OPTIONS. (a) So long as no Event of Default shall
have occurred and be continuing, Lessee shall have the option to purchase the
Aircraft on (i) the fifth anniversary date of the Acceptance Date, (ii) the
seventh anniversary of the Acceptance Date and (iii) the Expiration Date (each,
a "PURCHASE OPTION DATE"), such purchase to be on an "as-is", "where-is" and
"with all faults" basis, without any warranty whatsoever except with respect to
title and freedom from Lessor Liens, by giving Lessor, no less than forty-five
(45) days and no more than three hundred sixty-five (365) days prior to the
Purchase Option Date, a written notice advising of Lessee's decision to
exercise said purchase option.
(b) Provided that notice is received by Lessor pursuant to
Section 8(a), on the Purchase Option Date, Lessee shall upon request of Lessor
purchase the Aircraft from Lessor, such purchase to be on an "as is", "where
is" and "with all faults" basis, without any warranty whatsoever (except with
respect to title and freedom from Lessor Liens).
(c) The price payable for the Aircraft by Lessee to Lessor as a
result of the exercise of the purchase option shall be equal to the applicable
Termination Value (which shall not be less than 10% of the Aircraft Cost) plus
any due and unpaid Rent and all applicable Taxes, if any, due and payable as a
result of, or in relation to, the exercise by Lessee of the purchase option
shall be the sole liability of, and payable by, Lessee. The purchase price and
the Taxes referred to shall be paid by Lessee to Lessor on the Purchase Option
Date. All of Lessor's right, title and interest in and to the Aircraft shall
be transferred to Lessee upon full payment of the purchase price and Lessor
shall (i) execute in form recordable with the FAA, a bill of sale evidencing
such transfer and such documents relating to such transfer of title as Lessee
may reasonably request, at Lessee's expense, (ii) cause the Aircraft to be free
from all Lessors Liens and (iii) terminate any UCC financing statements filed
against the Aircraft.
9. USE OF AIRCRAFT; COMPLIANCE WITH LAWS. Lessee agrees that the
Aircraft will be used and operated only (a) in a passenger configuration for
which Lessee is duly authorized by the Aeronautics Authority, (b) in the manner
set forth in, and in accordance with, the terms, conditions and provisions of
the insurance policy or policies providing the coverages specified in Section
16 hereof, and (c) in countries which (i) are not experiencing civil or
external war or similar disturbance, and (ii) maintain normal diplomatic
relations with the United States. In no event shall Lessee use and operate the
Aircraft, or permit the Aircraft to be used and operated, for any purpose for
which the Aircraft is not designed or reasonably suitable, or in any fashion
that may subject the Aircraft to any Liens, other than Permitted Liens, or in
any area excluded from coverage by any such insurance policy or policies.
Lessee further agrees that, unless the Lessee shall have received the prior
written consent of the Lessor, the Aircraft will be used and operated solely in
the conduct of Lessee's and its Affiliates' business and in compliance with
<PAGE>
all applicable Laws of any federal, state, local or foreign government or
Governmental Authority having jurisdiction with respect to the use, operation,
maintenance, condition, airworthiness and occupancy of the Aircraft, and the
use of any premises or facilities by the Aircraft, including without
limitation, those of the Aeronautics Authority. Lessee will not load, use,
operate, hangar or store the Aircraft, or permit the loading, using, operating,
hangaring or storing of the Aircraft, negligently, abusively, improperly or in
violation of this Lease or so as to void any of the insurance coverages
respecting the Aircraft. Lessee shall procure and maintain in effect all
licenses, certificates, permits, approvals and consents required by federal,
state, local or foreign laws or by any governmental body, agency or authority
(including, without limitation, the Aeronautics Authority) in connection with
the delivery, use, operation, maintenance, condition, airworthiness and
occupancy of the Aircraft, and the use of any premises or facilities by the
Aircraft. Except as otherwise expressly permitted by the terms of this Lease,
the Aircraft will at all times be and remain in the possession and control of
Lessee; PROVIDED that, notwithstanding anything in this Lease to the contrary,
so long as no Default or Event of Default shall have occurred and be
continuing, Lessee may, without the written consent of Lessor but subject to
the other provisions of this Lease, enter into any Charter of the Aircraft.
Lessee will keep the Aircraft adequately protected at all times when not in
use, and Lessee will not remove or permit the Aircraft to be removed from its
home airport as specified in Schedule B attached hereto for periods in excess
of thirty (30) days without first giving Lessor written notice designating the
contemplated location of the Aircraft and obtaining Lessor's written approval
thereof (which consent shall not be unreasonably withheld or delayed) and
Lessee will not permanently remove the Aircraft, or permit the Aircraft to be
permanently removed, from such home airport without Lessor's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed. The Aircraft shall be operated only by duly licensed pilot operators
currently certificated and qualified to operate the Aircraft by the Aeronautics
Authority and by any other authority having jurisdiction therefor, and
authorized by the terms of (in accordance with the provisions and requirements
of) the insurance policy or policies providing the coverages specified in
Section 16 hereof.
10. MAINTENANCE OF AIRCRAFT. Lessee, at its sole cost and expense,
shall cause the Aircraft to be maintained under the Maintenance Program, and
shall service, repair, maintain and overhaul the Aircraft so as to (a) keep the
Aircraft in as good operating condition as when inspected by Lessee on the
Acceptance Date, ordinary wear and tear from proper use thereof excepted, and
(b) keep the Aircraft in such operating condition and state of maintenance as
shall be in accordance with prevailing industry standards for an aircraft of
the same type as the Aircraft and in accordance with the Aeronautics Authority
and Manufacturer approved maintenance program, but in no event less than such
operating condition and state of maintenance as may be necessary to satisfy the
safety, maintenance and airworthiness requirements of the Aeronautics Authority
and any other Governmental Authority, state or federal, foreign or domestic,
having jurisdiction with respect thereto. Lessee covenants that in no event
shall the Maintenance Program with respect to the Aircraft be inferior to, or
of less quality than, its maintenance program with respect to any other
aircraft of similar type owned or leased by Lessee. Lessee shall, at its cost
and expense, comply with all applicable service, maintenance, repair and
overhaul regulations, Airworthiness Directives and instructions of any
Aeronautics Authority and all appropriate maintenance, service, repair and
overhaul manuals and service bulletins published by the Manufacturer of the
<PAGE>
Airframe, Engines, accessories, equipment and Parts installed on the Aircraft;
provided that any recommended service bulletins shall be performed at the next
scheduled inspection to be performed on the Aircraft (such scheduled inspection
not to exceed twelve (12) months from the previous scheduled inspection). All
service, inspection, overhauls, maintenance, directives, repairs and
improvements with respect to or affecting the Aircraft shall be made and
performed only by appropriately licensed, certificated and qualified personnel,
in accordance with applicable standards of any Aeronautics Authority or any
other such Governmental Authority having jurisdiction with respect thereto. At
its own cost and expense, Lessee shall maintain in English all records, logs
and other materials required by any Aeronautics Authority or by any other
Governmental Authority to be maintained in respect of the Aircraft. Lessee
agrees that the Aircraft will not be maintained, used or operated in violation
of any applicable Law of any government or Governmental Authority having
jurisdiction or in violation of any airworthiness certificate, license or
regulations relating to the Aircraft issued by any such authority.
11. REPLACEMENT OF PARTS; ALTERATIONS; MODIFICATIONS; AND ADDITIONS.
(a) Lessee may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing, any Part,
equipment or appliance, PROVIDED, HOWEVER, that Lessee will, at its own cost
and expense, replace such Part, equipment or appliance or cause such Part,
equipment or appliance to be replaced, as promptly as practicable. Any such
Part, equipment or appliance shall immediately be and become the property of
Lessor and subject to the terms of this Lease. In case any part of the
Aircraft is required to be altered or modified, or any equipment or appliance
is required to be altered, added, replaced or modified on the Airframe or any
Engine or in either case in order to comply with the laws, regulations,
requirements, rules and orders of any government or Governmental Authority
having jurisdiction over the Aircraft (a "REQUIRED ALTERATION") pursuant to
Sections 9 or 10 hereof, Lessee agrees to make such Required Alteration at its
own expense. Any such Required Alteration shall immediately be and become the
property of Lessor and subject to the terms of this Lease. All Parts,
equipment and appliances incorporated or installed in or attached to the
Airframe or any Engine in connection with servicing, repairing, maintaining and
overhauling the Aircraft pursuant to the requirements of Section 10 hereof (a
"REPLACEMENT") shall be considered accessions to the Airframe or any such
Engine, as the case may be, and shall immediately, without further act, be and
become the property of Lessor and part of the Aircraft. Lessee shall purchase
any Part to be replaced, altered or modified pursuant to this Section 11 in the
name of Lessor. Lessee shall, upon the reasonable request by Lessor, deliver
to Lessor a legal opinion in form and substance satisfactory to Lessor stating
that title and ownership to such Required Alteration or Replacement have been
duly conveyed to Lessor under applicable Law and any security interest of
Lessor therein has been perfected under applicable Law. Lessee may, without
the prior written consent of Lessor, affix or install any accessory, equipment
or device on the Airframe or any Engine or make any improvement or addition
thereto other than a Required Alteration or Replacement (an "IMPROVEMENT");
PROVIDED that such Improvement is readily removable without causing material
damage (Lessee shall repair at its expense any damage caused by such removal)
to the Airframe or any such Engine prior to the return of the Aircraft to
Lessor or impairing the value, utility or condition which the Airframe or such
Engine would have had if such Improvement had not been so affixed or installed.
Lessee may at any time during the Basic Term remove such removable Improvement
at its own expense without causing at any time during the term material damage
<PAGE>
to the Airframe or any such Engine provided that Lessee shall repair any damage
caused by such removal, and upon such removal title thereto shall, without
further act, vest in Lessee free and clear of all Lessor Liens. In addition,
Lessee may, without the prior written consent of Lessor, remove any Part,
equipment or appliance that Lessee in the proper conduct of its business
determines to be obsolete or no longer suitable or appropriate for use on the
Airframe or any Engine; PROVIDED that no such removal materially impairs the
value, utility, useful life or condition which the Airframe or such Engine
would have had if such removal had not been made and Lessee shall repair any
damage caused by such removal. Except as required or permitted by the
provisions of this Section 11, Lessee shall not modify the Aircraft (including
the Airframe and any Engine) without the prior written consent of Lessor.
(b) Lessee shall have installed at Lessee's cost and expense
all of the Lessee Furnished Equipment on the Aircraft no later than ninety (90)
days after the Acceptance Date.
12. REGISTRATION; DELIVERY; RECORDATION; INSIGNIA AND INSPECTION.
(a) Lessee shall cause the Aircraft to be registered and shall
maintain the registration of the Aircraft with the Aeronautics Authority
pursuant to all applicable Laws in the United States in the name of Lessor as
owner and shall not register or permit the registration of the Aircraft in any
other name or under the laws of any other country. Lessee shall promptly
provide Lessor with evidence of such registration, filing and recordation.
Lessee agrees promptly to furnish Lessor such information as may be required to
file any reports required to be filed by Lessor with any Governmental Authority
as a result of Lessor's ownership of the Aircraft.
(b) Upon the sale of the Aircraft to Lessor by Seller, on or
prior to the Acceptance Date Lessor shall accept title to the Aircraft and the
Bill of Sale therefor from Seller. On the Acceptance Date, Lessor and Lessee
shall inspect the Aircraft and Lessee shall execute the Certificate of
Acceptance evidencing Lessee's acceptance of the Aircraft and accept delivery
of the Aircraft at Ontario, California. On the Acceptance Date, the Aircraft
shall be registered with the FAA in the name of Lessor, as owner.
(c) Lessee agrees, at its own cost and expense, to place such
insignia, plates or other identifications on the Airframe indicating Lessor's
title thereto and Lessor's interest therein, as Lessor may from time to time
reasonably request; and in any event Lessee will cause to be affixed to and
maintained on the Airframe, in a location adjacent to and not less prominent
than the airworthiness certificate for the Aircraft would have to be affixed
under FAA regulations, and on each Engine, a plate bearing the following legend
in English:
"PROPERTY OF AND LEASED FROM C.I.T. LEASING CORPORATION"
Except as above provided, Lessee will not allow the name of any person,
association or corporation to be placed on the Airframe or on any Engine as a
designation that might be interpreted as a claim of ownership; PROVIDED,
HOWEVER, that the Lessee may cause the Airframe to be lettered or otherwise
marked in an appropriate manner for convenience of identification of the
interest of the Lessee therein..
<PAGE>
(d) At all reasonable times upon notice, Lessor shall, at
Lessor's cost, have the right to inspect the Aircraft and the books, logs and
records of Lessee pertaining thereto where located, which shall be at the home
base airport for the Aircraft. Lessor shall not however have any duty to make
such inspection and shall not incur any liability or obligation by reason of
not making any such inspection.
13. ASSIGNMENT AND SUBLEASING.
(a) BY LESSEE. Lessee shall not assign this Lease or any
rights in or to the Aircraft or sublease or otherwise relinquish possession of
the Airframe or any Engine or install any Engine, or permit any Engine to be
installed, on any airframe other than the Airframe without the consent of
Lessor, which consent shall not be unreasonably withheld, conditioned or
delayed; PROVIDED, HOWEVER, that Lessee may, without the prior consent of
Lessor deliver the Airframe or any Engine to the Manufacturer or any other
applicable manufacturer thereof for testing or other similar purposes or to any
approved maintenance provider for service, repair, maintenance or overhaul work
on the Airframe or such Engine or for alterations or modifications in or
additions to the Airframe or such Engine to the extent required or permitted by
the terms hereof. Any attempted assignment not otherwise expressly permitted
hereby shall be of no effect, unless Lessor first shall have consented thereto
in writing. Lessor's consent to an assignment in any one or more instances
shall not impose any obligation upon Lessor to consent to any other or further
assignments. Lessor's consent to an assignment shall not release Lessee from
any obligations with respect to this Lease unless expressly so stated in the
written consent.
(b) BY LESSOR. All rights of Lessor hereunder may be assigned,
pledged, mortgaged, transferred or otherwise disposed of, either in whole or in
part, (but subject always to the rights of Lessee under this Lease) to any
Person; PROVIDED that (a) such assignment, pledge, mortgage, transfer or
disposition shall in no way impair Lessee's rights and interests in the
Aircraft and this Lease, (b) such assignment, pledge, mortgage, transfer or
disposition shall not increase any indemnity or other obligation of Lessee
hereunder, and Lessee shall have no greater obligations hereunder whether by
reason of an increase in the amount of any indemnity payable hereunder or
otherwise, and (c) Lessor shall reimburse Lessee for all costs and expenses,
including reasonable legal fees, in connection with such assignment, pledge,
mortgage, transfer or disposition; PROVIDED FURTHER, that the foregoing
provision shall not be applicable or effective if any such assignment, pledge,
mortgage, transfer or disposition is made pursuant to Section 8 or 23 hereof.
Lessor shall give Lessee notice of any such assignment, and Lessee shall
acknowledge receipt thereof in writing.
14. LIENS. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Aircraft,
Airframe, or any Engine, or any Part, unit or component thereof, Lessor's title
thereto, or any interest therein, except (i) the respective rights of Lessor
and Lessee as provided in this Lease, (ii) the rights of Persons under
agreements and arrangements to the extent permitted by the terms of Section 11
and 13(a), (iii) Lessor Liens, (iv) Liens for Taxes being contested by Lessee
in good faith by appropriate proceedings in accordance with Section 17(e)
hereof, and (v) materialmen's, mechanics', workmen's, repairmen's, employee's,
<PAGE>
storage or other like Liens arising in the ordinary course of business, for
amounts the payment of which is either not yet delinquent or being contested by
Lessee in good faith by appropriate proceedings and where, in Lessor's opinion,
there is no danger of the sale, forfeiture or loss of the Aircraft, Airframe or
any Engine or any part thereof. Lessee, at its own expense, will promptly pay,
satisfy and otherwise take such actions as may be necessary to keep the
Aircraft, Airframe and each Engine free and clear of, and to duly discharge or
eliminate or bond in a manner satisfactory to Lessor, any such Lien not
excepted above if the same shall arise at any time. Lessee will notify Lessor
in writing promptly upon becoming aware of any tax or other Lien that shall
attach to the Aircraft, Airframe or any Engine, and of the full particulars
thereof.
15. LOSS, DAMAGE OR DESTRUCTION.
(a) RISK OF LOSS, DAMAGE OR DESTRUCTION. Lessee hereby assumes
all risk of loss, damage, theft, taking, destruction, confiscation, requisition
or commandeering, partial or complete, of or to the Aircraft, however caused or
occasioned, such risk to be borne by Lessee with respect to the Aircraft from
the date of this Lease, and continuing until the Aircraft has been returned to
Lessor in accordance with the provisions of Section 4 hereof. Lessee agrees
that no occurrence specified in the preceding sentence shall impair, in whole
or in part, any obligation of Lessee under this Lease, including, without
limitation, the obligation to pay Rent.
(b) PAYMENT OF CASUALTY LOSS VALUE UPON AN EVENT OF LOSS. If
an Event of Loss occurs with respect to the Aircraft or the Airframe at any
time after the date hereof and until the Expiration Date, Lessee shall promptly
give Lessor written notice thereof and shall, not later than the earlier of the
date (a) 15 days following the date of receipt of proceeds of insurance with
respect to such Event of Loss and (b) on such date designated by Lessee
occurring on or before the date ninety (90) days after the date of such Event
of Loss, either (x) substitute an airframe for the Airframe in accordance with
the provisions of the succeeding paragraph of this Section 15(b) and substitute
an engine or engines for the Engine or Engines, if any, with respect to which
such Event of Loss occurred on the date of substitution of said airframe
pursuant to the terms of this Lease PROVIDED, THAT, notwithstanding anything
herein to the contrary, Lessee must either (A) substitute an airframe in
accordance with this Section 15 for the Airframe on or prior to the last day of
the calendar year on which such Event of Loss occurs or (B) agree to indemnify
Lessor for all costs, losses and expenses (including but not limited to the
loss of any tax benefits) incurred directly or indirectly by Lessor in
connection with the substitution of the Airframe after the last day of the
calendar year on which such Event of Loss occurs, or (y) pay to Lessor on the
Rent Payment Date next following the date of such Event of Loss (i) the
Casualty Loss Value of the Aircraft. Upon payment in full of the amounts
specified in Section 15(b)(y) above, plus all Supplemental Payments then due
and payable by Lessee hereunder, (1) the obligation of Lessee to pay Basic Rent
hereunder shall terminate, (2) the Basic Term and this Lease shall end, and (3)
Lessor will transfer to Lessee, without recourse, representation or warranty
(except as set forth in Section 19 hereof with respect to title and Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and
the Engines (if any) with respect to which such Event of Loss occurred, as well
as all Lessor's right, title and interest in and to any Engines constituting
part of the Aircraft but not installed thereon when such Event of Loss
occurred.
<PAGE>
In the event of a substitution of an airframe pursuant to the
preceding paragraph, Lessee shall purchase in the name of Lessor or cause to be
conveyed to Lessor, as replacement for the Airframe, title to another
Gulfstream 1159-A airframe, free and clear of all Liens other than any
Permitted Liens and having a value, utility and remaining useful life at least
equal to, and being in as good operating condition as, the Airframe, assuming
that the Airframe was of the value, utility and remaining useful life and in
the condition and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss, and if such Event of Loss also occurred with
respect to an Engine or the Engines, Lessee shall duly convey or cause to be
conveyed to Lessor, in replacement for the Engine or Engines with respect to
which such Event of Loss occurred, title to a number of engines equal to the
number of Engines with respect to which such Event of Loss has occurred of the
same or an improved make, model and manufacturer suitable for installation and
use on the Airframe free and clear of all Liens other than any Permitted Liens
having a value and utility at least equal to, and being in as good operating
condition as, the Engine with respect to which such Event of Loss occurred,
assuming that such Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of Loss. In either
case, as applicable, prior to or at the time of any such conveyance, Lessee, at
its own expense, will promptly (i) furnish Lessor with a bill of sale in form
and substance satisfactory to Lessor, with respect to such replacement airframe
or engines, as the case may be, (ii) cause supplements hereto, in form and
substance satisfactory to Lessor, subjecting such replacement airframe or
engines, as the case may be, to this Lease, to be duly executed by Lessee,
(iii) furnish Lessor with such evidence of the condition of such replacement
airframe or engines, as the case may be, and of compliance with the insurance
provisions of Section 16 hereof with respect to the replacement airframe or
engines as Lessor may reasonably request, (iv) deliver to Lessor a legal
opinion in form and substance satisfactory to Lessor stating that the title and
ownership to such replacement airframe or engine have been conveyed to Lessor
under applicable Law and any security interest is protected under applicable
Law, and (v) take such other action as Lessor may reasonably request in order
that such replacement airframe or engines, as the case may be, be duly and
properly titled in Lessor and leased hereunder to the same extent as the
Airframe or the Engine replaced hereby. Upon full compliance by Lessee with
the terms of this paragraph, Lessor will transfer to Lessee without recourse,
representation or warranty, express or implied, of any nature whatsoever
(except as set forth in Section 19 hereof with respect to the title and Lessor
Liens), and on an "as-is, where-is" basis, all of Lessor's right, title and
interest in and to the Airframe, Engine or Engines with respect to which such
Event of Loss occurred, and such Airframe or Engine shall thereafter no longer
be an "Airframe" or an "Engine" (as the case may be) as defined herein.
Thenceforth, for all purposes hereof, such replacement airframe or such
replacement engine shall be deemed the "Airframe" or an "Engine" (as the case
may be) as defined herein and part of the same Aircraft as was the Airframe or
the Engine or Engines.
(c) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon each
occurrence of an Event of Loss with respect to an Engine only and not to the
Airframe, Lessee shall give Lessor prompt written notice thereof and shall, as
promptly as possible and in any event within 30 days after the occurrence of
such Event of Loss, duly convey or cause to be conveyed to Lessor, as
replacement for such Engine, title to another engine of the same or an improved
make, model and manufacture as the Engine with respect to which such Event of
<PAGE>
Loss occurred, free and clear of all Liens other than any Permitted Liens, and
having a value and utility at least equal to, and being in as good operating
condition as, the Engine with respect to which such Event of Loss occurred,
assuming that such Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of Loss; and, upon
such conveyance, Lessee, at its own expense, will promptly (i) furnish Lessor
with a bill of sale, in form and substance satisfactory to Lessor, with respect
to such replacement engine, (ii) cause a supplement hereto, in form and
substance satisfactory to Lessor, subjecting such replacement engine to this
Lease, to be duly executed by Lessee, (iii) furnish Lessor with such evidence
of the condition of such replacement engine, and of compliance with the
insurance provisions of Section 16 hereof with respect to such replacement
engine as Lessor may reasonably request and, (iv) furnish Lessor with a legal
opinion, in form and substance satisfactory to Lessor, stating that title and
ownership have been duly conveyed to Lessor under applicable Law and as to such
other matters of applicable Law as Lessor may reasonably request, and (v) take
such other action as Lessor may reasonably request in order that title to such
replacement engine is duly conveyed to Lessor and that such replacement engine
has been validly subjected to this Lease to the same extent as the Engine
replaced thereby. Upon full compliance by Lessee with the terms of this
paragraph (c), Lessor will transfer to Lessee without recourse, representation
or warranty, express or implied, of any nature whatsoever (except as to title
and freedom from Lessor Liens) and on an "as-is, where-is" basis, Lessor's
title to the Engine with respect to which such Event of Loss occurred, and such
Engine shall thereafter no longer be an "Engine" as defined herein.
Thenceforth, for all purposes hereof, such replacement engine shall be deemed
an "Engine" as defined herein and part of the Aircraft.
(d) APPLICATION OF OTHER PAYMENTS UPON EVENT OF LOSS. Any
payments (including, without limitation, insurance proceeds) received at any
time by Lessor or by Lessee from any insurer, Governmental Authority or other
party or insurer (except Lessee) as a result of the occurrence of an Event of
Loss will be applied as follows: (i) (except as provided in Section 16 hereof)
any such payments received at any time by Lessee shall be promptly paid to
Lessor for application pursuant to the following provisions of this Section
15(d); (ii) if any such payments are received with respect to the Airframe (or
the Airframe and any Engine or engines then installed thereon) that has been or
is being replaced pursuant to Section 15(b), so much of such payments as shall
not exceed the cost of any replacement Airframe, Engine or Engines to be
purchased pursuant to Section 15(b) hereof shall be applied for payment of (or
to reimburse Lessee for its payment of) such replacement Airframe, Engine or
Engines; (iii) if any such payments are received with respect to the Airframe
(or the Airframe and any Engine or engines then installed thereon) that have
not or are not being replaced pursuant to Section 15(b) so much of such
payments as shall not exceed the amount of the Casualty Loss Value, required to
be paid by Lessee pursuant to Section 15(b) hereof shall be applied in
reduction of Lessee's obligation to pay such amounts, if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such amounts unless an Event of Default shall have occurred and
be continuing; (iv) if any such payments are received with respect to an Engine
that has been or is being replaced pursuant to Section 14(c), so much of such
payments as shall not exceed the cost of any replacement Engine or Engines to
be purchased pursuant to Section 14(c) hereof shall be applied for payment of
(or to reimburse Lessee for its payment of) such replacement Engine or Engines,
unless an Event of Default shall have occurred and be continuing; and (v) the
balance, if any, of such payments remaining thereafter shall be paid to Lessee,
<PAGE>
unless an Event of Default shall have occurred and be continuing.
16. INSURANCE.
(a) PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.
Lessee, at its own expense, shall maintain in effect comprehensive third party
aircraft liability insurance against bodily injury and property damage losses
arising from ground, flight and taxiing exposures, including, but not limited
to, passenger legal liability, cargo liability, contractual liability and
products liability insurance, during the Basic Term in an amount not less than
$50,000,000 for any one accident, or series of accidents arising out of any one
event, with respect to the Aircraft and Items of Equipment. Such policy shall
include war and allied risks in accordance with standard market practice
(currently "THE EXTENDED COVERAGE ENDORSEMENT-AVN 52A"). Any such liability
insurance policy may be subject to a deductible in an amount not to exceed
$50,000 per occurrence or such lesser amount as shall be equivalent to the
industry standard for aircraft of the same type operated by airlines similarly
situated to Lessee. All such policies shall be maintained in effect with
insurers and/or reinsurers of recognized reputation and responsibility,
reasonably satisfactory to Lessor. Any policies of insurance carried in
accordance with this Section 16 and any policies taken out in substitution or
replacement for any of such policies shall: (1) name Lessor and any
Indemnified Party, together with any of their respective successors and
assigns, as additional insureds; (2) provide that in respect of the interests
of Lessor and any Indemnified Party such policies of insurance shall insure
Lessor and such Indemnified Party regardless of any breach or violation of any
warranty, declarations or conditions contained in such policies by Lessee; (3)
provide that if the insurers cancel such insurance for any reason whatever, or
the same is allowed to lapse for nonpayment of premium, or if there is any
material change in policy terms and conditions, such cancellation, lapse or
change shall not be effective until thirty (30) days after receipt by Lessor
and any Indemnified Parties of written notice from such insurers of such
cancellation, lapse or change (and with respect to war risk insurance, such
shorter period as shall be customary on the London market for such insurance in
such area of the world); (4) provide that neither Lessor nor any Indemnified
Party shall have any responsibility for any premiums, commissions or calls in
connection with such insurance and (5) provide that all payments shall be made
in United States Dollars. Each liability policy shall (i) be primary without
right of contribution from any other insurance which is carried by Lessor and
(ii) expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured.
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT. Lessee,
at its own expense, shall maintain in effect with insurers and/or reinsurers of
recognized reputation and responsibility reasonably satisfactory to Lessor:
(A) all-risk ground and flight aircraft hull insurance covering the Aircraft
(including taxiing exposures); (B) all-risk coverage with respect to any
Engines, Parts or Landing Gear while removed from the Aircraft; and (C) war
risk and hijacking (including political/non-political hijacking and acts of
terrorism) coverages, including, but not limited to, coverage against
government confiscation, expropriations, nationalization or seizure, including
the government of registry (if other than the United States). All such
insurance shall be in full force and effect throughout any geographical areas
at any time traversed by the Aircraft, shall be payable in Dollars in the
United States and shall be in the amount of not less than the greater of (i)
<PAGE>
the applicable Casualty Loss Value which is the agreed value between Lessor and
Lessee and (ii) the amount necessary to obtain a replacement aircraft of equal
or greater value. Any hull insurance carried in accordance with this Section
16 shall not contain any provision for self-insured amounts or a deductible,
provided that such insurance may be subject to a deductible which does not
exceed $50,000 per occurrence. Each Engine, after removal, shall be insured
for not less than $2,500,000 under a ground risks policy reasonably acceptable
to Lessor. Any policies carried in accordance with this Section 16: (1) shall
be primary without right of contribution from any other insurance which is
carried by Lessor or any Indemnified Party with respect to the Aircraft; (2)
shall provide that if such insurance is cancelled or materially changed for any
reason whatsoever, or the same is allowed to lapse for non-payment of premium,
such cancellation, change or lapse shall not be effective as to Lessor or any
Indemnified Party for thirty (30) days (and, with respect to war risk
insurance, seven (7) days or such shorter period as shall be customary on the
London market for such insurance in such area of the world) after receipt by
Lessor and any Indemnified Party of written notice from such insurers of such
cancellation or lapse or material change in policy terms and conditions; (3)
shall provide that partial losses of less than $50,000 shall be adjusted by and
payable to Lessee (so long as no Default has occurred and is continuing
hereunder), but that in the event of a greater loss the entire insurance shall
be adjusted by Lessee and Lessor and payable to Lessor alone; (4) shall provide
that in respect of the interest of Lessor or any Indemnified Party in such
policies the insurance shall insure Lessor or such Indemnified Party regardless
of any breach or violation of any warranties, declarations or conditions
contained in such policies by Lessee or any other Person; (5) shall waive any
rights of set off, counterclaim or deduction, whether by attachment or
otherwise, and all rights of subrogation against Lessor, and any Indemnified
Party, together with their respective successors, assignors, agents, officers,
employees and servants; (6) shall provide that neither Lessor nor any
Indemnified Party shall have any liability for any premiums, commission or
calls in connection with such insurance; (7) to the extent of reinsurance,
include a cut-through provision permitting Lessor and any Indemnified Party to
file claims and to obtain payment directly from the reinsurers under the
reinsurance policies; and (8) shall name Lessor as sole loss payee for the
account of all interests.
Lessor is not under any duty or obligation to verify the
existence or adequacy of any insurance.
Lessee may obtain additional hull insurance on the Aircraft,
over and above the Casualty Loss Value hereunder, provided that it does not
adversely affect the coverage required to be maintained hereunder.
(c) APPLICATION OF PROCEEDS IN AN EVENT OF LOSS OF AIRCRAFT.
All insurance payments received from policies maintained by Lessee as the
result of the occurrence of an Event of Loss shall be applied as follows: If
such payments are received with respect to the Airframe and the Engines
installed thereon, Lessor and Lessee shall proceed diligently and cooperate
fully with each other in the recovery of any and all proceeds of insurance
applicable thereto, and such insurance proceeds shall be paid to Lessor in an
amount equal to the Casualty Loss Value.
(d) APPLICATION OF PROCEEDS IN THE ABSENCE OF AN EVENT OF LOSS.
As between Lessor and Lessee, insurance payments with respect to any property
damage to the Aircraft or any Part thereof not constituting an Event of Loss
<PAGE>
with respect thereto will be applied in payment repairs or for replacement
property in accordance with the terms of Sections 10 and 11 hereof, if not
already paid by Lessee (or to reimburse Lessee for such repairs or replacements
already paid by Lessee), and any balance remaining after compliance with such
Sections with respect to such loss shall be paid to Lessee or as otherwise
directed by Lessee. Any amount which is payable to Lessee under this Section
16 shall not be paid to Lessee if at the time of such payment a Default or an
Event of Default shall have occurred and be continuing, but shall be held by
Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as there no longer exists any
Default or Event of Default.
(e) REPORTS, ETC. Lessee's insurance broker shall be required
to advise Lessor in writing promptly of any default in the payment of any
premium and of any other act or omission on the part of Lessee which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft. Not less than ten (10) days prior to the Acceptance Date, and
thereafter on or prior to each renewal or replacement by Lessee of the
insurance required hereby, Lessee will furnish to Lessor one or more original
certificates each executed and delivered by an insurance broker appointed by
Lessee and approved by Lessor, which together shall describe in reasonable
detail insurance carried on the Aircraft and shall certify that the insurance
then maintained on the Aircraft complies with the terms of this Lease. Lessee
will cause each such approved insurance broker to agree to advise Lessor in
writing at least thirty (30) days (seven (7) days or such lesser period as may
from time to time be applicable in the case of any war risk and allied perils
coverage) prior to the non-renewal, termination or cancellation by the
underwriters for any reason (including, without limitation, failure to pay the
premium therefor) of any such insurance or as soon as possible in respect of
"non-renewal" or automatic termination for war risk. Not less than five (5)
Business Days before the expiration or termination date of any insurance
required hereunder, Lessee will provide Lessor with telexed or telecopied
confirmation from Lessee's insurance brokers certifying that renewal
certificates of insurance evidencing the renewal or replacement of such
insurance pursuant to the provisions of Article 12 hereof will be issued on the
termination date of the prior certificate of insurance coverage. Within seven
(7) days after such renewal, Lessee will furnish to Lessor a certificate of
such insurance coverage from such insurance broker.
(f) LESSOR'S ADDITIONAL INSURANCE. Lessor, at its option and
at its sole expense, may obtain insurance with respect to the Aircraft;
PROVIDED, that no such insurance shall have the effect of suspending,
impairing, defeating, invalidating or rendering unenforceable or reducing, in
whole or in part, the coverage of or the proceeds payable under any insurance
required to be provided and maintained by Lessee pursuant to this Section 16.
Lessee shall have no right to any proceeds of any insurance policies maintained
by Lessor.
(g) LESSEE'S ADDITIONAL INSURANCE. Lessee, at its option and
at its sole expense, may obtain additional insurance with respect to the
Aircraft; PROVIDED, that no such insurance shall have the effect of suspending,
impairing, defeating, invalidating or rendering unenforceable or reducing, in
whole or in part, the coverage of or the proceeds payable under any insurance
required to be provided and maintained pursuant to this Section 16. Lessor
shall have no right to any proceeds of any insurance policies maintained by
Lessee.
<PAGE>
17. GENERAL TAX INDEMNIFICATION
(a) Lessee agrees that all payments by Lessee in connection
with the transactions contemplated by this Lease shall be free of all
withholdings of any nature whatsoever (including, without limitation,
withholding taxes, monetary transfer fees, or similar taxes and charges), and
in the event any withholding is required, Lessee shall pay the same together
with such additional amount as is required so that each such payment shall be,
under any circumstances and in any event, in the amount as set forth or
referred to herein. Lessee shall pay, and shall hold each Tax Indemnitee
harmless from liability for, any and all sales, use, business, gross or net
income, personal property, license, documentation, transfer, fuel, leasing,
occupational, value added, excess profits, excise, gross or net receipts,
franchise, stamp, environmental and other taxes, levies, imposts, withholdings,
charges, fees, assessments or duties of any nature, together with any
penalties, fines, additions to tax or interest thereon imposed by any Federal,
state or local government or taxing authority in the United States, or by any
foreign country or any taxing authority or subdivision thereof ("Taxes"), upon
or with respect to, based upon or measured by the Aircraft or any Part thereof
or interest therein, or the manufacture, purchase, financing, refinancing,
ownership, delivery, leasing, subleasing, registration, possession, use,
location, operation (including, without limitation, landing and take-off),
return, replacement, storage, transfer of title, acceptance or other
disposition thereof, or the rentals, receipts or earnings arising therefrom
(including, without limitation, the Rent) or otherwise with respect to or in
connection with the transactions contemplated by this Lease or the other
Operative Documents, and any out-of-pocket costs and expenses attributable to
any of the foregoing incurred by any Tax Indemnitee; PROVIDED, HOWEVER, that
Lessee shall have not such obligation with respect to (i) Taxes (other than
sales, use, rental, value added and similar taxes) imposed by the Federal
government of the United States upon or with respect to, based on or measured
by, the net income of any Tax Indemnitee; (ii) Taxes which are net income,
capital, net worth, franchise, or similar conduct of business taxes which are
imposed on any Tax Indemnitee by any state or local taxing authority in the
United States; (iii) Taxes imposed as a result of a voluntary transfer or other
disposition by Lessor of the Aircraft or any Part thereof or interest therein,
unless such transfer or other disposition occurs by reason of exercise of
Lessor's remedies under this Lease after occurrence of a Default or an Event of
Default; (iv) Taxes imposed as a direct and primary result of any Tax
Indemnitee's gross negligence or willful misconduct; and (v) Taxes imposed as a
result of Lessor's failure to file any Tax report or return in a timely or
proper manner (provided Lessee has complied with Section 17(b) hereof).
(b) REPORTS. In case of any report or return to be made with
respect to any obligation of Lessee under this Section 17 or arising out of
this Section 17, Lessee will either (i) make such report or return in such
manner as will show the ownership in Lessor of the Aircraft, and send a copy of
such report or return to the relevant Tax Indemnitee or (ii) notify such Tax
Indemnitee of such requirement and make such report or return in such manner as
shall be satisfactory to such Tax Indemnitee. Lessee shall, at its expense,
duly file all required reports and returns respecting all Taxes paid or
indemnified against by Lessee pursuant to Section 17(a) to the extent Lessee is
permitted to do so; PROVIDED, HOWEVER, that if the same must be filed by an Tax
Indemnitee, Lessee will advise such Tax Indemnitee of the necessity of filing
the same and, in sufficient time before the same are due, furnish such Tax
<PAGE>
Indemnitee with a completed copy thereof and funds in the amount required to be
submitted, together with any additional information and records relating
thereto as such Tax Indemnitee may reasonably request. Lessee shall hold such
Tax Indemnitee harmless from and against any liabilities, obligations, losses,
damages, penalties, claims, actions, suits and costs arising out of any
insufficiency or inaccuracy in any information in such report or return filed
or supplied by Lessee. Lessee shall make available to such Tax Indemnitee such
other information and records as are maintained by Lessee regarding the
location, operation or use of the Aircraft. If any Tax Indemnitee reasonably
requests additional information relating to any Part or the operation, use or
location thereof, Lessee shall make available such other information and
records as it maintains in the course of its business.
(c) AFTER-TAX NATURE OF INDEMNITY. (i) Lessee agrees that,
with respect to any indemnity payment under this Lease, including, without
limitation, this Section 17, such indemnity payment shall include any amount
necessary to hold each Tax Indemnitee harmless on an after-tax basis from all
Taxes required to be paid by such Tax Indemnitee with respect to such indemnity
payment under the laws of any Federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
subdivision of a foreign country.
(ii) For purposes of this Section 17(c), calculations made
on an after-tax basis shall be made assuming the maximum statutory rates
applicable to the recipient for the relevant year, after taking into account
deductions attributable to the imposition of other taxes (such as state and
local taxes), which would similarly be calculated on the basis of the maximum
statutory rates for which such deduction was available for the applicable year.
(d) PAYMENT OF TAXES AND INDEMNITIES. Lessee shall, to the
extent permissible, pay all Taxes directly and shall reimburse each Tax
Indemnitee for all Taxes paid or payable by such Tax Indemnitee within 10 days
of receipt of written notice that reimbursement for such amount is due. Lessee
shall pay all indemnities and other amounts due hereunder within five (5) days
of receipt of written notice that reimbursement for such amount is due.
(e) CONTEST. If a written claim is made against any Tax
Indemnitee for any Taxes for which Lessee is responsible under Section 17(a)
hereof, such Tax Indemnitee shall promptly notify Lessee; PROVIDED, that, the
failure to provide such notice shall not affect Lessee's obligations hereunder
to such Tax Indemnitee unless such failure shall preclude the contest of such
claim. If reasonably requested by Lessee in writing within 30 days after such
notification, and upon determination that the amount of the claim exceeds
$25,000 and that the action to be taken will not, in the sole opinion of
Lessor, result in any material danger of sale, forfeiture or loss of, or the
creation of any Lien on the Aircraft or any interest therein (or in the event
of such material danger of sale, forfeiture, loss or lien, Lessee shall have
not obtained a bond satisfactory to Lessor in Lessor's sole discretion), such
Tax Indemnitee shall upon receipt of an indemnity reasonably satisfactory to it
at the sole expense of Lessee (including without limitation, all reasonable
costs, expenses, losses, legal and accountant's fees and disbursements,
penalties and interest) in good faith contest the validity, applicability or
amount of such Taxes by in such Tax Indemnitee's sole discretion (i) resisting
payment thereof; (ii) not paying the same except under protest, if protest is
necessary and proper; and (iii) if payment is made, using reasonable efforts to
obtain a refund thereof in appropriate administrative or judicial proceedings;
<PAGE>
PROVIDED, HOWEVER, that such Tax Indemnitee shall not be required to take any
action to contest a claim unless (x) Lessee provides an opinion of tax counsel
of nationally recognized standing selected by Lessee and reasonably
satisfactory to such Tax Indemnitee, to the effect that there is a reasonable
basis under the standard set forth in ABA Formal Opinion 85-352 or any
successor thereto in law and fact for contesting such proposed adjustment
(which opinion shall be obtained at Lessee's sole cost and expense), (y) in the
event that the subject matter of the contest is of a continuing nature and has
previously been decided adversely pursuant to the contest provisions of this
Section 17(e) by the highest court to which an appeal was taken, there has been
a change in the law (including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after such claim shall
have been so previously decided and such Tax Indemnitee shall have received an
opinion of independent tax counsel selected by such Tax Indemnitee, which
opinion shall be obtained at Lessee's sole expense, to the effect that, as a
result of such change it is (at least) as likely as not that the position which
such Tax Indemnitee or Lessee, as the case may be, will assert in any contest
of such Tax would prevail, and (z) prior to the commencement of any contest,
Lessee shall have delivered to such Tax Indemnitee a written acknowledgment of
its obligation to fully indemnify Lessor to the extent the contest is not
successful. Any contest required pursuant to the preceding sentence shall, at
the option of such Tax Indemnitee, be conducted by such Tax Indemnitee or
Lessee in the name of Lessee or such Tax Indemnitee. If any contest involves
payment of the Tax in question, Lessee shall either make such payment directly
to the appropriate authority or advance to such Tax Indemnitee sufficient funds
(on an interest-free basis) to make such payment.
If a Tax Indemnitee shall obtain an actual refund or credit of all or
any part of any Taxes paid by Lessee, such Tax Indemnitee shall pay to Lessee
the amount of such refund or credit (taking into account any tax savings
resulting therefrom), net of expenses not already paid or reimbursed by Lessee,
and any interest fairly attributable thereto plus an amount equal to the Tax
savings realized by such Tax Indemnitee as a result of any payment to Lessee
pursuant to this paragraph; PROVIDED, HOWEVER, that such amount shall not be
payable before Lessee makes all payments and indemnities to such Tax Indemnitee
then due hereunder; and, PROVIDED FURTHER, HOWEVER, that the aggregate amount
of all payments with respect to any Taxes made by such Tax Indemnitee pursuant
to this sentence shall not exceed the aggregate amount of all payments made by
Lessee to such Tax Indemnitee pursuant to this Section 17 with respect to such
Taxes.
Notwithstanding anything to the contrary herein, (x) if a Default or
Event of Default shall have occurred and be continuing, Lessee shall not be
entitled, and no Tax Indemnitee shall be obligated, to commence or to continue
any contest hereunder and (y) in no event shall a Tax Indemnitee be required to
appeal an adverse judicial decision to the United States Supreme Court.
Lessee shall not be deemed to be in default under any of the
indemnification provisions of this Article 17 while it or a Tax Indemnitee
diligently prosecutes such contest pursuant to this Section 17(e).
Nothing contained in this Section 17(e) shall require any Tax
Indemnitee to contest or permit Lessee to contest a claim which it would
otherwise be required to contest pursuant to this Section 17(e) if such Tax
Indemnitee shall waive payment by Lessee of any amount that might otherwise be
payable by Lessee under Section 17(a) by way of indemnity in respect of such
claim.
<PAGE>
(f) AFFILIATED GROUP. The terms "Lessor" and "Tax Indemnitee"
for purposes of this Section 17 shall include the affiliated group of
corporations and each member thereof (within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended) of which Lessor or a Tax Indemnitee
is or shall become a member if such group shall file a consolidated United
States Federal income tax return.
(g) SURVIVAL. The provisions of this Section 17 shall survive
the expiration or termination of this Lease.
18. GENERAL INDEMNITIES. (a) Lessee hereby assumes liability for,
and does hereby agree, whether or not any of the transactions contemplated
hereby are consummated, to indemnify, protect, save, defend, and hold harmless
each of Lessor and its respective officers, directors, stockholders,
successors, assigns, agents and servants (but excluding the Manufacturer in its
capacity as manufacturer of the Aircraft), (each such party being herein, for
purposes of this Section 18, called an "INDEMNIFIED PARTY") on an after-tax
basis from and against any and all obligations, fees, liabilities, losses,
damages, penalties, claims, demands, actions, suits, judgments, costs and
expenses, including legal expenses, of every kind and nature whatsoever
("LOSS") imposed on, incurred by, or asserted against any Indemnified Party, in
any way relating to or arising out of (a) the manufacture, construction,
ordering, purchase, acceptance or rejection, ownership, titling or retitling,
registration or re-registration, delivery, leasing, releasing, possession, use,
operation, maintenance, storage, removal, return, sale or other disposition of
the Aircraft, or any portion thereof (including without limitation the Airframe
and each Engine) and, including, without limitation, any of such as may arise
from (i) loss or damage to any property or death or injury to any person, (ii)
patent or latent defects in the Aircraft (whether or not discoverable by Lessee
or any Indemnified Party), (iii) any claims based on strict liability in tort,
and (iv) any claims based on patent, trademark or copyright infringement, or
(b) this Lease, the Operative Documents or any failure on the part of Lessee to
perform or comply with any of the terms of this Lease or the other Operative
Documents to which it is a party.
(b) Notwithstanding the preceding paragraph (a), Lessee shall
not be obligated to make any payment by way of indemnity to any Indemnified
Party in respect of (i) any Loss of such Indemnified Party which results from
or arises out of the gross negligence or willful misconduct of such Indemnified
Party, (ii) any Loss arising out of the period after the return of the Aircraft
in accordance with the terms of this Lease, (iii) any Loss which arises from
the creation or existence of Lessor Liens, (iv) any Loss which relates to any
sale, pledge, mortgage, assignment, transfer or other disposition (whether
voluntary or involuntary) by such Indemnified Party of any interest of such
Indemnified Party in the Aircraft, the Airframe, any Engine or any Part,
equipment or accessory other than a transfer or disposition pursuant to the
exercise of remedies pursuant to Section 23 hereof or a transfer or disposition
pursuant to Section 8 hereof, (v) any Tax (it being understood that Section 17
hereof and the Tax Indemnity Agreement provides for Lessee's liability with
respect to Taxes), and (vi) any Loss which constitutes expenses that such
Indemnified Party shall have expressly agreed in this Lease or any agreement
relating hereto or thereto by which such Indemnified Party is expressly bound
to bear without right of reimbursement.
<PAGE>
(c) Lessee shall give each Indemnified Party prompt notice of
any occurrence, event or condition known to Lessee as a consequence of which
any Indemnified Party may be entitled to indemnification hereunder. Lessee
shall forthwith upon demand of any such Indemnified Party reimburse such
Indemnified Party for amounts expended by it in connection with any of the
foregoing or pay such amounts directly. If any Indemnified Party shall obtain
a repayment of any indemnified amount paid by Lessee, such Indemnified Party
shall promptly pay to Lessee the amount of such repayment together with the
amount of any interest received by such Indemnified Party on account of such
repayment.
(d) Subject to the provisions of Section 18(c) hereof, Lessee
shall pay directly to each Indemnified Party all amounts due under this Section
18 within five (5) days of the receipt of written notice by Lessee from such
Indemnified Party that such payment is due.
(e) Lessee shall be subrogated to an Indemnified Party's rights
in any matter with respect to which Lessee has actually reimbursed such
Indemnified Party for amounts expended by it or has actually paid such amounts
directly pursuant to this Section 18. In case any action, suit or proceeding
is brought against any Indemnified Party in connection with any claim
indemnified against hereunder, such Indemnified Party will, promptly after
receipt of notice of the commencement of such action, suit or proceeding,
notify Lessee thereof, enclosing a copy of all papers served upon such
Indemnified Party. Lessee may, and upon such Indemnified Party's request will,
at Lessee's expense, resist and defend such action, suit or proceeding, or
cause the same to be resisted or defended by counsel selected by Lessee and
reasonably satisfactory to such Indemnified Party and in the event of any
failure by Lessee to do so, Lessee shall pay all costs and expenses (including,
without limitation, reasonable attorney's fees and expenses) incurred by such
Indemnified Party in connection with such action, suit or proceeding. Lessor
agrees that no claim which is indemnifiable hereunder shall be compromised or
settled without the prior written consent of Lessee, which consent shall not be
unreasonably withheld.
(f) Lessee agrees that, with respect to any payment or
indemnity hereunder, such payment or indemnity shall include any amount
necessary to hold the Indemnitee harmless on an after-tax basis from all Taxes
required to be paid by such Indemnified Party with respect to such payment or
indemnity under the laws of any Federal, state or local government or Taxing
Authority in the United States, or under the laws of any Taxing Authority or
governmental subdivision of a foreign country. For purposes of this Section
18(f), calculations made on an after-tax basis shall be made assuming the
maximum statutory rates applicable to the recipient for the relevant year,
after taking into account deductions attributable to the imposition of other
taxes (such as state and local taxes), which would similarly be calculated on
the basis of the maximum statutory rates for which such deduction was available
for the applicable year.
(g) The indemnities contained in this Section 18 shall continue
in full force and effect notwithstanding the expiration or other termination of
this Lease, and are expressly made for the benefit of and shall be enforceable
by each Indemnified Party.
<PAGE>
19. NO WARRANTIES. LESSOR NOT BEING THE MANUFACTURER OR VENDOR OF
THE AIRCRAFT, THE AIRFRAME OR ANY ENGINE OR ANY PART, MAKES NO REPRESENTATION
OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING,
WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE AIRCRAFT, THE AIRFRAME OR
ANY ENGINE, ITS MERCHANTABILITY, DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
AIRFRAME OR ANY ENGINE, OR THE CONFORMITY OF THE AIRCRAFT, THE AIRFRAME OR ANY
ENGINE TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING
THERETO, AND LESSOR HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY (WHICH
DISCLAIMER LESSEE HEREBY ACKNOWLEDGES). WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, LESSOR SHALL NOT BE LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER
PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN THE AIRCRAFT, THE
AIRFRAME OR ANY ENGINE, OR FOR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR
PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S LOSS OF USE OF THE AIRCRAFT,
AIRFRAME OR ANY ENGINE OR FOR ANY INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY
LESSEE'S INABILITY TO USE THE AIRCRAFT, AIRFRAME OR ANY ENGINE FOR ANY REASON
WHATSOEVER. NOTWITHSTANDING THE FOREGOING, Lessor represents, warrants and
covenants to Lessee that (i) it has full power and authority to enter into and
perform this Lease and the other Lessee Documents to which it is a party, (ii)
the execution, delivery and performance of this Lease and the other Lessee
Documents to which it is a party have been duly authorized by all necessary
action on the part of Lessor, do not require any stockholder approval or
approval or consent of any trustee or holders of any debt or other obligations
of Lessee, and do not contravene any provision of any applicable Law,
governmental rule, regulation or order, the by-laws or other constituent
documents of Lessor or any indenture, mortgage, contract or other material
agreement or instrument to which Lessor is a party or by which it or any of its
assets may be bound or affected, (iii) this Lease constitutes the valid and
legally binding obligation of Lessor enforceable against Lessor in accordance
with the terms thereof, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity), (iv) on the
Acceptance Date it will have good and marketable title to the Aircraft free and
clear of all Lessor Liens and (v) so long as Lessee performs each and every
covenant to be performed by it hereunder, Lessor or anyone claiming by or
through Lessor shall not interfere with Lessee's quiet enjoyment and use of the
Aircraft. So long and only so long as no Event of Default shall have occurred
and be continuing, and so long and only so long as the Aircraft shall be
subject to this Lease and Lessee shall be entitled to possession of the
Aircraft hereunder, (i) Lessor authorizes Lessee, at Lessee's expense, to
assert for Lessor's account, all rights and powers of Lessor under any
manufacturer's, vendor's or dealer's warranty on the Aircraft, Airframe, and
each Engine, and any part thereof or (ii) Lessor shall have, to the extent
permitted by any such manufacturer's, vendor's or dealer's warranty, assigned
such warranty to Lessee, and Lessee may in its own name seek to enforce the
same against any manufacturer, vendor or dealer; PROVIDED, HOWEVER, that Lessee
shall indemnify, protect, save, defend and hold harmless Lessor from and
against any and all claims, and all costs, expenses, damages, losses and
liabilities incurred or suffered by Lessor in connection therewith, as a result
of, or incident to, any action by Lessee pursuant to the foregoing
authorization or assignment.
<PAGE>
20. FINANCIAL INFORMATION. From the date of execution of this Lease
and during the Basic Term of this Lease, Lessee agrees to furnish to Lessor
such information as Lessor may reasonably request at any time concerning the
Lessee and its affairs.
21. CONDITIONS PRECEDENT. The obligation of Lessor to purchase from
Seller and lease the Aircraft to Lessee is subject to the following conditions
precedent having been complied with to the satisfaction of or waived in writing
by Lessor on or before the Acceptance Date (each document, instrument,
certificate, opinion or other paper referred to below to be in form and
substance reasonably satisfactory to Lessor):
(a) The following documents set forth in clauses (i) through
(xv) below shall have been duly authorized, executed and delivered by the
respective party or parties thereto and shall be in full force and effect on
the Acceptance Date, and an executed copy of each of the following documents
shall have been delivered to Lessor:
(i) the Purchase Agreement;
(ii) the Purchase Agreement Assignment;
(iii) this Lease;
(iv) the Guaranty;
(v) the Tax Indemnity Agreement;
(vi) the Assignment of Warranties;
(vii) a legal opinion of special FAA counsel to Lessor
and in-house counsel of each of Lessee and Guarantor (the "LEGAL OPINIONS") in
form and substance satisfactory to Lessor;
(viii) an executed appointment of CT Corporation, New
York, New York, as agent to receive service of process in New York on behalf of
Lessee and Guarantor, together with an executed acceptance of such appointment
by CT Corporation;
(ix) a consent by Seller to the Purchase Agreement
Assignment in form and substance similar to Exhibit A to the Purchase Agreement
Assignment;
(x) the Aeronautical Bill of Sale executed by Seller
to Lessor;
(xi) an FAA form Application for Registration executed
by Lessor;
(xii) the Warranty Bill of Sale executed by Seller to
Lessor and other documents requested to be delivered by Seller pursuant to the
Purchase Agreement;
<PAGE>
(xiii) the Certificate of Acceptance in the form set
forth as Exhibit A to this Lease;
(xiv) UCC-1 Financing Statements executed by Lessee and
filed in the appropriate jurisdictions with appropriate agencies in California;
and
(xv) such other documentation as Lessor may reasonably
require.
(b) Lessor shall have received the following:
(i) evidence satisfactory to Lessor confirming that
this Lease has been duly filed with the FAA;
(ii) copies of all necessary consents or approvals
from any Governmental Authority or such other Person as to the transactions
contemplated by this Lease, including but not limited to the authorization, if
necessary, issued by the appropriate monetary control agency for the payments
required under the terms of this Lease;
(iii) evidence that Lessee has obtained such licenses,
operator's certificates or other documents from each appropriate Governmental
Authority as may be required to operate the Aircraft under applicable Law,
including but not limited to, approval by the FAA of Lessee's Maintenance
Program for the Aircraft;
(iv) a copy of the Articles of Incorporation of Lessee
and the Certificate of Incorporation of Guarantor and a copy of resolutions of
the Board of Directors of each of Lessee and Guarantor duly authorizing the
execution, delivery and performance by Lessee or Guarantor, as the case may be,
of each of the Lessee Documents, to which it may be a party, and each other
document required to be executed and delivered by Lessee or Guarantor, as the
case may be, in accordance with any provisions under the Lessee Documents;
(v) a certificate signed by a duly authorized officer
of each of Lessee and Guarantor certifying that (i) the copies of the Articles
of Incorporation of Lessee and the Certificate of Incorporation of Guarantor,
as the case may be, and (ii) the resolutions of the Board of Directors of
Lessee or Guarantor, as the case may be, are true and correct as of the
Acceptance Date, and such certificate shall be in form and substance acceptable
to Lessor, executed by Lessee or Guarantor, as the case may be;
(vi) a certificate signed by a duly authorized officer
of each of Lessee and Guarantor, dated the Acceptance Date, to the effect that
(i) the representations and warranties of Lessee contained in Section 22 hereof
or the representations and warranties of Guarantor contained in the Guaranty,
as the case may be, are true and correct on and as of such date as though made
on and as of such date, and all authorizations and approvals of, giving of
notice to, and filings and recordings with, all regulatory bodies and
authorities which may be conditions to the validity or enforceability of this
Lease or the Guaranty, as the case may be, or Lessee's or Guarantor's
performance, as the case may be of the terms thereof have been duly
accomplished; and (ii) no Default or Event of Default has occurred and is
continuing or would result from the lease of the Aircraft hereunder.
<PAGE>
(vii) a current certificate of existence of each of
Lessee and Guarantor.
(viii) such other documents and evidence with respect to
Lessee or Guarantor as Lessor or its counsel may request in order to establish
the consummation of the transactions contemplated by this Lease, the taking of
all corporate proceedings in connection therewith and compliance with the
conditions herein or therein set forth.
(ix) the Basic Rent due on the first Rent Payment Date
and all transaction costs due and owing pursuant to Section 34 hereof.
(c) On the Acceptance Date the following statements shall be
correct, and Lessor shall have received evidence reasonable satisfactory to it
to the effect that:
(i) Lessor has good and legal title to the Aircraft
free and clear of all Liens;
(ii) the Aircraft has been duly certified by the
Aeronautics Authority as to type and airworthiness;
(iii) the Aircraft has been duly registered in the name
of Lessor as owner with the FAA;
(iv) the representations and warranties of Lessee
contained herein shall be true and correct on and as of the Acceptance Date as
though made on and as of the Acceptance Date;
(v) the representations and warranties of Guarantor
contained in the Guaranty shall be true and correct on and as of the Acceptance
Date as though made on and as of the Acceptance Date;
(vi) all authorizations and approvals of, giving of
notice to, and filings and recordings with, all regulatory bodies and
authorities which may be conditions to the validity or enforceability of this
Lease or Lessee's performance of the terms hereof have been duly accomplished;
(vii) no event shall have occurred and be continuing
which constitutes a Default or an Event of Default under this Lease;
(viii) there shall not have occurred, on or after the
date hereof and on or prior to the Acceptance Date, any amendment or proposed
amendment having an effective date or proposed effective date on or prior to
the Acceptance Date to the Code or the Treasury Regulations promulgated
thereunder, that renders inaccurate or would, if enacted or made final, render
inaccurate any assumption contained in Section 1 of the Tax Indemnity
Agreement;
(ix) there has not occurred in Lessor's reasonable
judgment, any material adverse change in the business, assets, property,
prospects or condition (financial or otherwise) of Lessee or Guarantor since
the date of this Lease; and
<PAGE>
(x) the Aircraft shall have (x) a distress value on
the Acceptance Date, and (y) a residual value on the Expiration Date both
satisfactory to Lessor in its sole discretion.
(d) Lessor shall have received an appraisal of Avmark with
respect to the Aircraft, satisfactory in form and substance to Lessor.
(e) Lessor shall have received a duly executed independent
insurance and/or reinsurance broker's report, together with certificates of
insurance and/or reinsurance from such broker, each satisfactory to Lessor, as
to the due compliance with the terms of Section 16 herein relating to
liability, hull all-risk and hull war insurance with respect to the Aircraft.
(f) All approvals and consents of any trustee or holder of the
indebtedness or obligation of each of Lessee and Guarantor which are required
in connection with any of the transactions contemplated by the Operative
Documents shall have been duly obtained and evidence thereof shall have been
delivered to Lessor; all appropriate action, if any, required to have been
taken in connection with any of the transactions contemplated by the Operative
Documents by the Aeronautics Authority and each other Governmental Authority
having jurisdiction shall have been taken, and Lessee and Guarantor shall have
furnished to Lessor copies of all governmental approvals required for the
execution, delivery or performance of this Lease, the Purchase Agreement
Assignment, any other Operative Documents to which Lessee or the Guarantor is a
party and the transactions contemplated hereby and thereby.
(g) No change shall have occurred after the date of this Lease
in applicable Law and no change in circumstances shall have occurred and no
fact or condition shall exist which, in the reasonable opinion of Lessor, would
make it illegal under applicable Law for Lessor to lease the Aircraft to
Lessee.
22. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee covenants,
represents and warrants to Lessor that:
(a) Lessee is a corporation duly organized, validly existing
and in good standing under the Laws of the State of California, and is
registered, licensed or otherwise certificated or duly authorized by all
appropriate authorities of the United States to engage in air transportation
and is duly qualified or otherwise authorized to do business in all
jurisdictions in which it intends to operate the Aircraft, except for
jurisdictions where failure to so qualify or obtain authorization would not in
the aggregate have a material adverse effect on the business of Lessee and
would not involve any danger of the sale, forfeiture or loss of the Aircraft or
impairment of the value thereof. Lessee also represents and warrants that as
of the Acceptance Date it operates, and it will throughout the Basic Term
continue to operate, the Aircraft in accordance with the rules and regulations
of the FAA.
(b) Lessee has full power and authority to enter into and
perform this Lease and the other Lessee Documents to which it is a party,
including the documents executed or to be executed by Lessee in connection with
the Purchase Agreement Assignment and the execution, delivery and performance
of this Lease and the other Lessee Documents (i) have been duly authorized by
<PAGE>
all necessary action on the part of Lessee, (ii) do not require any stockholder
approval or approval or consent of any trustee or holders of any debt or other
obligations of Lessee except such as have been duly obtained and (iii) do not
contravene any provision of any Law, governmental rule, regulation or order,
the by-laws or other constituent documents of Lessee or any indenture,
mortgage, contract or other material agreement or instrument to which Lessee is
a party or by which it or any of its assets may be bound or affected.
(c) Neither the making nor performance by Lessee of this Lease
and each other Lessee Document, including the documents to be executed by
Lessee in connection with the Purchase Agreement Assignment nor the
consummation of any of the transactions by Lessee contemplated hereby or
thereby, nor the assignment of the Purchase Agreement to Lessor requires the
consent or approval of, the giving of notice to, the registration or filing for
recordation with, or the taking of any other action in respect of, any
Governmental Authority of or in the United States including any instrumentality
thereof.
(d) Each of this Lease and each other Lessee Document,
including the documents executed or to be executed by Lessee in connection with
the leasing of the Aircraft constitutes or, when so executed, will constitute
the valid and legally binding obligation of Lessee enforceable against Lessee
in accordance with the terms thereof, except as such enforceability may be
limited by applicable bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(e) There are no suits or proceedings pending or, to the
knowledge of Lessee, threatened in any court or before any regulatory
commission, board or other administrative or governmental agency against or
affecting Lessee which relate to the transactions contemplated hereby and
which, if adversely determined, would have a material adverse effect on (i) the
financial condition or business of Lessee, (ii) its obligations under this
Lease, or (iii) its obligations under any of the Operative Documents. Neither
Lessee nor any of its Affiliates is in material default with respect to any
order of any court or any regulatory commission, board or other administrative
or governmental agency or body or arbitration board or tribunal.
(f) Upon reliance by Lessee of the opinion of McAfee & Taft as
required under Section 21(a)(vii) hereof solely as to filings and recordings
with the Aeronautics Authority, except for the registration of the Aircraft and
the filing of this Lease with the FAA and the filing of Uniform Commercial Code
financing statements in California, no further filing or recording of any
document and no other action is necessary or advisable, whether in the United
States or elsewhere, in order to establish and perfect under United States
federal and New York State law, Lessor's title to and interest in the Aircraft
as against Lessee and any third parties claiming against or through Lessee,
including trustees, custodians and other representatives or similar officials,
under any bankruptcy or liquidation law or regulations, or otherwise.
(g) The Aircraft (i) is not principally for use in any nation
with which under United States Law, regulation or stated policy Lessee is
prohibited from doing business, (ii) is not to be used principally in any
nation which engages in armed conflict, declared or otherwise, and (iii) is not
currently, and will not be in the future, used in violation of the Articles of
Incorporation of Lessee.
<PAGE>
(h) The obligations of Lessee to pay Rent hereunder will be a
direct and unconditional general obligation of Lessee, and will rank in right
of payment at least PARI PASSU with all other unsecured and unsubordinated debt
of Lessee, whether now or hereafter outstanding, subject to any bankruptcy,
insolvency, reorganization or similar law.
(i) On the Acceptance Date, Lessee has no material liabilities,
contingent or otherwise, including liabilities for taxes or any unusual forward
or long-term commitments, other than payments due to Lessor under this Lease,
and there are no unrealized or anticipated losses from any unfavorable
commitments of Lessee which may materially and adversely affect the financial
condition of Lessee.
(j) There is no fact peculiar to Lessee which Lessee has not
disclosed to Lessor in writing which materially and adversely affects or, so
far as Lessee can reasonably foresee, would materially and adversely affect the
Aircraft or the property, business, prospects, profits or condition (financial
or otherwise) of Lessee or would impair the ability of Lessee to perform its
obligations under this Lease and the other Operative Documents.
(l) The Aircraft will on the Acceptance Date be covered by the
insurance required by Section 16 hereof.
(m) No Default or Event of Default under this Lease has
occurred and is continuing or will occur immediately after giving effect to the
execution and delivery of this Lease on the Acceptance Date. Lessee is not in
violation in any material respect of any term of its Articles of Incorporation,
or other material agreement or instrument to which it is a party or by which it
is bound. Lessee is in compliance with all laws, ordinances, governmental
rules and regulations to which it is subject, the failure to comply with which
would have a material and adverse effect on its operations or condition,
financial or otherwise, or would impair the ability of Lessee to perform its
obligations under this Lease or any other Operative Document to which Lessee is
a party, and has obtained all applicable licenses, permits, franchises and
other governmental authorizations material to the conduct of its business.
(n) On the Acceptance Date, (i) payments by Lessee to Lessor
hereunder will not be subject to income Tax, and withholding of any Tax will
not be required upon any such payments to Lessor, and (ii) there is no Tax
imposed by virtue of the execution or delivery of any of the Operative
Documents. On the Acceptance Date, Lessor will not be obligated to collect
sales tax on any payments made by Lessee to Lessor hereunder.
(o) Lessee's chief executive office (as defined in the Uniform
Commercial Code as in effect in the applicable jurisdiction) and principal
place of business, and the place where its records concerning the Aircraft and
its interest therein and all documents relating thereto are kept is in 3731
Wilshire Boulevard, 10th Floor, Los Angeles, California 90010. Lessee
maintains an agent for service of process with CT Corporation, New York, New
York.
(p) All tax returns required to be filed by Lessee in any
jurisdiction have in fact been filed, and Lessee has paid or caused to be paid
all taxes, assessments, fees and other governmental charges which have become
due pursuant to such returns or pursuant to any assessment received by it, and
<PAGE>
Lessee does not have any knowledge of any actual or proposed deficiency or
additional assessment in conjunction therewith which either in any case or in
the aggregate would be materially adverse to Lessee; and the charges, accruals
and reserves on the books of Lessee in respect of federal, state, local or
foreign taxes for all such years, and for the current fiscal year, make
adequate provision for all unpaid tax liabilities for such periods.
(q) All necessary registrations, filings and recordings of the
Lease and all other documents in connection therewith have been made in order
to fully protect, establish and perfect Lessor's title to, and interest in, the
Aircraft and Lessor's rights and interests hereunder as against Lessee and any
third parties.
(r) Lessee has not, directly or indirectly, used the services
of any broker, agent or finder in regard to any of the transactions
contemplated hereby; and no broker's or finder's fees or commissions or
management or advisory fees are, will or may become payable arising out of any
actions or omissions to act on Lessee's part in connection with the
transactions contemplated by this Lease or any other Operative Document to
which Lessee is a party.
(s) The Maintenance Program maintained by Lessee for the
Aircraft and the Engines shall remain in full force and effect and complies
with and shall, at all times during the Basic Term, continue to comply with all
applicable Aeronautics Authority requirements applicable to a Gulfstream Model
1159-A and, in addition, all applicable FAA requirements applicable to a
Gulfstream Model 1159-A.
(t) Lessee is not in default in the performance of any of its
obligations (i) for the payment of indebtedness for borrowed money in a
principal amount in excess of One Hundred Thousand Dollars ($100,000) or of any
interest or premium thereon or (ii) for the payment of rent under any lease
agreement for the lease of real, personal or mixed property where the monthly
rental exceeds Ten Thousand Dollars ($10,000) or where the aggregate rentals
over the term thereof exceed One Hundred Thousand Dollars ($100,000).
23. EVENTS OF DEFAULT. Any of the following events shall constitute
an Event of Default (whether any such event shall be voluntary or involuntary,
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) Failure of Lessee to pay within ten (10) days when due, any
sum, including installments of Rent, owed by Lessee at any time to Lessor under
this Lease; Lessor shall use reasonable efforts to give Lessee written notice
of any payments which may become past due; PROVIDED THAT, the failure by Lessor
to provide such notice to Lessee shall in no event be deemed a waiver by Lessor
of any of its rights hereunder; or
(b) Lessee shall fail to observe or perform any of the
covenants or agreements of Lessee set forth in Sections 12 or 13(a) hereof;
PROVIDED THAT, solely with respect to Lessee's failure to provide the plates
indicating Lessor's ownership of the Aircraft and the Engines pursuant to
Section 12 (c), such failure shall continue unremedied for thirty (30) days
after written notice by Lessor to Lessee; or
<PAGE>
(c) Lessee shall fail to procure and maintain any insurance
required by Article 16 hereof or shall operate the Aircraft outside the scope
of the insurance coverage maintained with respect to the Aircraft; or
(d) Lessee or Guarantor shall fail to perform or observe any
other covenant, condition, or agreement to be performed or observed by it under
this Lease, the Lessee Documents or in any agreement or certificate furnished
to Lessor or an other assignee or lender in connection herewith, and such
failure shall continue unremedied for thirty (30) days after written notice by
Lessor to Lessee or Guarantor, as the case may be, specifying such failure and
demanding the same to be remedied; or
(e) Lessee or Guarantor shall become insolvent or bankrupt or
make a general assignment for the benefit of creditors or consent to the
appointment of a trustee or receiver; or a trustee or a receiver shall be
appointed for Lessee or Guarantor or for a substantial part of its property
without its consent and shall not be dismissed for a period of 90 days; or any
petition for the relief, reorganization or arrangement of Lessee or Guarantor
or any other petition in bankruptcy or for the liquidation, insolvency or
dissolution of Lessee or Guarantor shall be filed by or against Lessee or
Guarantor and, if filed against Lessee or Guarantor, shall be consented to or
be pending and not dismissed for a period of 90 days; or an order for relief
under any bankruptcy or insolvency law shall be entered by any court or
Governmental Authority of competent jurisdiction with respect to Lessee or
Guarantor; or any execution or writ or process shall be issued under any action
or proceeding against Lessee or Guarantor whereby the Aircraft, the Airframe or
any Engine may be taken or restrained; or
(f) Lessee's or Guarantor's corporate existence shall cease; or
Lessee or Guarantor shall, without Lessor's prior written consent, sell,
transfer or dispose of, or pledge or otherwise encumber, all or substantially
all of its assets or property, or Lessee or Guarantor shall consolidate or
merge with any other entity, PROVIDED, HOWEVER, that an Event of Default shall
not have occurred if (i) Lessee or Guarantor, as the case may be, is the
surviving corporation of any such consolidation or merger or (ii) the parties
to any such merger or consolidation include only Lessee or Guarantor and its
Affiliate(s); or
(g) any representation, warranty, statement or certification
made by Lessee or Guarantor under any Lessee Document or in the Certificate of
Acceptance or in any document or certificate furnished to Lessor, or any other
assignee in connection herewith or pursuant hereto, shall prove to be untrue or
incorrect when made in any material respect, or shall be breached in any
material respect; or
(h) either the Lease or the Guaranty shall cease to be a valid,
effective and enforceable agreement.
24. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may exercise one or more of the following remedies with respect to the
Aircraft or any part thereof (including, without limitation, the Airframe or
any Engine) as Lessor in its sole discretion shall elect:
(a) Lessor, at its option, may cause Lessee, upon the written
<PAGE>
demand of Lessor and at Lessee's expense, to return promptly, and Lessee shall
return promptly, the Aircraft to Lessor or its order in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Section 4 hereof as if such Aircraft were being returned at the end of the
Basic Term or, if Lessee does not so deliver such Aircraft, Lessor may
terminate this Lease, without prejudice to any other remedies of Lessor
hereunder. Whether or not this Lease has been so terminated, Lessor at its
option shall to the fullest extent permitted by applicable Law, (i) have the
right to enter the premises of Lessee or any other party to take immediate
possession of the Aircraft or any part thereof and remove all or any part of
the Aircraft or any part thereof by summary proceedings or otherwise, (ii) not
be liable, in conversion or otherwise, for the taking of any personal property
of Lessee which is in or attached to the Aircraft, the Airframe, an Engine or
Part which is repossessed; PROVIDED, HOWEVER, that Lessor shall return to
Lessee all personal property of Lessee or its passengers which was on the
Aircraft at the time Lessor re-takes possession of the Aircraft; (iii) not be
liable or responsible, in any manner, for any inadvertent damage injury to any
of Lessee's property in repossessing and holding the Aircraft, the Airframe, an
Engine or Part, except for that caused by or in connection with Lessor's gross
negligence or willful acts; (iv) have the right to maintain possession of and
dispose of the Aircraft, the Airframe, an Engine or Part on any premises owned
by Lessee or under Lessee's control; (v) have the right to obtain a key to any
premises at which the Aircraft, the Airframe, an Engine or Part may be located
from the landlord or owner thereof; or (vi) cause Lessee, at Lessee's expense,
to store, maintain, surrender and deliver possession of the Aircraft in the
same manner as provided in Section 4 hereof, all without liability to Lessor
for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise except
damages caused by gross negligence or wilful misconduct;
(b) Lessor may sell the Aircraft or any Part thereof at public
or private sale, as Lessor may determine, free and clear of any rights of
Lessee, in which event Lessee's obligation to pay Basic Rent hereunder with
respect to the Aircraft for all Rental Periods commencing after the date of
such sale shall terminate and in the event that the net sales proceeds is less
than the Casualty Loss Value as of the next preceding Rent Payment Date and any
Basic Rent due as of the date of such sale, Lessee shall pay Lessor the
difference;
(c) Lessor may hold, keep idle or lease to others the Aircraft
or any Part thereof, as Lessor in its sole discretion may determine, free and
clear of any rights of Lessee in which event Lessee's obligation to pay Basic
Rent for any Rental Periods commencing after Lessee shall have been deprived of
possession pursuant to this Section 24 shall be reduced by the net proceeds, if
any, received by Lessor from leasing the Aircraft or any Part thereof to any
Person other than Lessee for the same Rental Periods or any portion thereof;
(d) If reasonably required by Lessor, Lessee, at its sole
expense, shall assemble and make the Aircraft, the Airframe, any Engine or Part
available at a place designated by Lessor in accordance with Section 4 hereof.
Lessee hereby agrees that, in the event of the return to or repossession by
Lessor of the Aircraft, the Airframe, any Engine or Part, any rights in any
warranty (express or implied) heretofore assigned to Lessee or otherwise held
by Lessee shall without further act, notice or writing be assigned or
reassigned to Lessor, if assignable. Lessee shall be liable to Lessor for all
reasonable expenses, disbursements, costs and fees incurred in (i)
<PAGE>
repossessing, storing, preserving, shipping, maintaining, repairing and
refurbishing the Aircraft, the Airframe, any Engine or Part to the condition
required by Section 4 hereof and (ii) preparing the Aircraft, the Airframe, any
Engine or Part for sale or lease, advertising the sale or lease of the
Aircraft, the Airframe, any Engine or Part and selling or releasing the
Aircraft, the Airframe, any Engine or Part. Lessor is hereby authorized and
instructed, at its option, to make reasonable expenditures which Lessor
considers advisable to repair and restore the Aircraft, the Airframe, any
Engine or Part to the condition required by Section 4 hereof, all at Lessee's
sole expense;
(e) Lessee shall be liable, except as otherwise provided above,
for any and all unpaid Basic Rent and Casualty Loss Value hereunder before or
during the exercise of any of the foregoing remedies and for all legal and
arbitration fees (including reasonable attorneys' fees incurred in any and all
judicial and other governmental proceedings or arbitration proceedings,
including appellate proceedings, whether such proceedings arise before or after
entry of final judgment or arbitration award) and other reasonable costs and
expenses incurred by Lessor by reason of the occurrence of any Event of Default
or the exercise of Lessor's remedies with respect thereto, including all
reasonable costs and expenses incurred in connection with the return of the
Aircraft in accordance with Section 4 hereof or in placing the Aircraft in the
condition required by said Section. At any sale pursuant to this Section 24,
Lessee or any of its Affiliates may bid for and purchase the Aircraft. Except
as otherwise expressly provided above, no remedy referred to in this Section 24
is intended to be exclusive, but each shall be cumulative (except that nothing
hereunder shall entitle Lessor to duplicative remedies) and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not constitute the exclusive election of such remedies
and shall not preclude the simultaneous or later exercise by Lessor of any or
all of such other remedies. No express or implied waiver by Lessor of any
Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default.
(f) Lessor may exercise any other right or remedy which may be
available to it under the New York Uniform Commercial Code or applicable Law,
or proceed by appropriate court action to enforce the terms hereof to recover
damages for the breach hereof.
25. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee at any time
shall fail to pay to any Person any sum which Lessee is required to pay
hereunder or shall fail to do or perform any other thing Lessee is required to
do or perform hereunder, Lessor at its option may pay such sum or do or perform
such thing, and Lessee shall reimburse Lessor on demand for the amount of such
payment and for the cost and expense which may be incurred by Lessor for such
acts or performance, together with interest from the date of demand until paid
accrued at the Default Rate.
26. LATE CHARGES. If any installment of Basic Rent or other sum
owing under this Lease shall not be paid within five (5) days from the date
when due, Lessee shall pay Lessor interest on such amount at the Default Rate.
Such late charge is in addition to and not in lieu of other rights and remedies
of Lessor.
<PAGE>
27. FURTHER ASSURANCES. Lessee will promptly and duly execute and
deliver to Lessor such other documents and assurances, including, without
limitation, such amendments to this Lease as may be reasonably required by
Lessor, and Uniform Commercial Code financing statements and continuation
statements, and will take such further action as Lessor may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor.
28. NOTICES. All notices provided for or required under the terms
and provisions hereof shall be in writing, and any such notice shall be deemed
given when personally delivered or if deposited in the United States mails,
with proper postage prepaid, for first class registered mail, return receipt
requested, when received or when sent by telecopy with electronic confirmation,
addressed if to Lessor or Lessee, at their respective addresses as set forth on
Schedule B hereof or at such other address as either of them shall, from time
to time, designate in writing to the other.
29. GOVERNING LAW AND CONSENT TO JURISDICTION. THIS LEASE SHALL IN
ALL RESPECT BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, UNITED STATES OF AMERICA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAW PROVISIONS THEREIN. Lessee hereby irrevocably consents that any legal
action or proceeding against it or any of its assets with respect to this Lease
may be brought in any jurisdiction where Lessee or any of its assets may be
found, or in any court of the State of New York or any Federal court of the
United States of America located in New York, New York, United States of
America, or both, as Lessor may elect, and by execution and delivery of this
Lease, Lessee hereby irrevocably submits to and accepts with regard to any such
action or proceeding, for itself and in respect of its assets, generally and
unconditionally, the jurisdiction of the aforesaid courts. Lessee hereby
designates, appoints and empowers CT Corporation System at its principal office
at 1633 Broadway, New York, New York 10019, as its authorized agent for service
of process in the State of New York in any suit or proceeding with respect to
this Lease and the other Operative Documents to which Lessee is a party (such
agent being hereinafter called the "Process Agent"); PROVIDED HOWEVER, that if
the Process Agent shall at any time cease to be the Process Agent, Lessee shall
forthwith designate a successor Process Agent and shall give prompt notice of
such designation to Lessor. A copy of any such process served on such agent
shall be promptly forwarded by air courier by the person commencing such
proceeding to Lessee at its address set forth in Schedule B hereof, but the
failure of Lessee to receive such copies shall not affect in any way the
service of such process as aforesaid. Lessee further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified first class mail, postage prepaid, to Lessee at its address set forth
in Schedule B hereof. The foregoing, however, shall not limit the rights of
Lessor to serve process in any other manner permitted by Law or to bring any
legal action or proceeding or to obtain execution of judgment in any
jurisdiction. Lessee further agrees that final judgment against Lessee in any
action or proceeding in connection with this Lease shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States of
America by suit on the judgment, a certified or exemplified copy of which shall
be conclusive evidence of the fact and the amount of Lessee's indebtedness.
Lessee hereby irrevocably waives, to the fullest extent permitted by law, any
<PAGE>
objection which Lessee may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Lease brought in
the State of New York, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in the State of New York has been
brought in an inconvenient forum.
30. MISCELLANEOUS. Any provision of this Lease which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating or diminishing Lessor's rights under the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable Law, Lessee hereby waives
any provision of law which renders any provision of this Lease prohibited or
unenforceable in any respect. No term or provision of this Lease may be
amended, altered, waived, discharged or terminated orally, but only by an
instrument in writing signed by a duly authorized officer or the party against
which the enforcement of the amendment, alteration, waiver, discharge or
termination is sought. A waiver on any one occasion shall not be construed as
a waiver on a future occasion. All of the covenants, conditions and
obligations contained in this Lease shall be binding upon and shall inure to
the benefit of the respective successors and assigns of Lessor and (subject to
the restrictions of Section 13 (a) hereof) Lessee. This Lease, the Certificate
of Acceptance, and each related instrument, document, agreement and certificate
collectively constitute the entire agreement of Lessor and Lessee with respect
to the acquisition and leasing of the Aircraft, and cancels and supersedes any
and all prior oral or written understandings with respect thereto. This Lease
may be executed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto were upon the same
instrument. To the extent, if any, that this Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in this Lease may be created
through the transfer of possession of any counterpart other than the
counterpart which has been marked "Original" on the signature page thereof.
31. EFFECT OF THIS LEASE. This Lease shall become binding and
effective when it shall have been executed by each of Lessor and Lessee.
32. SURVIVAL. The representations, warranties, covenants,
agreements and indemnities of Lessee set forth in this Lease, and Lessee's
obligations hereunder, shall survive the expiration or other termination of
this Lease to the extent required for full performance and satisfaction
thereof.
33. BROKERS. Each party agrees to indemnify and hold the other
harmless from and against any and all claims, suits, damages, costs and
expenses (including, but not limited to reasonable attorney's fees) asserted by
any agent, broker or other third party for any commission or compensation of
any nature whatsoever based upon the lease of the Aircraft, if such claim,
damage, cost or expense arises out of any action or alleged action by the
indemnifying party, its employees or agents. It is understood and agreed
between the parties that this Lease has been concluded by direct negotiation
without any intermediaries or agents. Lessee hereby represents and warrants
that he has not been paid, agreed to pay or caused to be paid directly or
indirectly in any form, any commission, percentage, contingent fee, brokerage
or other similar payments of any kind, in connection with the establishment or
<PAGE>
operation of this Lease, to any employee of Lessor or to any person or entity
in the United States or elsewhere.
34. TRANSACTION COSTS. (a) Whether or not the transactions
contemplated hereby are consummated, Lessee shall pay all costs and expenses
incurred in connection with the preparation, execution and delivery of this
Lease and any other documents delivered in connection herewith, including
without limitation the reasonable fees, expenses and disbursements of counsel,
except as otherwise expressly set forth herein. In addition, Lessee shall be
solely responsible for all costs, including reasonable attorneys' fees and
expenses, incurred in registering an executed counterpart of this Lease with
the FAA.
(b) Notwithstanding anything herein to the contrary, Lessor
hereby acknowledges that Lessee has paid to Lessor a Commitment Fee in the
amount $25,000.00 (the "COMMITMENT FEE").
(c) Lessee shall pay for all sales tax imposed upon or arising
out of the sale or delivery of the Aircraft under the Purchase Agreement,
regardless of who is responsible therefor at law; provided, however, Lessor
will cooperate with any requests made by Lessee that are not adverse to
Lessor's interests to minimize such sales tax.
(d) Each of Lessor and Lessee hereby agrees to pay the
reasonable costs and expenses of the other party incurred in connection with
the entering into or giving or withholding of any future waiver, supplement or
amendment or other action with respect to the Lease or any other document
delivered in connection herewith that it may request, except in the case of an
Event of Default in which case all of such costs shall be at the expense of
Lessee.
35. INTENT; TITLE: It is the express intent of the parties that
this Lease constitute a true lease and not a sale of the Aircraft. Title to
the Aircraft shall at all times remain in Lessor, and Lessee shall acquire no
ownership, title, property, right, equity, or interest in the Aircraft other
than its leasehold interest solely as lessee subject to all the terms and
conditions hereof. The parties agree that this Lease is a "Finance Lease" as
defined in Uniform Commercial Code Article 2A -- Leases ("Article 2A"). Lessee
acknowledges: (a) that Lessee has selected the "Supplier" (as defined in
Article 2A) and directed Lessor to purchase the Aircraft from the Supplier; (b)
that Lessee has been informed in writing in this Lease, before signing this
Lease, that Lessee is entitled under Article 2A to the promises and warranties,
including those of any third party, provided to Lessor by the Supplier in
connection with or as part of the contract by which Lessor acquired the
Aircraft, and that Lessee may communicate with the Supplier and receive an
accurate and complete statement of those promises and warranties, including any
disclaimers and limitations of them or of remedies. To the extent permitted by
applicable Law, Lessee hereby waives any and all rights and remedies conferred
upon a lessee in Article 2A and any rights now or hereafter conferred by
statute or otherwise which may limit or modify any of Lessor's rights or
remedies under Section 24 of this Lease; PROVIDED, HOWEVER, that such waiver
shall not preclude Lessee from asserting any claim of Lessee against Lessor in
a separate cause of action; and PROVIDED FURTHER, that such waiver shall not
affect Lessor's obligations of good faith, diligence, reasonableness and care.
<PAGE>
Notwithstanding the express intent of the parties, should a court of
competent jurisdiction determine that this Agreement is not a true lease, but
rather one intended as security, then solely in that event and for the
expressly limited purposes thereof, Lessee shall be deemed to have hereby
granted Lessor a security interest in this Lease, the Aircraft, and all
accessions thereto, substitutions and replacements therefor, and all products
and proceeds (including insurance proceeds) thereof; to secure the prompt
payment and performance as and when due of all obligations and indebtedness of
Lessee (or any Affiliate of Lessee) to Lessor, now existing or hereafter
created. For the purposes of this paragraph, this Lease or a photocopy hereof
may be filed as a financing statement under the Uniform Commercial Code.
36. TIME IS OF THE ESSENCE. Time and strict and punctual
performance are of the essence with respect to each provision of this Lease.
37. TRUTH-IN-LEASING CLAUSE. (a) LESSEE HAS REVIEWED THE
AIRCRAFT'S MAINTENANCE AND OPERATING LOGS SINCE ITS DATE OF MANUFACTURE AND HAS
FOUND THAT THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91 OF THE
FEDERAL AVIATION REGULATIONS SINCE INCEPTION OF OPERATIONS. LESSEE CERTIFIES
THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE MAINTENANCE AND
INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS.
(b) LESSEE CERTIFIES THAT LESSEE, AND NOT LESSOR, IS
RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS AGREEMENT DURING
THE BASIC TERM HEREOF. LESSEE FURTHER CERTIFIES THAT LESSEE UNDERSTANDS ITS
RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
(c) LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND
INSPECTED UNDER PART 91 OR PART 135, AS APPLICABLE OF THE FEDERAL AVIATION
REGULATIONS OF OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT. LESSEE
UNDERSTANDS THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR
CARRIER DISTRICT OFFICE.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed by their duly authorized representatives as of the date first
written above.
C.I.T. LEASING CORPORATION, as Lessor
By: /s/ John F.P. Lamb
----------------------------
Name: John F.P. Lamb
----------------------------
Title: General Counsel
----------------------------
OXFORD AVIATION CORPORATION, INC.,
a California corporation, as Lessee
<PAGE>
By: /s/ John F.P. Lamb
----------------------------
Name: John F.P. Lamb
----------------------------
Title: General Counsel
----------------------------
<PAGE>
SCHEDULE A
TO
AIRCRAFT LEASE AGREEMENT
DESCRIPTION OF AIRCRAFT
DESCRIPTION OF AIRFRAME: Gulfstream Model 1159-A, also known as Gulfstream
Aerospace 1159-A, Manufacturer's Serial Number 428 and United States
Registration Number N760G, and any and all avionics, appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature (except the Engines) attached to or installed on the Airframe.
DESCRIPTION OF ENGINES: Two each Rolls Royce Spey MK 511-8 Engines with
Serial Numbers L/H 11278 R/H 11275 (each of which engines has 750 or more rated
takeoff horsepower or the equivalent thereof), installed on the Airframe.
<PAGE>
SCHEDULE B
TO
AIRCRAFT LEASE AGREEMENT
ADDRESSES AND PAYMENT INFORMATION
LOCATION OF PAYMENT OF RENT:
- - ---------------------------
Bank of America
1000 West Temple Street
Los Angeles, California 90012
Transit #121000358
For credit to: The CIT Group/
Industrial Financing, Inc.
Account # 1233-5-18855
HOME AIRPORT OF AIRCRAFT:
- - ------------------------
Ontario, California
NOTICE ADDRESS OF LESSOR:
- - ------------------------
C.I.T. Leasing Corporation
1620 West Fountainhead Parkway
Tempe, Arizona 85282
Attention: Vice-President, Credit
Telecopy No. (602) 858-1488
With a copy to:
The CIT Group/Industrial Financing
650 CIT Drive
Livingston, New Jersey 07039
Attn: General Counsel
Telecopy No. (201) 740-5148
ADDRESS OF LESSEE:
- - -----------------
Oxford Aviation Corporation, Inc.
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attn: Gregory J. Witherspoon
Executive Vice President - Finance
Telecopy No.: 213-487-5814
<PAGE>
with a copy to:
Aames Financial Corporation
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attention: John F.P. Lamb
General Counsel
Attention: John F. P. Lamb, Esq.
Telecopy No.: 213-380-9365
ADDRESS OF AGENT FOR SERVICE OF
- - -------------------------------
PROCESS FOR LESSEE IN NEW YORK:
- - ------------------------------
CT CORPORATION
1633 Broadway
New York, New York 10019
Attention: Frieda Dawson
<PAGE>
EXHIBIT A
TO
AIRCRAFT LEASE AGREEMENT
CERTIFICATE OF ACCEPTANCE
THIS CERTIFICATE OF ACCEPTANCE dated March __, 1996 (this
"Certificate of Acceptance) between C.I.T. LEASING CORPORATION, as Lessor
("LESSOR"), and OXFORD AVIATION CORPORATION, INC., as Lessee ("LESSEE");
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of March 8, 1996 (the "LEASE"), which
provides for the execution and delivery of a Certificate of Acceptance in
substantially the form hereof for the purpose of leasing the Aircraft in
accordance with the terms thereof;
NOW, THEREFORE, in consideration of the premises, and pursuant to
Section 2 of the Lease, Lessor and Lessee hereby agree as follows:
I. All capitalized terms used herein which are defined in the Lease
shall have, for all purposes hereof, the respective meanings given them in the
Lease.
II. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor under the Lease, as hereby supplemented, the
Aircraft as follows:
A. Aircraft: One Gulfstream Model 1159-A, also known as
Gulfstream Aerospace G-1159-A aircraft consisting of the following:
1. Airframe:
Manufacturer's Serial No. 428
United States Registration Number N760G
2. Engines: Two (2) Rolls Royce Spey MK 511-8 engines
(each of which engines has 750 or more rated takeoff
horsepower or the equivalent thereof), installed on
said Airframe, bearing, respectively the following:
Engine Manufacturer's
POSITION SERIAL NO.
-------- ----------
1 11278
2 11275
3. Other Stated Equipment and Manuals: Such other
Equipment (if any) and Manuals as is described in
Appendix I hereto.
<PAGE>
B. Maintenance Status:
1. Airframe:
Total Airframe Hours: _____
Total Airframe Cycles: _____
2. Engines:
POSITION 1
----------
Manufacturer's Serial No.: 11278
a. Total Hours: _____
b. Total Cycles: _____
POSITION 2
----------
Manufacturer's Serial No.: 11275
a. Total Hours: _____
b. Total Cycles: _____
C. Interior Configuration:
1. Seating:
2. Lavatories:
3. Galleys:
Lessee confirms that the Aircraft has been examined by its duly
appointed and authorized representatives and the records conform to the
information set forth above.
III. The Acceptance Date of the Aircraft is the date of this
Certificate of Acceptance, as set forth in the opening paragraph hereof, and
the Aircraft is hereby delivered and accepted on such date at _____ a.m.
____________________ Time at __________________.
IV. The amount of fuel on board the Aircraft at the time of delivery
hereunder is _____________________.
V. Lessee hereby confirms to Lessor that (i) Lessee has accepted
the Aircraft for all purposes hereof and of the Lease, (ii) Lessee has
inspected the Aircraft and the Aircraft satisfies all of the delivery
conditions set forth in the Lease; and (iii) the information set forth herein
and on Appendix 1 hereto pertaining to the Aircraft delivery are correct as of
the date hereof.
<PAGE>
VI. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Certificate of Acceptance to the same extent
as if fully set forth herein.
VII. This Certificate of Acceptance may be executed in any number of
counterparts, each of such counterparts, except as provided in Section 30 of
the Lease, shall for all purposes be deemed to be an original; and all such
counterparts shall together constitute but one and the same Certificate of
Acceptance.
VIII. THIS CERTIFICATE OF ACCEPTANCE SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREIN.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Certificate of Acceptance to be duly executed by their authorized officers on
the date first above written.
C.I.T. LEASING CORPORATION,
Lessor
By:
--------------------------------------
Title:
--------------------------------------
OXFORD AVIATION CORPORATION, INC.,
Lessee
By:
-------------------------------------
Title:
--------------------------------------
<PAGE>
APPENDIX I
TO
CERTIFICATE OF ACCEPTANCE
A. AVIONICS INVENTORY*
MAJOR AVIONICS EQUIPMENT MANUFACTURER MODEL
- - ------------------------ ------------ -----
*The above list of Avionics Inventory is subject to further addition and
descriptions by Lessor or Lessee and will be included in the Certificate of
Acceptance as executed on the Acceptance Date.
<PAGE>
APPENDIX I
TO
CERTIFICATE OF ACCEPTANCE
B. MANUALS INCLUDED WITH AIRCRAFT*
*To be completed on the Acceptance Date and included on the Certificate of
Acceptance as executed on such date.
<PAGE>
APPENDIX I
TO
CERTIFICATE OF ACCEPTANCE
C. LOOSE EQUIPMENT*
ITEM DESCRIPTION QUANTITY
- - ---- ----------- --------
*To be completed on the Acceptance Date and included on the Certificate of
Acceptance as executed on such date.
<PAGE>
APPENDIX I
TO
CERTIFICATE OF ACCEPTANCE
D. HARD TIME COMPONENTS*
*To be completed on the Acceptance Date and included on the
Certificate of Acceptance as executed on such date.
<PAGE>
APPENDIX I
TO
CERTIFICATE OF ACCEPTANCE
E. LESSEE FURNISHED EQUIPMENT*
*To be attached on the Acceptance Date and included on the Certificate of
Acceptance as executed on such date.
<PAGE>
[This Exhibit to be omitted
from FAA Filing Copy]
EXHIBIT B
TO
AIRCRAFT LEASE AGREEMENT
AIRCRAFT COST
Nine Million Two Hundred Seventy-Five Thousand Dollars
($9,275,000.00)
<PAGE>
[This Exhibit to be omitted
from FAA Filing Copy]
EXHIBIT C
TO
AIRCRAFT LEASE AGREEMENT
BASIC RENT
Lessee shall pay to Lessor as rental for the Aircraft ("BASIC RENT") for each
Rent Period hereunder from the Acceptance Date to the Expiration Date an amount
equal to $74,239.39 which shall be equal to .80042% of the Aircraft Cost. The
Basic Rent shall be paid by Lessee in advance to Lessor on each Rent Payment
Date.
<PAGE>
[This Exhibit to be omitted
from FAA Filing Copy]
EXHIBIT D
TO
AIRCRAFT LEASE AGREEMENT
CASUALTY LOSS VALUE
ON THE ATTACHED SCHEDULE
<PAGE>
[This Exhibit to be omitted
from FAA Filing Copy]
EXHIBIT E
TO
AIRCRAFT LEASE AGREEMENT
TERMINATION VALUE
If Lessee purchases the Aircraft pursuant to Section 8(a) hereof (i) on the
fifth anniversary date of the Acceptance Date, the Termination Value shall
equal to 87.156% of the Aircraft Cost which shall be in an amount equal to
$8,083,737.80, (ii) on the seventh anniversary date of the Acceptance Date, the
Termination Value shall equal 77.946% of the Aircraft Cost which shall be in an
amount equal to $7,229,449.02, and (iii) on the Expiration Date, the
Termination Value shall equal the fair market value of the Aircraft.
<PAGE>
[This Exhibit to be omitted
from FAA Filing Copy]
EXHIBIT G
TO
AIRCRAFT LEASE AGREEMENT
DEPOSIT
Five Hundred Thousand Dollars
$500,000.00
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS 2
-----------
2. AGREEMENT FOR PURCHASE AND LEASE OF AIRCRAFT 8
--------------------------------------------
3. TERM 8
----
4. RETURN OF AIRCRAFT 9
------------------
5. RENT 11
----
6. NET LEASE 12
---------
7. LESSOR'S TITLE 13
--------------
8. PURCHASE OPTIONS 13
----------------
9. USE OF AIRCRAFT; COMPLIANCE WITH LAWS 13
-------------------------------------
10. MAINTENANCE OF AIRCRAFT 14
-----------------------
11. REPLACEMENT OF PARTS; ALTERATIONS; MODIFICATIONS; AND ADDITIONS 15
---------------------------------------------------------------
12. REGISTRATION; DELIVERY; RECORDATION; INSIGNIA AND INSPECTION 16
------------------------------------------------------------
13. ASSIGNMENT AND SUBLEASING 17
-------------------------
14. LIENS 18
-----
15. LOSS, DAMAGE OR DESTRUCTION 18
---------------------------
16. INSURANCE 21
---------
17. GENERAL TAX INDEMNIFICATION 24
---------------------------
18. GENERAL INDEMNITIES 27
-------------------
19. NO WARRANTIES 29
-------------
20. FINANCIAL INFORMATION 30
---------------------
21. CONDITIONS PRECEDENT 31
--------------------
22. LESSEE'S REPRESENTATIONS AND WARRANTIES 35
---------------------------------------
23. EVENTS OF DEFAULT 38
-----------------
24. REMEDIES UPON DEFAULT 39
---------------------
25. LESSOR'S RIGHT TO PERFORM FOR LESSEE 41
------------------------------------
26. LATE CHARGES 41
------------
<PAGE>
27. FURTHER ASSURANCES 42
------------------
28. NOTICES 42
-------
29. GOVERNING LAW AND CONSENT TO JURISDICTION 42
-----------------------------------------
30. MISCELLANEOUS 43
-------------
31. EFFECT OF THIS LEASE 43
--------------------
32. SURVIVAL 43
--------
33. BROKERS 44
-------
34. TRANSACTION COSTS 44
-----------------
35. INTENT; TITLE 44
-------------
35. TIME IS OF THE ESSENCE 45
----------------------
36. TRUTH-IN-LEASING CLAUSE 45
-----------------------
SCHEDULE A. Description of Aircraft
SCHEDULE B. Addresses and Payment Information
EXHIBIT A. Certificate of Acceptance
EXHIBIT B. Aircraft Cost
EXHIBIT C. Basic Rent
EXHIBIT D. Casualty Loss Value
EXHIBIT E. Termination Value
EXHIBIT F. Form of Purchase Agreement Assignment
EXHIBIT G. Deposit
EXHIBIT 10.31
EXECUTION COPY
CORPORATE GUARANTY AGREEMENT
THIS CORPORATE GUARANTY AGREEMENT (this "Agreement") dated as of
March 08, 1996, is between AAMES FINANCIAL CORPORATION, a Delaware corporation
(the "Guarantor"), and C.I.T. LEASING CORPORATION, a Delaware corporation
("CIT").
W I T N E S S E T H:
WHEREAS, CIT has agreed to purchase one (1) Gulfstream Model III Aircraft,
manufacturer's serial number 428 (the "Aircraft"), which is subject to the
Aircraft Lease Agreement dated as of March __, 1996 (the "Lease," capitalized
terms used herein and not defined herein shall have the meanings set forth in
the Lease) between CIT, as lessor and Oxford Aviation Corporation, Inc., as
lessee (the "Lessee");
WHEREAS, the agreement by CIT to lease the Aircraft to Lessee is
conditioned upon the Guarantor entering into a guaranty in the form hereof;
WHEREAS, because the Guarantor will derive benefit from the transactions
contemplated by the Operative Documents, the Guarantor has agreed to guarantee
the Obligations on the terms set forth in this Agreement; and
WHEREAS, in order to induce CIT to enter into the Lease, the Guarantor is
willing to execute and deliver this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. The Guarantor absolutely, unconditionally and irrevocably
guarantees, as a primary obligor and not merely as a surety, the due and
punctual payment by the Lessee of any and all amounts owed to CIT (including
without limitation all payments of Basic Rent and all Supplemental Payments),
and the due and punctual performance of all covenants, agreements, obligations
and liabilities of the Lessee, under or pursuant to the Operative Documents.
All obligations of the Lessee guaranteed by the Guarantor in this Section 1
shall be collectively referred to as the "Obligations". The Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain bound upon
its guaranty notwithstanding any extension or renewal of an Obligation.
SECTION 2. The Guarantor waives presentment to, demand of payment
from and protest to the Lessee of any of the Obligations, and also waives
notice of acceptance of its guaranty and notice of protest for nonpayment. The
obligations of the Guarantor hereunder shall not be affected by (a) the failure
of CIT to assert any claim or demand or to enforce or exercise any right or
remedy against the Lessee or the Guarantor under the provisions of any
Operative Document or otherwise; (b) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of any
Operative Document, or (c) the release of any security, if any, held by CIT for
the Obligations or any of them.
SECTION 3. The Guarantor further agrees that its guaranty hereunder
constitutes a guaranty of payment when due and not of collection, and waives
any right to require that any resort be had by CIT to any security, if any,
held by CIT for payment of the Obligations.
SECTION 4. The obligations of the Guarantor hereunder shall be absolute
and unconditional and shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any setoff, counterclaim, deduction, diminution, withholding,
abatement, suspension, deferment, reduction, recoupment, termination or defense
(other than full and strict indefeasible satisfaction of the Obligations)
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of the Guarantor hereunder shall not be released, discharged or
impaired or otherwise affected by any circumstance or condition whatsoever
(whether or not the Lessee, the Guarantor or CIT has knowledge or notice
thereof or consents thereto) which may or might in any manner or to any extent
vary the risk of the Guarantor or otherwise operate as a discharge of the
Guarantor as a matter of law or equity (other than the indefeasible payment in
full of all the Obligations) including, without limitation:
(a) any termination, amendment, modification, addition, deletion or
supplement to or other change to any of the terms of any Operative Document, or
any other instrument or agreement applicable to any of the parties hereto or
thereto, or any assignment or transfer of any thereof, or any furnishing or
acceptance of security or any additional guaranty, or any release of any
security, for any Obligations or the obligations of the Guarantor hereunder or
thereunder, or the failure of any security or the failure of any Person to
perfect any interest in any collateral;
(b) any failure, forbearance, omission or delay on the part of the
Lessee or the Guarantor to conform or comply with any term of any Operative
Document to which it is a party or any other instrument or agreement, or any
failure to give notice to the Lessee or the Guarantor of the occurrence of an
Event of Default or any Default occurring under the Lease;
(c) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any Operative
Document, or any other waiver, consent, extension, forbearance, renewal,
indulgence, compromise, release, settlement, refunding or other action or
inaction under or in respect of any Operative Document or any other instrument
or agreement, or under or in respect of any obligation or liability of the
Lessee or the Guarantor, any exercise or non-exercise of any right, remedy,
power or privilege under or in respect of any such instrument or agreement or
any such obligation or liability;
(d) any extension of the time for payment of the principal of or
interest on any Obligation, or of the time for performance of any other
obligations, covenants or agreements under or arising out of any Operative
Document or the extension or the renewal of any thereof;
(e) the exchange, surrender, substitution or modification of, or the
furnishing of any additional collateral or security for the obligations under,
any Operative Document;
(f) to the extent permitted by applicable Law, any voluntary or
involuntary bankruptcy, insolvency, reorganization, moratorium, arrangement,
adjustment, readjustment, composition, assignment for the benefit of creditors,
receivership, conservatorship, custodianship, liquidation, marshalling of
assets and liabilities or similar proceedings with respect to the Lessee or the
Guarantor or any other Person or any of their respective properties or
creditors, or any action taken by any trustee or receiver or by any court in
any such proceeding (including, without limitation, any automatic stay incident
to any such proceeding);
(g) any limitation on the liability or obligations of the Lessee or
the Guarantor under any Operative Document or any other instrument or
agreement, which may now or hereafter be imposed by any statute, regulation,
rule of law or otherwise, or any discharge, termination, cancellation,
frustration, irregularity, invalidity or unenforceability, in whole or in part,
of any thereof;
(h) any sale, lease or transfer of any of the assets of the Lessee
or the Guarantor to any other Person;
(i) to the extent permitted by applicable Law, any release or
discharge, by operation of law, of the Lessee or the Guarantor from the
performance or observance of any obligation, covenant or agreement contained in
any Operative Document;
(j) any suit or other action brought by any beneficiaries or
creditors of, or by, the Lessee, the Guarantor or any other Person for any
reason whatsoever, including without limitation any suit or action in any way
attacking or involving any issue, matter or thing in respect of any Operative
Document;
(k) any lack or limitation of status or of power, incapacity or
disability of the Lessee or the Guarantor or any trustee or agent thereof;
(l) any failure, omission or delay on the part of CIT to enforce,
assert or exercise any right, power or remedy conferred on it in any Operative
Document, or any such failure, omission or delay on the part of CIT in
connection with any Operative Document or any other action or inaction on the
part of CIT; or
(m) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or
unforeseen and any other circumstance which might otherwise constitute a legal
or equitable defense, release or discharge (including the release or discharge
of the liabilities of a guarantor or surety or which might otherwise limit
recourse against the Lessee or the Guarantor, whether or not the Lessee or the
Guarantor shall have notice or knowledge of the foregoing).
SECTION 5. The Guarantor further agrees that its guaranty hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded, invalidated,
declared to be fraudulent or preferential, or must otherwise be returned,
refunded, repaid or restored by CIT upon the bankruptcy or reorganization of
the Lessee or the Guarantor or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Lessee or the Guarantor, or otherwise, all as though such payments had not been
made.
SECTION 6. In furtherance of the foregoing and not in limitation of any
other right which CIT has at law or in equity against the Guarantor by virtue
hereof, upon the failure of the Lessee to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, the Guarantor hereby promises to and will, upon
receipt of written demand by CIT, forthwith pay, or cause to be paid, to CIT,
if and as appropriate, in cash the amount of such unpaid Obligation; PROVIDED,
HOWEVER, that until the indefeasible payment in full of all the Obligations,
the Guarantor shall not have any right by way of subrogation or otherwise as a
result of the payment of any sums hereunder. The Guarantor agrees that it will
never have, and hereby waives and disclaims, any claim or right against the
Lessee by way of subrogation or otherwise in respect of any payment that the
Guarantor may be required to make hereunder, to the extent that such claim or
right would cause the Guarantor to be a "creditor" of the Lessee for purposes
of Title 11 of the United States Code, as now or hereafter amended, or any
other Federal, state or other bankruptcy, insolvency, receivership or similar
Law, during the period of one year prior to filing of a petition thereunder by
or against the Lessee. If any amount shall be paid to the Guarantor on account
of such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by the Guarantor in trust for
CIT, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to CIT in the exact form received by
the Guarantor (duly endorsed by the Guarantor to CIT, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
CIT may determine.
SECTION 7. The Guarantor agrees that, as between the Guarantor, on the
one hand, and CIT, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in the Operative Documents for
the purposes of the Guarantor's guaranty herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in the Operative Documents, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for purposes of this Agreement.
SECTION 8. The Guarantor warrants and represents that:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing in the State of Delaware, is duly licensed or qualified
and is in good standing as a foreign corporation in each jurisdiction in which
the character of its property or the nature of its activities make such
qualifications necessary other than those jurisdictions in which the failure to
be so qualified would not have a materially adverse effect on its business or
the performance of its obligations under the Operative Documents to which it is
a party, and has all requisite corporate power and authority and all necessary
licenses and permits to carry on its business as now conducted except for
matters which are not material in the aggregate, to own and operate its assets
and to enter into and perform its obligations under the Operative Documents to
which it is a party.
(b) The Operative Documents to which the Guarantor is a party have
been duly authorized, executed and delivered by the Guarantor and constitute
legal, valid and binding obligations of the Guarantor enforceable against the
Guarantor in accordance with the respective terms thereof, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar Laws generally
affecting creditors' rights, and general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
(c) The execution and delivery by the Guarantor of the Operative
Documents to which it is a party and compliance by the Guarantor with all of
the provisions thereof (i) are within the corporate powers of the Guarantor and
all necessary corporate action has been taken to authorize the same, and (ii)
do not and will not contravene any Law, governmental rule or regulation, or any
order of any court or Governmental Authority or agency applicable to or binding
on the Guarantor or contravene or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, its certificate of
incorporation or its by-laws or any indenture, mortgage, contract or other
agreement or instrument to which the Guarantor is a party or by which the
Guarantor or any of its property may be bound or affected.
(d) There are no proceedings pending or, to the knowledge of the
Guarantor, threatened, and to the knowledge of the Guarantor there is no
existing basis for any such proceedings, against or affecting the Guarantor or
any of its subsidiaries in or before any court or before any Governmental
Authority or arbitration board or tribunal which has a reasonably likelihood of
being adversely determined and, if adversely determined might individually or
in the aggregate materially and adversely affect the business, prospects,
profits or condition (financial or otherwise) of the Guarantor and its
subsidiaries taken as a whole or impair the ability of the Guarantor to
execute, deliver and perform its obligations under the Operative Documents to
which it is a party.
(e) No authorization, approval, consent or other action by, and no
notice to or filing with, any Person or any Governmental Authority or
regulatory body is required for the due execution, delivery and performance by
the Guarantor of the Operative Documents to which it is a party.
(f) The Guarantor's chief executive office (as defined in the
Uniform Commercial Code as in effect in the applicable jurisdiction) and
principal place of business, is 3731 Wilshire Boulevard, 10th Floor, Los
Angeles, California 90010.
(g) The Guarantor is solvent, able to meet its debts as they become
due, and the fair market value of its assets exceeds the aggregate amount of
its debts and liabilities as they become due, and the consummation of the
transactions contemplated hereby and in the Operative Documents to which it is
a party will not adversely affect the financial condition of the Guarantor.
(h) All tax returns required to be filed by the Guarantor and its
subsidiaries in any jurisdiction have in fact been filed, and each of the
Guarantor and its subsidiaries has paid or caused to be paid all taxes,
assessments, fees and other governmental charges which have become due pursuant
to such returns or pursuant to any assessment received by it; PROVIDED,
HOWEVER, that such payment shall not be required with respect to any such tax,
assessment, fee or other governmental charge so long as (i) the validity,
amount or applicability thereof shall be contested in good faith by appropriate
proceedings and the Guarantor or such subsidiary, as applicable, shall set
aside on its books adequate reserves as required by generally accepted
accounting principles with respect thereto or (ii) in the case of any such tax,
assessment, fee or other governmental charge, such payment may lawfully be made
at a later date without incurring a material penalty or material obligation to
pay interest with respect thereto. The Guarantor does not have any knowledge
of any actual or proposed deficiency or additional assessment in conjunction
therewith which either in any case or in the aggregate would be materially
adverse to the Guarantor or any of its subsidiaries and the charges, accruals
and reserves on the books of the Guarantor and its subsidiaries in respect of
Federal, state, local or foreign taxes for all such years, and for the current
fiscal year, make adequate provision for all unpaid tax liabilities for such
periods.
(i) The audited consolidated financial statements of the Guarantor
and its subsidiaries as at June 30, 1995 and for the twelve-month period ended
on such date and the 10-Q for the six months ended December 31, 1995, certified
by the chief financial officer of the Guarantor, copies of which have
heretofore been furnished to CIT, are complete and correct and present fairly
the consolidated financial condition of the Guarantor and its subsidiaries as
at December 31, 1995 and the consolidated results of their operations and
changes in their financial position for the fiscal quarter period then ended
(subject to normal year-end audit adjustments). Such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with generally accepted accounting principles. None of the
Guarantor or any of its subsidiaries has any material contingent liability or
liability for taxes, long-term lease or forward or long-term commitment except
as set forth in the financial statements of the Guarantor for the fiscal
quarter ended December 31, 1995 or as arising in the ordinary course of
business (which liabilities, either alone nor in the aggregate, have a material
adverse effect on the business, operations, assets, financial or other
condition of the Guarantor and its subsidiaries taken as a whole).
(j) Since December 31, 1995 there has been no material adverse
change in the business, operations, assets or financial or other condition of
the Guarantor and its subsidiaries taken as a whole, as such condition was
reflected in the financial statements dated June 30, 1995 for the twelve (12)
month period then ended.
(k) The Guarantor is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
(l) All representations and warranties contained in any of the
Operative Documents which were made by the Guarantor are true and correct on
and as of the date hereof and will be true and correct in all material respects
on the Acceptance Date as though made on such date.
SECTION 9. The Guarantor covenants that it will:
(a) Furnish to CIT (i) annual consolidated balance sheets and profit
and loss statements of Guarantor and its subsidiaries, which financial reports
of Guarantor and its subsidiaries shall be accompanied, at CIT's request, by
the audit report of Guarantor's certified public accountant within one-hundred
twenty (120) days after the end of each fiscal year; and (ii) quarterly during
the term of this Agreement, Guarantor's 10-Q filing as filed with the
Securities and Exchange Commission within ninety (90) days after the end of
each fiscal quarter.
(b) Furnish to CIT (i) concurrently with the delivery of the
financial statements referred to in Sections 9(a)(i) and 9(a)(ii), a
certificate of the chief financial officer of the Guarantor stating that, to
the best of his knowledge, the Guarantor during the period covered by such
financial statements has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in the Operative Documents
to be observed, performed or satisfied by it, and that such person has obtained
no knowledge of any Default or Event of Default except as specified in such
certificate; and (ii) promptly, such additional financial and other information
(whether concerning the Guarantor or otherwise) as CIT may from time to time
reasonably request.
(c) Continue to engage in business of the same general type as now
conducted by it, preserve, renew and keep in full force and affect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; and comply with all contractual obligations and applicable Law except
to the extent that the failure to comply therewith would not, in the aggregate,
have a material adverse effect on the business, operations, property or
financial or other condition of the Guarantor and its subsidiaries taken as a
whole or upon its ability to perform its obligations hereunder.
(d) Promptly give notice to CIT (i) of any litigation or proceeding
affecting the Guarantor (A) in which the amount involved is $1,000,000 or more
and not covered by insurance or (B) in which injunctive or similar relief is
sought; (ii) of the occurrence of any Default or Event of Default or Event of
Loss; (iii) of any (A) default or event of default under any material
contractual obligation of the Guarantor, or (B) litigation, investigation or
proceeding that may exist at any time between the Guarantor and any
Governmental Authority that has a reasonable likelihood of being adversely
determined and if adversely determined would have a material adverse effect on
the business, operations, property or financial or other condition of the
Guarantor; and (iv) of any material adverse change in the business, operations,
property or financial or other condition of the Guarantor and its subsidiaries
taken as a whole. Each such notice shall be accompanied by a statement of the
President or a Vice President of the Guarantor setting forth details of the
occurrence referred to therein and stating what action the Guarantor proposes
to take with respect thereto.
(e) Not merge into or consolidate with any other Person, or permit
any other Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of transactions) all
or any substantial part of its assets (whether now owned or hereafter acquired)
unless the surviving or resulting corporation or the Person acquiring such
assets, as the case may be, (i) has the same or greater net worth (determined
in accordance with generally accepted accounting principles) after such merger,
consolidation or sale as the Guarantor immediately prior to such merger,
consolidation or sale, (ii) assumes in writing all of the obligations and
liabilities of the Guarantor under this Agreement and the other Operative
Documents to which it is a party by an instrument reasonably satisfactory in
form and substance to CIT (unless, in the case of a merger, the Guarantor is
the surviving corporation) and (iii) delivers a written opinion of counsel
addressed to CIT, which counsel shall be reasonably satisfactory to CIT, to the
effect that, after giving effect to such merger, consolidation or sale, as the
case may be, each Operative Document to which the Guarantor is a party will
constitute the legal, valid and binding obligation of the surviving or
resulting corporation or the Person acquiring such assets, as the case may be,
enforceable against such corporation or Person, as the case may be, in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar Laws
affecting creditors' rights generally from time to time in effect and except as
enforceability may be limited by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and such opinion shall also cover such other matters as may be reasonably
requested by CIT; PROVIDED, HOWEVER, nothing in this paragraph (e) shall
prohibit the Guarantor from merging into or consolidating with any of its
Affiliates or permitting any of its Affiliates to merge into or consolidate
with it or from selling, transferring, leasing or otherwise disposing of (in
one transaction or a series of transactions) all or any substantial part of its
assets to any of its Affiliates.
SECTION 10. The guaranties made hereunder shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid and shall be reinstated to the extent provided in Section 5.
SECTION 11. This Agreement and the terms, covenants and conditions hereof
shall be binding upon the Guarantor and its successors and shall inure to the
benefit of CIT and its successors and assigns. The Guarantor shall not be
permitted to assign or transfer any of its rights or obligations under this
Agreement, except as expressly contemplated by this Agreement or the other
Operative Documents. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party. CIT may without notice to the Guarantor assign
or otherwise transfer any and all of its rights hereunder to any other person
or entity which CIT has assigned its rights to under the Operative Documents,
and such other person or entity shall thereupon become vested with all the
benefits in respect hereof granted to CIT herein.
SECTION 12. No failure on the part of CIT to exercise, and no delay in
exercising, any right, power or remedy hereunder or under any Operative
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by CIT preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder and under the other Operative Documents are cumulative
and are not exclusive of any other remedies provided by Law. CIT shall not be
deemed to have waived any rights hereunder or under any other agreement or
instrument unless such waiver shall be in writing and signed by CIT.
SECTION 13. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF
LAW PRINCIPLES THEREOF.
SECTION 14. All notices and other communications provided for herein
shall be in writing and shall be personally delivered or sent by registered or
certified mail, postage prepaid, or by prepaid telex, TWX, telegram or
telecopier (with messenger delivery specified in the case of a telegram, and in
the case of a telex, TWX, telegram or telecopier, to be confirmed by registered
or certified mail, postage prepaid) or by prepaid courier service, and shall be
deemed to have been given (unless otherwise required by the specific provisions
hereof in respect to any matter) when delivered personally or otherwise
actually received at their addresses set forth beneath their respective
signatures below or at such other address as any such Person may designate by
notice duly given in accordance with this Section 14 to the other parties.
SECTION 15. In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal, prohibited or unenforceable in any
respect, no party hereto shall be required to comply with such provisions for
so long as such provision is held to be invalid, illegal, prohibited or
unenforceable and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired. The
parties shall endeavor in good-faith negotiations to replace any invalid,
illegal, prohibited or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal, prohibited or unenforceable provisions.
SECTION 16. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart. This Agreement shall be effective with respect to the Guarantor
when a counterpart which bears the signature of the Guarantor shall have been
delivered to CIT.
SECTION 17. No term, covenant, agreement or condition of this Agreement
may be amended or compliance herewith waived (either generally or in a
particular instance and either retroactively or prospectively) except by one or
more written instruments signed by CIT and, in the case of any amendment, by
the Guarantor, PROVIDED, HOWEVER, no such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon.
SECTION 18. If an Event of Default shall have occurred and be continuing
under any Operative Document, CIT is hereby authorized at any time and from
time to time, to the fullest extent permitted by Law, to set off and apply any
and all indebtedness at any time owing by CIT to or for the credit or the
account of the Guarantor against any of and all the obligations of the
Guarantor now or hereafter existing under this Agreement irrespective of
whether or not CIT shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of CIT under this Section 18 are
in addition to other rights and remedies (including other rights of setoff)
which CIT may have.
SECTION 19. If default shall be made in the performance of any of the
Obligations, the Guarantor will also pay to CIT such amounts, to the extent
lawful, as shall be sufficient to pay the costs and expenses of collection or
of otherwise enforcing any of CIT's rights under this Agreement, including
reasonable fees and disbursements of counsel.
SECTION 20. The guaranties of the Guarantor hereunder are continuing
guaranties and shall apply to the Obligations whenever arising. Each default
in the payment or performance of any of the Obligations shall give rise to a
separate claim and cause of action hereunder, and separate claims or suits may
be made and brought, as the case may be, hereunder as each such default occurs.
The Guarantor will from time to time deliver, upon the reasonable request of
CIT, an acknowledgment, reasonably satisfactory to CIT of the Guarantor's
continued liability hereunder.
SECTION 21. Any legal action or proceeding against the Guarantor with
respect to this Agreement or any other Operative Document may be brought in
such of the courts of competent jurisdiction of the State of New York in The
City of New York or in the United States District Court for the Southern
District of New York as CIT or its respective successors and assigns, as the
case may be, may elect, and by execution and delivery of this Agreement and the
other Operative Documents to which it is a party, the Guarantor irrevocably
submits to the non-exclusive jurisdiction of such courts, and to appellate
courts therefrom, for purposes of legal actions and proceedings hereunder and,
in the case of any such legal action or proceeding brought in the above-named
New York courts, hereby irrevocably consents, during such time, to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered mail, postage
prepaid, to the Guarantor at its address as provided herein, or by any other
means permitted by applicable Law. If it becomes necessary for the purpose of
service of process out of any such courts, the Guarantor shall take all such
action as may be required to authorize a special agent to receive, for and on
behalf of it, service of process in any such legal action or proceeding, and
shall take all such action as may be necessary to continue said appointment in
full force and effect so that the Guarantor will at all times have an agent for
service of process for the above purposes in New York, New York. To the extent
permitted by Law, final judgment (a certified copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness of the Guarantor to
CIT) against the Guarantor in any such legal action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on an unsatisfied
judgment. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY OF THE ABOVE-NAMED COURTS OR FROM ANY LEGAL
PROCESS THEREIN, THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY, AND THE
GUARANTOR HEREBY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER
IN ANY OF THE ABOVE-NAMED COURTS (I) ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, (II) THAT IT OR ANY OF
ITS PROPERTY IS IMMUNE FROM THE ABOVE DESCRIBED LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION, OR OTHERWISE), (III) THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS, OR (IV) ANY DEFENSE THAT WOULD HINDER OR DELAY THE LEVY, EXECUTION
OR COLLECTION OF ANY AMOUNT TO WHICH EITHER PARTY HERETO IS ENTITLED PURSUANT
TO A FINAL JUDGMENT OF ANY COURT HAVING JURISDICTION. NOTHING IN THIS SECTION
21 SHALL LIMIT ANY RIGHT OF CIT TO BRING ACTIONS, SUITS OR PROCEEDINGS IN THE
COURTS OF ANY OTHER JURISDICTION. THE GUARANTOR EXPRESSLY ACKNOWLEDGES THAT
THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE AND HEREBY WAIVES ANY RIGHT
WHICH IT MAY HAVE TO REQUEST A TRIAL BY JURY IN ANY ACTION RELATING TO THE
OPERATIVE DOCUMENTS.
SECTION 22. The Guarantor does hereby irrevocably appoint the New York,
New York office of CT Corporation as its agent for the purpose of service of
process in any action, suit, or proceeding arising out of this Agreement or the
subject matter hereof or any transaction contemplated herein. A copy of any
such process served on such agent shall be promptly forwarded by air courier by
the person commencing such proceeding to Guarantor at its address set forth on
the signature page hereof, but the failure of Guarantor to receive such copies
shall not affect in any way the service of such process as aforesaid.
Guarantor further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to Guarantor
at its address set forth on the signature page hereof. Nothing herein shall
affect the right to serve process in any other manner permitted by Law or shall
limit the right of CIT to bring proceedings against the Guarantor in the courts
of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Guaranty as
of the day and year first above written.
AAMES FINANCIAL CORPORATION
By: /s/ John F.P. Lamb
---------------------------------------------
Name: -------------------------------------------
Title: General Counsel
Address for Notices: 3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attention: Gregory J. Witherspoon
Telephone: 213-351-6153
Telecopier: 213-380-9365
With a copy to: 3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Attention: John F. P. Lamb, Esq.
General Counsel
Telephone: 213-351-7577
Telecopier: 213-487-5184
C.I.T. LEASING CORPORATION
By: /s/ John F.P. Lamb
-------------------------------------------
Name: John F.P. Lamb
Title: General Counsel.
Address for Notices: 1620 West Fountainhead Parkway
Suite 600
Tempe, Arizona 85282
Attention: Vice President, Credit
Telecopy No.: 602-858-1496
With a copy to: The CIT Group/Industrial Financing
650 CIT Drive
Livingston, New Jersey 07039
Attention: Chief Credit Officer
Telecopy No. 201-740-5005
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 42,814,000
<SECURITIES> 0
<RECEIVABLES> 153,997,000
<ALLOWANCES> 425,000
<INVENTORY> 62,085,000
<CURRENT-ASSETS> 258,471,000
<PP&E> 6,953,000
<DEPRECIATION> 2,745,000
<TOTAL-ASSETS> 262,679,000
<CURRENT-LIABILITIES> 24,644,000
<BONDS> 138,000,000
<COMMON> 9,000
0
0
<OTHER-SE> 100,026,000
<TOTAL-LIABILITY-AND-EQUITY> 262,679,000
<SALES> 84,310,000
<TOTAL-REVENUES> 84,310,000
<CGS> 12,430,000
<TOTAL-COSTS> 12,430,000
<OTHER-EXPENSES> 31,529,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,303,000
<INCOME-PRETAX> 35,048,000
<INCOME-TAX> 14,713,000
<INCOME-CONTINUING> 20,335,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,335,000
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 2.15
</TABLE>
